8th Circuit Clarifies Minnesota Human Rights Act Doesn’t Cover Remote Workers
Last week, the Eighth Circuit said that a remote worker cannot sue their employer under the Minnesota Human Rights Act (MHRA), noting the law’s language makes clear that it does not apply to nonresidents.
The plaintiff in the case—a Michigan-based remote employee—took time off from work to recover from surgery. Shortly after her FMLA protected leave ran out, her employment was terminated. She sued her employer, alleging her employer violated the MHRA by refusing to accommodate her and by terminating her employment.
Her employer moved for summary judgment, arguing that the plaintiff was not covered under the MHRA because the statute defines an employee as someone who works for an employer and “resides or works in this state [of Minnesota].” The plaintiff had never lived in Minnesota, nor had she traveled to Minnesota for work for nearly two years before she was fired. Accordingly, the district court entered summary judgment for the employer.
On appeal, a three-judge panel honed in on the statute’s “works in this state” language, questioning whether it required Kuklenski to have a physical presence in Minnesota.
While the plaintiff argued the language should be interpreted liberally, the panel disagreed. In its opinion, the panel explained that the “plain meaning” of the phrase requires “some degree of physical presence in Minnesota,” as any other reading would contradict the statute’s purpose to “secure for persons in this state [of Minnesota], freedom from discrimination” because “discrimination threatens the rights and privileges of the inhabitants of this state [of Minnesota].” The panel found these phrases made clear that the law aimed to protect only those who live or work within the boundaries of Minnesota state lines.
The panel also rejected the plaintiff’s arguments that the court should consider her other contacts with the state, such as her supervisors’ and her clients’ physical presence in Minnesota, and her past travel to Minnesota for work. The panel found the MHRA’s language did not consider other factors and that her almost two-year absence from the state between February 2020 and December 2021 belied her argument that her absence was “temporary.”
The decision suggests that a non-resident with “customary or habitual” work in Minnesota potentially could be covered under the MHRA, and further clarifies that a person need not be physically present in Minnesota at the time of the discriminatory conduct to qualify as an employee under the MHRA.
However, an important question remains open: whether there are minimum requirements for travel to, or time spent in, the state of Minnesota to qualify for coverage under the MHRA.
“The plain meaning of this phrase requires some degree of physical presence in Minnesota.”
ecf.ca8.uscourts.gov/…
Are Your Lactation Spaces Compliant?
Lactation spaces go by different names — wellness room, vacant office, storage room. No matter what you call it, there are strict regulations about what the room contains and where the room must be located. Some of the requirements may surprise you.
PUMP Act Requirements
In short, the PUMP Act states that employees “are entitled to a place to pump at work, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public.”
However, last year a U.S. Department of Labor (DOL) memo provided more specifics. DOL guidance states that employees must be provided a place to sit, and a flat surface (other than the floor) on which to place the pump. The guidance does not say a refrigerator is required, but rather the employee must be able to safely store milk while at work, such as in an insulated food container, personal cooler, or refrigerator. Access to electricity is “ideal.” And the guidance states that access to a sink near the lactation “improves the functionality of the space.”
The DOL guidance says that some employers may choose to use a room with a door that closes and covered windows. But an employer can also create a space using partitions, as long as the space is shielded from view and free from intrusion.
But There’s More
Many employers forget that their lactation space must not only comply with the PUMP Act, but also the Pregnant Worker’s Fairness Act (PWFA) regulations. The PWFA regulations turn many of the amenities that were not mandatory into amenities that an employer may be required to provide if an employee makes a request and adding the amenity does not create an undue hardship for the employer.
The PWFA regulations state: “Accommodations related to pumping, such as, but not limited to, ensuring that the area for lactation is in reasonable proximity to the employee’s usual work area; that it is a place other than a bathroom; that it is shielded from view and free from intrusion; that it is regularly cleaned; that it has electricity, appropriate seating, and a surface sufficient to place a breast pump; and that it is in reasonable proximity to a sink, running water, and a refrigerator for storing milk.” Therefore, if an employee asks for something for the PUMP room, consider whether it qualifies as a reasonable accommodation request under the PWFA that you are required to provide.
Lactation spaces are no longer a “bonus room” or a “benefit,” they are a legal requirement. And not providing a room that is compliant with federal law may make you vulnerable to a collective action lawsuit. So do your research and ensure lactation spaces cover your legal basis.
Lactation spaces are no longer a “bonus room” or a “benefit,” they are a legal requirement.
