Noncompete Agreements: Updated Income Thresholds for 2025
As our readers know, in 2024 the Federal Trade Commission’s (FTC) proposed regulation to eliminate almost all noncompete agreements did not come to fruition — at least for now. As we reported earlier this month, however, the failure of the FTC ban has not stopped states from sharpening their hostility toward employer non-compete agreements.
One method many states use to restrict noncompete agreements is income thresholds, which prohibit employers from entering into noncompete agreements or other restrictive covenants with employees who earn below a certain wage. We previously wrote about these restrictions here. In several states, the threshold increases annually. Specifically, thresholds in Washington, Colorado, Maine, Rhode Island, Oregon, Virginia, and Washington D.C. increase each year. So, as we ring in 2025, we also ring in higher income thresholds in those states.
Washington: Washington’s noncompete statute, RCW 49.62.020, originally established an income threshold of $100,000. The Washington State Department of Labor & Industries adjusts the threshold annually to account for inflation. According to its website, the 2025 threshold for employees is $123,394.17. Washington maintains a higher income threshold for independent contractors, which increases to $308,485.43 in 2025.
Colorado: Colorado’s new noncompete law established a noncompete income threshold and a non-solicitation income threshold. The noncompete threshold is based on the Colorado Department of Labor’s definition of a “highly compensated” worker, which is updated annually. The non-solicitation threshold is 60% of the noncompete threshold. In 2024, the noncompete threshold was $123,750, and the non-solicitation threshold was $74,250. In 2025, the thresholds will be $127,091 and $76,254.60, respectively.
Maine: Maine bases its threshold on the federal poverty level. Maine’s threshold is 400% of the federal poverty level. Accordingly, Maine is updating its $60,240 threshold from 2024 to $62,600 in 2025.
Rhode Island: Rhode Island’s threshold is also based on the federal poverty level. Rhode Island’s threshold is 250% of the federal poverty level. Thus, Rhode Island’s threshold of $37,650 in 2024 is being increased to $39,125 in 2025.
Oregon: Oregon’s threshold is based on the consumer price index for all urban consumers in the western region, which increases its threshold from $113,241 in 2024 to $116,427 in 2025.
Virginia: Virginia’s threshold is based on the average weekly wage in the Commonwealth, which increases the Commonwealth’s 2024 threshold of $73,320 to $76,081.20 in 2025.
Washington D.C.: D.C.’s threshold is adjusted annually based on the Consumer Price Index. Although not yet released, D.C.’s $154,200 threshold is expected to increase considerably in 2025.
None of the other states that currently impose income thresholds are set to increase their thresholds in 2025. Under Illinois’s recent noncompete law, the $75,000 income threshold is not set to increase until 2027. As for the remaining states, a date of increase is not predetermined, and there is no reason to expect increases in 2025. New Hampshire’s threshold is tied to the federal minimum wage, Maryland’s threshold is set at $15 per hour and will not change (absent new legislation), Massachusetts’ threshold is tied to whether an employee is exempt under the FLSA, and Nevada’s threshold is based on whether an employee is paid on an hourly basis.
In light of the new thresholds, employers expecting to enter noncompete agreements with employees in Washington, Colorado, Maine, Rhode Island, Oregon, Virginia, or Washington D.C. should work with counsel to modify their agreements to meet these new standards as well as conside adjusting compensation for key employees who are close to the new thresholds. We will continue to monitor and report on developments in this highly dynamic area of law.
2025 Outlook: Recent Changes in Construction Law, What Contractors Need to Know
The construction industry is at a crossroads, influenced by shifting economic landscapes, technological advancements, and evolving workforce dynamics. With 2025 under way, businesses must stay ahead of key trends to remain competitive and resilient. Understanding these industry shifts is critical—not just for growth, but for long-term sustainability and safety.
Here’s what to expect in 2025:
Job Market
According to the Michael Bellaman, President and CEO of Associated Builders and Contractors (“ABC”) trade organization, the U.S. construction industry will need to “attract about a half million new works in 2024 to balance supply and demand.” This estimate considers the 4.6% unemployment rate, which is the second lowest rate on record, and the nearly 400k average job openings per month. A primary concern as we enter 2025 is to grow the younger employee pool, as 1 in 5 construction workers are 55 or older and nearing retirement.
While commercial construction has not yet been as heavily impacted as residential construction by the lack of workers, the demand for commercial will increase as more industries are anchored on U.S. soil. Think of bills such as the CHIPS and Science Act that allocated billions in tax benefits, loan guarantees, and grants to build chip manufacturing plants here. This is true regardless of political party; investing in American goods and manufacturing seems to be a bipartisan opinion.
AI and Robotics
At the end of 2024, PCL Construction noted that AI will be an integral part of the construction industry. Demand for control centers will drive up commercial production, though the workforce lack may present some challenges when it comes to a construction company’s productivity and workload capacity.