The State of Employment Law: The District of Columbia Has Legal Protections for Moonlighting
Many employers want their employees to stay focused on their job duties and not to start side businesses or moonlight on nights and weekends. Some employers even go so far as to publish policies prohibiting employees from working a second job, even if that job does not interfere with their duties to the primary employer. However, this sort of policy is unlawful in the District of Columbia.
Unlike most jurisdictions, the District of Columbia’s restrictions on non-compete provisions do not apply only in a post-employment setting – they also apply during employment. The District defines a “non-compete provision” as any agreement or policy that prohibits an employee “from performing work for another for pay or from operating the employee’s own business.” This means that an employer generally cannot prohibit an employee from working a second job.
The law has a few exceptions. An employer can prohibit a second job or side business where it would:
Result in the employee’s disclosure or use of confidential or proprietary employer information;
Conflict with the employer’s, industry’s, or profession’s established rules regarding conflicts of interest;
Constitute a conflict of commitment if the employee is employed by a higher education institution; or
Impair the employer’s ability to comply with District or federal laws or regulations, a contract, or a grant agreement.
Even where one of these exceptions applies, the employer cannot prohibit moonlighting unless it has published a written policy explaining that moonlighting is prohibited. Any such policy should carefully state that moonlighting is prohibited where it creates a conflict of interest or would result in the use or disclosure of confidential employer information.
The State of Employment Law: Three States Have Virtually No Anti-Discrimination Laws
Under federal employment discrimination laws, race, color, religion, national origin, sex, sexual orientation, gender identity, disability, age, citizenship status, and genetic information are protected classifications. Most states have a list of protected classes that closely mirrors federal law, and many states have even added more protected classifications. However, three states have largely left civil rights protections in employment to the federal government.
Mississippi has no anti-discrimination statute and therefore has no protected classes of its own. Alabama and Georgia prohibit age discrimination and unequal pay on the basis of sex, and Georgia additionally prohibits disability discrimination, but Alabama and Georgia otherwise have no protected classes. As such, employees who work in those three states are largely dependent on federal law for protection against employment discrimination.
Employers in Mississippi, Alabama, and Georgia may feel they benefit from lesser regulation, as fewer anti-discrimination laws may translate into fewer discrimination charges, as well as less time and lower legal fees devoted to administrative investigations. Many states with more robust anti-discrimination laws conduct civil rights investigations that employers would just as soon avoid. However, the lack of regulation could cut both ways. In fact, those same civil rights investigations that employers dread often prevent lawsuits, as a no-cause dismissal from a state civil rights agency often persuades an employee not to file suit.
Because of their minimal state law protections, employees in Mississippi, Alabama, and Georgia are likely to pursue any discrimination claims at the federal Equal Employment Opportunity Commission. But the EEOC has largely abdicated its duty to investigate charges of discrimination in the past five years, instead simply issuing “right-to-sue” letters that provide said employees with an easy path to court.
Consequently, employers in Mississippi, Alabama, and Georgia may pine for state civil rights agencies to play a more active, gatekeeping role–minimizing costly and time-consuming discrimination lawsuits.
Changes to Civil Rights Enforcement: New Executive Order Eliminates Disparate-Impact Liability in Federal Regulations
On April 23, 2025, the President issued an Executive Order (“EO”) titled “Restoring Equality of Opportunity and Meritocracy” that seeks to drastically curtail the use of disparate-impact liability in federal regulations, marking a significant shift in the federal government’s approach to civil rights enforcement. What does this mean for companies going forward?
BackgroundLet’s start with a review of disparate-impact liability under civil rights laws. This concept refers to practices or policies that, while seemingly neutral, disproportionately affect members of a protected class. This type of liability does not require proof of intentional discrimination; instead, it focuses on the outcomes of the policies or practices.
For example, under Title VII of the Civil Rights Act of 1964, disparate-impact liability occurs when an employment practice adversely affects one group more than another, even if the practice appears neutral. If a plaintiff can show that a policy has a disproportionately negative effect on a protected class, the burden shifts to the defendant to demonstrate that the practice is job-related and consistent with business necessity. Disparate-impact liability is also recognized under several other federal and state civil rights laws.
The EO asserts that the foundational principle of the United States is equality of opportunity, not equality of outcomes. The EO criticizes disparate-impact liability as a “pernicious movement” that, in the administration’s view, undermines meritocracy and the constitutional guarantee of equal protection. Disparate-impact liability, as described in the EO, is a legal doctrine that presumes unlawful discrimination based solely on statistical differences in outcomes among groups, even absent any discriminatory intent or facially discriminatory policy. The EO contends that this doctrine compels employers and businesses to consider race or other protected characteristics in decision-making, thereby encouraging racial balancing and undermining individual merit.
Key EO Provisions
The EO focuses on deprioritizing enforcement of any rules that impose disparate-impact liability. It directs the attorney general, in coordination with agency heads, to identify all existing regulations, guidance, rules, or orders that impose disparate-impact liability and reporting on steps for their amendment or repeal within 30 days. The review also extends to state laws and decisions that impose disparate-impact liability. In addition, the EO requires the following:
Revocation of Prior Approvals and Regulations: The EO revokes prior presidential approvals of Department of Justice regulations under Title VI of the Civil Rights Act of 1964 to the extent they impose disparate-impact liability. Specific regulatory provisions in 28 C.F.R. 42.104 are identified for revocation.
Review of Pending Matters: Within 45 days, the attorney general and the chair of the Equal Employment Opportunity Commission (“EEOC”) must assess all pending investigations, civil suits, or positions in ongoing matters under federal civil rights laws that rely on disparate impact liability and take appropriate action consistent with the new policy. The EO directs other agencies, including the Department of Housing and Urban Development and the Consumer Financial Protection Bureau, to review pending proceedings under the Fair Housing Act, Equal Credit Opportunity Act, and related statutes.
Review of Existing Judgments: The EO directs all agencies to evaluate, within 90 days, existing consent judgments and permanent injunctions that rely on disparate-impact theories and take appropriate action.
Future Agency Action and Guidance: The EO directs the attorney general to determine whether federal law preempts state laws imposing disparate-impact liability and to take appropriate measures. The EO also tasks the attorney general and the EEOC Chair with issuing guidance to employers on promoting equal access to employment, including for applicants without a college education.
Implications for Employers and Next StepsThis EO mandates a substantial change in the federal government’s enforcement of civil rights laws, particularly with respect to employment, housing, and credit. Employers should anticipate the following:
Reduced Federal Enforcement: Agencies are directed to deprioritize and amend regulations that can impose disparate-impact liability, potentially reducing the risk of federal enforcement actions that are based solely on statistical disparities.
Regulatory Uncertainty: The EO requires a comprehensive review and potential amendment or repeal of existing regulations that rely on disparate-impact theories, which may result in significant changes to compliance obligations.
State Law Considerations: The EO contemplates federal preemption of state disparate-impact laws, which may lead to further legal challenges and changes at the state level.
Guidance on Merit-Based Practices: Employers may receive new federal guidance emphasizing merit-based hiring and promotion practices, with a focus on individual qualifications rather than group-based outcomes.
Employers should continue to monitor developments as agencies undertake the required reviews and issue new guidance. Employers should also consult with legal counsel under privilege to confidentially review their current policies and practices in light of the coming changes.
New Executive Order Targets Workplace Discrimination Law: Major Shift Away from Disparate Impact Liability
The latest Executive Order signed by President Trump on April 23, 2025, titled “Restoring Equality of Opportunity and Meritocracy,” eliminates disparate impact liability in federal employment policy. Learn how this change could impact workplace discrimination claims and DEI compliance.
It directs the Attorney General and the Equal Employment Opportunity Commission (EEOC), within 45 days of the order, to “assess all pending investigations, civil suits, or positions taken in ongoing matters under every federal civil rights law within their respective jurisdictions, including Title VII of the Civil Rights Act of 1964, that rely on a theory of disparate-impact liability…” It also directs other federal agencies to effectively do the same, some within 45 days and others within 90 days. And, the Attorney General and EEOC are directed to “formulate and issue guidance or technical assistance to employers regarding appropriate methods to promote equal access to employment regardless of whether an applicant has a college education, where appropriate.”
A Significant Shift in Workplace Discrimination Law
While framed as a return to merit-based employment practices, this sweeping Executive Order marks a significant change in how workplace discrimination claims—specifically disparate impact—will be evaluated under federal law.
But what does this mean for employees, employers, and HR professionals?
Let’s start with the basics:
Disparate Impact vs. Disparate Treatment Discrimination: What’s the Difference?
Under U.S. anti-discrimination laws—such as Title VII of the Civil Rights Act—two key legal theories are often used to prove unlawful discrimination:
Disparate Impact Discrimination
This occurs when a neutral workplace policy or practice disproportionately harms a protected group—even if there was no intent to discriminate.
Example:A company implements a height requirement for job applicants. While it appears neutral, it may disproportionately exclude women or individuals of certain ethnic backgrounds. That unintended effect can give rise to a disparate impact claim.