AI will not just change the supply and demand market, but also will be integrated in the day-to-day mechanics and sensors for safety measures within a construction zone. On top of the demand for microchips catalyzed by the CHIPS and Sciences Act, AI is used to “monitor real-time activities to identify safety hazards.” AI-assisted robotics can take on meticulous work such as “bricklaying, concrete pouring, and demolition while drones assist in surveying large areas.” We will start to see where the line is drawn between which jobs require a skilled worker and which can be handled by AI without disrupting the workforce.
Economic Factors
The theme of the years following COVID-19 has been to return the economy to what it was pre-pandemic, including slashing interest rates and controlling inflation. With this favorable economic outlook for 2025, construction companies can look to increasing their projects. On the residential side, the economic boom may drive housing construction to meet demand. On the commercial side, less inflation and lower interest rates for the business can lead to more developmental projects such as megaprojects and major public works. Economist Anirban Basu believes that construction companies may not reap these benefits until 2026 due to the financing and planning required.
Bringing production supply chains back to U.S. soil can help alleviate some of the global concerns such as the crisis in the Red Sea, international wars, and the high tariffs proposed by the Trump Administration. Again, economists are predicting this bountiful harvest in a few years rather than immediately.
Environmental Construction
Trends toward sustainability are leading the construction industry toward greener initiatives such as modular and prefab structures. Both options find the construction agency developing their structures outside of the building sites.
AI can also play a hand in developing Building Information Modeling (“BIM”) to better understand the nuances, possible pitfalls, and visualization of the project before construction begins. Tech-savvy construction agencies are already using programs such as The Metaverse or Unreal Engine for BIM and can significantly reduce project time, resources, and operational costs.
Employee Safety and PPE: Emphasis on employee safety – smart PPE and “advanced monitoring systems”
PPE requirements will far surpass the traditional protective gear (such as helmets, masks, and gloves). Construction sites may soon be required to supply smart PPE products that can scan a worker’s biometrics and environment to prevent medical anomalies or hazardous environmental conditions. Smart PPE devices will be enabled with Internet of Things (“IoT”) to ensure real-time data transmission and to use data analytics to track patterns or predict risks.
Conclusion
The construction industry’s future hinges on adaptability and innovation. By addressing workforce shortages, integrating AI-driven solutions, and adopting sustainable practices, companies can position themselves for success in a dynamic market. Whether it’s preparing for the long-term economic upswing or enhancing employee safety through smart PPE, proactive measures today can lead to stronger, more resilient operations tomorrow. Staying informed and prepared will be crucial for navigating the challenges and seizing the opportunities ahead.
The DOL Issues New Guidance On The Relationship Between The FMLA and State Paid Family Medical Leave Programs
Employers face a complicated patchwork of state, local and federal laws governing time off for family and medical reasons. The intersection of these often-overlapping laws creates numerous issues including how to handle time off that qualifies under both state paid family medical leave (PFML) laws and the federal Family and Medical Leave Act (FMLA). On January 14, 2025, the Wage and Hour Division (WHD) of the U.S. Department of Labor (DOL) issued an opinion letter stating that employers cannot require employees to use their employer-provided paid time off such as vacation time while the employee is taking leave under the FMLA and receiving pay under a state or local PFML program. The WHD explained that the DOL’s FMLA regulations on substitution of paid leave apply to leave taken under a PFML program in the same way they apply when an employee is on FMLA leave and receiving benefits under a paid disability plan.
Background
Thirteen states and the District of Columbia have adopted mandatory PFML programs, and more states are considering similar legislation. Each state program is unique, but generally PFML programs provide income replacement for a certain number of weeks from a state fund for employees who are absent from work for specified family reasons, such as the birth of a child, and/or medical reasons, such as the employee’s own serious health condition. State and local PFML laws vary widely in their payment and eligibility structures but often employees who are eligible for leave and benefits under a state program are also eligible for unpaid leave under the FMLA.
Substitution of Paid Leave
When an employee takes job-protected leave under the FMLA, the regulations state that an employee may elect, or an employer may require an employee, to “substitute” accrued employer-provided paid leave (i.e., paid vacation, paid sick leave) for any part of the unpaid FMLA entitlement period. However, if an employee taking FMLA receives payments under a disability plan or worker’s compensation program, the employer cannot unilaterally require the employee to use accrued employer-provided paid time off.
DOL’s Guidance
Against this backdrop, the DOL opined that while state and local PFML programs are not directly addressed in the FMLA regulations, the same principles apply to such programs as those that apply to employees that receive payments on FMLA from workers’ compensation insurance programs or disability plans. These principles include:
Where an employee takes leave under a state or local PFML program, if the leave is covered by the FMLA, it must be designated as FMLA leave and the employee must be given notice of the designation, including the amount of leave to be counted against the employee’s FMLA leave entitlement.