Key Characteristics:
Unintentional discrimination
Based on statistical outcomes
Often seen in hiring, promotions, or testing criteria
Disparate Treatment Discrimination
This is the more familiar form of discrimination—when an employer treats someone differently because of their protected status (race, gender, religion, etc.).
Example:A manager refuses to promote an equally qualified candidate because she is pregnant. This is direct and intentional discrimination.
Key Characteristics:
Intentional unequal treatment
Often easier to identify, but harder to prove without clear evidence
May involve overt bias or prejudice
What the Executive Order Changes:
The new Executive Order eliminates disparate impact liability in federal employment policy and regulations. This means:
Federal agencies, contractors, and regulated entities are no longer expected to analyze or correct practices that produce unequal outcomes unless intentional discrimination can be proven.
Title VI disparate impact regulations previously enforced by the Department of Justice have been revoked.
DEI initiatives that were built to proactively address disparate outcomes may now be legally vulnerable.
The rationale?The Order argues that disparate impact theory forces race-conscious practices, compelling employers to consider demographics over merit, which the administration believes is unconstitutional.
Implications for Employers and DEI Policies
This Order creates a new legal landscape:
Federal Contractors & Government Entities must review their compliance programs—especially those involving hiring, testing, and promotion criteria that previously considered statistical disparities.
Private Employers, though not directly bound, the Order may influence litigation trends and public expectations. Courts may become more skeptical of claims based solely on disparate impact.
Diversity, Equity, and Inclusion (DEI) Programs and strategies focused on closing outcome gaps could be seen as race- or gender-conscious decision-making, which may now face legal challenges.
Employee Protections where employees may find it harder to challenge facially neutral practices that have discriminatory effects, even when patterns of exclusion are evident.
This Executive Order represents a dramatic departure from decades of anti-discrimination enforcement. While the Order re-centers meritocracy as a guiding principle, it also narrows the avenues for challenging systemic inequality in the workplace. The effect of this Executive Order is a significant raising of the bar for employees alleging discrimination. Under the prior framework, a plaintiff could bring a successful claim by showing that a neutral policy disproportionately affected a protected group—even without proving intent.
Now, plaintiffs must prove intentional discrimination—a much more difficult standard. This shift:
Narrows the legal pathway for holding employers accountable for systemic inequities;
Requires evidence of overt bias or discriminatory motive, which is often concealed or subtle; and
Makes it harder to challenge institutional practices that may perpetuate inequality, even if no one person intended to discriminate.
In short, by eliminating disparate impact as a legal tool, the Executive Order removes a critical mechanism for addressing hidden or structural discrimination in the workplace. We will continue to monitor developments regarding the implementation of this Executive Order and its impact on this critical area of the employment law landscape.
What’s Happening With EEO-1 Data Collection
2024 EEO-1 Component 1 Data Collection Set to Proceed
The 2024 EEO-1 Component 1 data collection process is expected to move forward, based on documentation submitted to the White House Office of Management and Budget (OMB) for approval. The proposed 2024 EEO-1 Instruction Booklet states the data collection is slated to begin on Tuesday, May 20, 2025, with a submission deadline of Tuesday, June 24, 2025.The EEOC has stated it intends to publish the finalized dates on its website.
EEOC Seeks to Eliminate Non-Binary Reporting Option
The EEOC has submitted a change request to OMB, aimed at modifying the Instruction Booklet rather than the reporting form itself. Notably, the EEOC is seeking to remove the voluntary reporting option for employees who identify as non-binary.
In previous years, employers had the option to report non-binary employees separately, outside the male/female categories, with the count included in a comments section. However, under Executive Order 14168, “Defending Women From Gender Ideology Extremism and Restoring Biological Truth to the Federal Government,” the EEOC has eliminated this reporting option entirely.
The updated “Reporting by Sex” section in the revised Instruction Booklet has been reduced to a single sentence: “The EEO-1 Component 1 data collection provides only binary options (i.e., male or female) for reporting employee counts by sex, job category, and race or ethnicity.”
What’s Next
The 2025 EEO-1 reporting cycle, covering 2024 data, appears to be on track, though the EEOC has not yet updated its official EEO-1 data collection website: https://www.eeocdata.org/eeo1.
Employers should monitor for further guidance from the EEOC, especially concerning the reporting of non-binary employees and compliance expectations for federal contractors. In the meantime, employers should consult with outside counsel regarding best practices for compliance and submission of data.
New Jersey Bill to Eliminate Minimum Wage Tip Credit Will Impact Hospitality Industry
New Jersey stands at a crossroads regarding the compensation of tipped workers. Introduced on March 10, 2025, Assembly Bill A5433 proposes a significant change to the New Jersey Wage and Hour Law: phasing out the “tip credit.”
Quick Hits
New Jersey Assembly Bill A5433 proposes a five-year phase-out of the tip credit, spanning from 2026 to 2030.
The bill would mandate employers pay the full state minimum wage to tipped employees before the addition of tips.
Potential consequences include increased labor expenses for businesses, higher prices for consumers, and uncertain effects on the overall income of tipped workers.
The tip credit is a legal provision allowing employers to pay tipped employees a direct cash wage below the applicable minimum wage rate, and allows employers to use a portion of the tips received by the employee to make up the difference.
This initiative has sparked intense debate about its potential consequences. Advocates claim the bill promotes fairness and worker protection, while opponents fear it will inflate business costs, drive up consumer prices, and trigger job losses within the restaurant and hospitality sectors.
Understanding the Tip Credit
Most employers in New Jersey are governed by two wage and hour laws: the federal Fair Labor Standards Act (FLSA) and the New Jersey Wage and Hour Law (NJWHL). Employers must pay their nonexempt employees the federal ($7.25) or state ($15.49) minimum wage rate, whichever is higher. Currently, both laws also permit employers to count a portion of their employees’ tips toward their minimum wage obligation—a legal mechanism known as the “tip credit.”
Under the FLSA, to utilize the tip credit, employers must first inform employees of their intent to do so. Subsequently, employers must pay “customarily tipped” employees (e.g., waiters and bartenders) a direct cash wage of at least $2.13 per hour. If an employee earns at least $5.12 per hour in tips (the difference between the $2.13 minimum cash wage and the $7.25 minimum wage) over the employee’s shift, the employer can apply these tips as a “credit” against the employee’s minimum wage obligations.
The NJWHL also allows for a tip credit, capped at $9.87 per hour as of 2025. Employers must pay tipped employees a minimum cash wage ($5.62 per hour in 2025), and the total of wages and tips must meet or exceed the state minimum wage.
Employers must ensure that the sum of the direct cash wage and the received tips equals or surpasses the federal (and state) minimum wage for all hours worked in a workweek. If the total falls short, the employer must pay the difference to the employee. This guarantees that the employee receives at least the minimum wage, regardless of the combination of employer-provided cash wages and customer tips. Employers are not required to use the tip credit, but employers commonly use it because it can reduce their costs.
Proposed Changes: Assembly Bill A5433
Assembly Bill A5433 aims to completely eliminate the tip credit under the NJWHL by reducing the amount of tip credit an employer may claim over a five-year period:
2026: $7.90 per hour allowable tip credit
2027: $5.92 per hour allowable tip credit
2028: $3.95 per hour allowable tip credit
2029: $1.97 per hour allowable tip credit
2030 and beyond: Tip credit eliminated
Crucially, the bill would not prohibit tipping; it would only prevent employers from using a portion of those tips to fulfill their obligation to pay nonexempt employees the minimum wage. By 2030, employers would be required to pay all tipped employees the full state minimum wage before any additional tips.
While the FLSA still permits employers in other states to utilize the tip credit, employers in New Jersey would be obligated to comply with the more stringent requirements of the bill. Thus, eliminating the tip credit under the NJWHL would effectively prohibit New Jersey employers from utilizing the tip credit under the FLSA as well, as taking any tip credit would constitute a violation of New Jersey’s minimum wage law for tipped employees.
Potential Impacts and Concerns
On April 10, 2025, the New Jersey Assembly convened a two-hour hearing to gather public feedback on the bill. The potential elimination of the tip credit elicited strong and contrasting reactions from employees and employers.
The bill’s sponsor, Assemblywoman Verlina Reynolds-Jackson, stated the bill’s intent is to ensure tipped workers “make a decent wage; people should be paid fairly for the work they do.” Proponents argue that eliminating the tip credit guarantees a stable baseline income that is not dependent on the discretionary nature of tipping. This simplified wage structure could also enhance employees’ understanding of their rights and streamline the enforcement of wage laws, thereby reducing wage theft.
Opponents say it would paradoxically reduce earnings for servers, who often make significantly more than minimum wage through tips. Restaurants would bear the increased burden of directly paying all tipped employees the full minimum wage, leading to increased labor costs. Restaurants might be forced to implement mandatory service charges that don’t necessarily benefit their tipped employees, or they could reduce staff hours and eliminate positions altogether. These changes could result in higher menu prices, potentially harming the business, and could also discourage individuals from seeking server positions due to diminished earning potential. Opponents also argue New Jersey’s current system functions effectively, already guaranteeing minimum wage while allowing for substantial earning potential through tips.
Conclusion
The proposed elimination of the tip credit in New Jersey has the potential to dramatically reshape the state’s legal landscape, particularly within the restaurant and hospitality industry. While intended to foster a more equitable wage system, the potential repercussions for employees, businesses, and consumers warrant careful consideration as the legislative process unfolds.
“Close Enough for Government Work” – California Pays Retiring Prison Dentist $1.2 Million for Unused Vacation Days!
According to the Los Angeles Times, a retiring “prison supervising dentist” became a millionaire overnight when the state paid him $1.2 million for unused vacation benefits that he had been accruing for decades. This mammoth payout represents just a drop in the bucket considering the more than $5.6 billion in unfunded liability the state has amassed for vacation and other leave benefits owed to current employees.
According to the article, state employees receive up to six weeks per year of paid vacation benefits, 11 paid state holidays, a paid “personal holiday” and paid professional development days. Apparently, there are policies in place that cap vacation balances at 640 hours for most state employees, but there is an inexplicable “failure to enforce” such policies. Any changes, notes the article, “would have to be negotiated with the state’s powerful and deep-pocketed public sector unions,” which are among the top donors to the unions’ many friends and admirers who control Sacramento.
Vital takeaway: Employers in the private sector should confirm that their vacation policies include a reasonable cap on the amount of vacation time employees may accrue and should otherwise verify with legal counsel their current compliance with California’s unique vacation accrual and payment rules to avoid potential liability pitfalls.
Red Tape Rollback: DOJ’s Anticompetitive Regulations Task Force
As we predicted before the inauguration, Trump 2.0 antitrust enforcers have shown continued support for the pro-worker, anti-tech antitrust agenda that has permeated recent antitrust enforcement through the last two administration changes. This time around, President Trump appointed competition agency leaders in Chair Ferguson at the Federal Trade Commission (FTC) and AAG Slater at the Department of Justice Antitrust Division (DOJ) who identify with a brand of conservative populism coalescing around many of the same policies and priorities as Biden-appointed competition leaders like FTC Chair Lina Khan. For example, since the inauguration, antitrust agencies under their leadership have forged on with antitrust cases against Big Tech, backed the Biden-era revisions to the merger and labor guidelines, and doubled down on efforts to use antitrust laws to protect American workers.
The Anticompetitive Regulations Task Force
The DOJ recently announced an Anticompetitive Regulations Task Force “to advocate for the elimination of anticompetitive state and federal laws and regulations that undermine free market competition and harm consumers, workers, and businesses.”
The move was instigated by President Trump’s Executive Orders 14192 and 14219, which promote deregulation and direct agencies to identify regulations that “impede private enterprise and entrepreneurship.” To that end, the Task Force will partner with federal agencies to help identify regulations that inhibit competition in the industries they monitor. Significantly, EO 14192 requires that for an agency to promulgate new regulation, it must identify at least ten existing regulations to be repealed. Similar efforts have been announced across other agencies.
In addition to advising agencies, the Task Force “Invites Public Input Targeting Red Tape that Hinders Free Market Competition” and is soliciting public comments at www.Regulations.gov through May 26 on regulations that interfere with businesses’ ability to compete. This is a powerful prospect for those interested in influencing competition policy, since the administration appears to be looking to do away with as much regulation as possible and has shown it can move quickly.
The Task Force also seeks to influence policy by filing amicus briefs in private litigation and weighing in on proposed state legislation. In a “what’s old is new again” way, much of this work has been done for decades by the DOJ’s Policy and Appellate Sections, and examples of this type of competition advocacy spanning more than a decade can be found in its Comments to Federal Agencies, Comments to States and Other Organizations, and Statements of Interest.
Industries of Interest
The Task Force intends to focus on markets that have the greatest impact on American households, including:
Housing
Transportation
Food and Agriculture
Healthcare
Energy
The cited industries of interest are unsurprising, since not only are they currently tightly regulated, but they also represent some of the largest areas of government spending and have been a perennial focus of antitrust investigations, litigation, enforcement, and competition advocacy. Indeed, these industries are held out by some as examples of industries dominated by large players.
The Task Force announcement focuses on the ways red tape regulations hurt small businesses by imposing barriers to entry and inequitably increasing compliance costs. A purported goal is to cut back regulations in order to make it easier for smaller, disruptive companies (“Little Tech!”) to enter these industries and successfully compete. However, the effects of anticompetitive regulations and any regulatory rollbacks will be experienced equally by large and established companies, so the call for identification of areas in need of rollback appears to be open to all.
Potential Impact
While businesses are attempting to navigate the administration’s other swift changes, this Task Force presents an opportunity for some long overdue positive changes, particularly in areas plagued by anticompetitive red tape. For example, in the healthcare industry, the DOJ and FTC have expressed competition concerns relating to Certificate of Need laws in numerous states.
The energy industry could present an interesting policy conundrum for Trump 2.0 antitrust enforcers as the smaller, disruptive market participants the Task Force encourages to speak up are likely non-incumbent alternative and environmentally conscious energy providers. While these issues are likely to be swept into the Task Force’s review, it remains to be seen whether the Trump administration will have an appetite to advocate for these providers’ competitive footing, or instead focus on seeking rollback of ESG-focused regulations.
Similarly, the Task Force’s attention to small businesses means another likely target is occupational licensing. Under the previous Trump administration, the FTC’s Economic Liberty Task Force released a report on Options to Enhance Occupational License Portability, but rolling back licensing requirements altogether could push the administration’s policy goals much further. Here too, regulation repeal would likely face a fair amount of pushback, even from within the industries.
Conclusion
While the fruits of the Task Force’s efforts will likely take a long time to materialize, companies—particularly those in the Housing, Transportation, Food and Agriculture, Healthcare and Energy industries—have a meaningful opportunity to call out barriers to competition that they face and potentially impact competition agencies’ focus.
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President Trump Signs Executive Order Seeking to End Disparate Impact Discrimination
On April 23, 2025, President Donald Trump issued an executive order (EO) calling for an end to disparate impact liability for discrimination and ordering federal enforcement agencies to stop enforcement of antidiscrimination laws based on disparate impact theories.
Quick Hits
President Trump signed an executive order aimed at ending the legal theory of disparate impact discrimination by deprioritizing its enforcement within federal regulations, including Title VII of the Civil Rights Act of 1964.
The move is part of a broader effort by the Trump administration to reshape federal antidiscrimination and DEI policies and could lead to potential legal disputes.
The EO, titled “Restoring Equality of Opportunity and Meritocracy,” effectively deprioritizes disparate impact, calls for technical assistance to be issued by the U.S. Equal Employment Opportunity Commission (EEOC), and questions disparate impact regulations under Title VII of the Civil Rights Act of 1964 and other laws that implicate disparate impact causes of action and liability.
Disparate impact refers to the legal doctrine whereby employers or other entities may be held accountable for a specific employment practice or policy that, while neutral on its face and not intended to discriminate, causes a substantial adverse impact to a protected group (such as sex) and cannot be justified as serving a legitimate business goal for the employer.
Disparate impact liability has been a key component of federal antidiscrimination law and has been upheld in multiple landmark court cases and codified in Title VII as part of the Civil Rights Act of 1991 (42 U.S.C. 200e-2(K)). However, the EO states it is now “the policy of the United States to eliminate the use of disparate-impact liability in all contexts to the maximum degree possible to avoid violating the Constitution, Federal civil rights laws, and basic American ideals.”
Specifically, the EO orders “all agencies” to “deprioritize enforcement of all statutes and regulations to the extent they include disparate-impact liability,” including Title VII. The order directs the Attorney General and the EEOC chair to “assess pending investigations, civil suits, or positions taken in ongoing matters” that “rely on a theory of disparate-impact liability.”
The EO further revokes “Presidential approval” of key regulations carrying out Title VI of the Civil Rights Act of 1964, which prohibits discrimination on the basis of race, color, or national origin in programs and activities receiving federal financial assistance.
Next Steps
The EO is the latest related to antidiscrimination and diversity, equity, and inclusion (DEI) policies, as the Trump administration seeks to refocus federal policy and eliminate “unlawful” racial preferences. However, the policies have faced over 200 legal challenges, and some aspects of the orders have been enjoined. It is likely that the latest EO could similarly be challenged. Further, while the EO seeks to stop the federal agencies from pursuing claims or taking positions that rely on theories of disparate impact, private individuals may still pursue such claims.
The Employee Retention Credit: IRS’s “Risking” Model Faces Legal Challenge
Case: ERC Today LLC et al. v. John McInelly et al., No. 2:24-cv-03178 (D. Ariz.)
In an April 2025 order, the US District Court for the District of Arizona denied a motion for a preliminary injunction filed by two tax preparation firms. The firms sought to halt the Internal Revenue Service’s (IRS) use of an automated “risk assessment model” that the IRS used to evaluate and disallow claims for the Employee Retention Credit (ERC), seeking to restore individualized review of ERC claims.
BACKGROUND ON THE ERC
The ERC was enacted in 2020 as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act to provide financial relief to businesses affected by COVID-19 by incentivizing employers to retain employees and rehire displaced workers. The ERC allowed employers that experienced significant disruptions due to government orders or a substantial decline in gross receipts to claim a tax credit equal to a percentage of qualified wages paid to employees. Millions of employers have filed amended employment tax returns (Form 941-X) claiming the credit for periods in 2020 and 2021. Since the enactment of the CARES Act, the IRS has issued roughly $250 billion in ERC.
THE IRS’S MORATORIUM AND AUTOMATED RISK ASSESSMENT MODEL
In September 2023, the IRS instituted a moratorium on processing ERC claims to review its procedures, reduce the backlog of claims, and identify potential fraud. Before the moratorium, all ERC claims received individualized review. During the moratorium, the IRS developed an automated “risk assessment model” to facilitate the processing of claims. This model, which is alternatively known as “risking,” utilizes taxpayer-submitted data and publicly available information to predict the likelihood that a taxpayer’s claim is valid or invalid. Claims deemed to be “high risk” by the system are excluded from review by an IRS employee and instead are designated for immediate disallowance. In August 2024, the IRS lifted its ERC processing moratorium and began issuing thousands of disallowance notices to taxpayers. Notwithstanding these actions, the number of pending ERC claims remained above one million as of November 2024.
THE COURT CHALLENGE TO THE IRS’S “RISKING” MODEL
In their motion for a preliminary injunction, filed January 7, 2025, the plaintiffs (the tax preparation firms) sought a court order compelling the IRS to, among other things, stop the use of “risking” and restore individualized employee review of ERC claims. The plaintiffs claimed to be injured by the “risking” model because they were unable to collect contingency fees from clients when claims were disallowed.
In support of their motion, the plaintiffs pointed to having received on behalf of their clients many boilerplate rejections immediately following the end of the moratorium. The plaintiffs alleged that these summary disallowances were arbitrary and capricious, thus violating the Administrative Procedure Act (APA), because the “risking” model precluded the IRS from acquiring information necessary to properly evaluate the claims.[1] The plaintiffs also contended that the disallowances reflected a shift in IRS policy to disfavor ERC, with the result being that several legitimate claims were being unfairly disallowed. The plaintiffs argued that this apparent shift violated Congress’s intent in enacting legislation providing for ERC.
On April 7, 2025, the court denied the motion, finding that the plaintiffs failed to meet the high bar for injunctive relief at this stage of the litigation.[2] The court said that the record of the case at this juncture did not support the plaintiffs’ contention that the increase in claim disallowances after August 2024 was because of the IRS denying valid claims. However, the court pointed to a concession by the IRS that its use of the “risking” model may be resulting in the disallowance of legitimate claims. The court suggested at several points in its order that the plaintiffs (or the employers they support) could bring forth evidence demonstrating that the “risking” model was unduly denying benefits to deserving taxpayers.
Practice Point: This case highlights that the IRS has been adopting novel mechanisms to address its backlog of pending ERC claims, which given current resource constraints, it may seek to employ them in other contexts, including those involving income tax refunds. The “risking” model in particular, while purporting to expedite the review of certain supposedly “high-risk” claims, may be having the collateral consequence of denying benefits to eligible employers. Taxpayers with potentially meritorious claims can (and should) be prepared to administratively appeal or even litigate disallowed claims, which they can do by filing a complaint in the US district court with jurisdiction or in the US Court of Federal Claims.
[1] The plaintiffs also alleged that the IRS exceeded its statutory authority by disallowing their clients’ ERC claims without providing them a right to be heard or a direct right to appeal in an independent forum. The plaintiffs argued that the IRS violated the Due Process Clause of the US Constitution’s Fifth Amendment by depriving their clients of ERC without adequate review of these clients’ claims.
[2] More specifically, the court found that the plaintiffs did not establish that they had standing to seek the requested relief, or that the United States (through the actions of the IRS) had waived sovereign immunity as to the plaintiffs’ APA claims. The court also concluded that the plaintiffs did not show that their due process claim was likely to succeed on the merits such that a preliminary injunction was an appropriate remedy.