Where an employee, during leave covered by the FMLA, receives compensation from a state or local PFML program, the FMLA substitution provision does not apply to the portion of leave that is compensated. This means that an employee or employer cannot unilaterally require the concurrent use of employer-provided paid leave for leave that is already compensated by the PFML program.
Where an employee is receiving compensation through the state or local PFML program that does not fully compensate the employee for their FMLA covered leave, the employer and employee may agree, if state law permits, to use the employee’s accrued employer-provided paid leave to supplement the payments under the state or local leave program, but the employer cannot require it.
If an employee is eligible for a state or local PFML program under circumstances that do not qualify as FMLA leave, the employer cannot apply the leave against the employee’s FMLA entitlement.
If an employee’s leave under a state or local PFML program ends before the employee has exhausted the full FMLA entitlement, the employee is still entitled to the protections of the FMLA and the employee could elect, or the employer could require the employee, to substitute the employer-provided paid leave consistent with the FMLA rules and regulations.
The DOL provides a useful example to illustrate these principles:
Yvette takes eight weeks of continuous FMLA leave to care for her mother following her mother’s inpatient surgery. Yvette’s employer notifies her that the eight weeks are designated as FMLA leave. Caring for a parent with a serious health condition is also a qualifying reason under her state’s family leave program, and she applies for and receives benefits that replace two-thirds of her normal income each week that she is on leave, for up to six weeks.
During the six weeks that Yvette is receiving paid leave benefits under the state program, under the FMLA, her employer cannot require, and she cannot unilaterally elect, to substitute her accrued vacation under her employer’s leave plan and thereby receive full pay from her employer in addition to the state-paid benefit. However, if Yvette’s state permits an employee to use accrued paid leave concurrently with the state’s paid leave, the FMLA permits Yvette and her employer to agree that Yvette will use one-third of a week of her vacation time each week to supplement the portion of her full pay that is not provided by the state’s paid leave benefit.
During the final two weeks of Yvette’s FMLA leave, she will have exhausted her state program’s paid leave. At that point, her leave becomes unpaid leave, and the FMLA substitution provision applies. Yvette elects to use her employer-provided accrued paid vacation time to receive pay during the final two weeks of her FMLA leave.
Using the False Claims Act to Police Federal Contractors’ Employment Practices
Two recent events — one settlement and one executive order — have heightened the risk that the False Claims Act (FCA) will be used as a tool to enforce the employment obligations of companies doing business with the federal government.
First, on January 16, 2025, the Department of Justice (DOJ) announced a settlement with Bollinger Shipyard. DOJ alleged that Bollinger violated the False Claims Act by knowingly billing the US Coast Guard for labor provided by workers who were not verified in the E-Verify system. Under FAR 52.222-54, federal contractors are required to enroll in the E-Verify program and verify the employment eligibility of all new employees as well as verify the eligibility of existing employees before assigning them to a contract. This is the first case we are aware of where DOJ has used the FCA to enforce the requirement to use the E-Verify system.
Second, included among the flurry of “Day-One” executive orders issued on January 21, 2025, the Trump Administration issued an executive order entitled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” Among other things, this sweeping order addressed the “Federal contracting process” in Section 3(b).
Section 3(b) instructs the Office of Federal Contract Compliance Programs to “immediately cease . . . Holding Federal contractors and subcontractors responsible for taking ‘affirmative action’ [and] Allowing or encouraging Federal contractors and subcontractors to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin.” (emphasis added).[1] That section further purports to prohibit federal contractors from advancing diversity initiatives by directing that “the employment, procurement, and contracting practices of Federal contractors and subcontractors shall not consider race, color, sex, sexual preference, religion, or national origin in ways that violate the Nation’s civil rights laws.”
To give teeth to this new mandate, the executive order attempts to bring its requirements within the purview of the FCA by providing:
(iv) The head of each agency shall include in every contract or grant award:
(A) A term requiring the contractual counterparty or grant recipient to agree that its compliance in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decisions for purposes of section 3729(b)(4) of title 31, United States Code; and
(B) A term requiring such counterparty or recipient to certify that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.
There is tension between this directive and current law. For example, in Escobar, the Supreme Court expressly rejected the notion that the government can establish materiality for FCA purposes through an agreement term. “The materiality standard is demanding. . . A misrepresentation cannot be deemed material merely because the Government designates compliance with a particular statutory, regulatory, or contractual requirement as a condition of payment. Nor is it sufficient for a finding of materiality that the Government would have the option to decline to pay if it knew of the defendant’s noncompliance.” Universal Health Serv. Inc. v. United States ex rel. Escobar, 579 U.S. 176, 194 (2016).
Further, there are few cases where the FCA was used to enforce a contractor’s employment practice obligations under current law. In Hill, the US Court of Appeals for the Seventh Circuit upheld the dismissal of an FCA case where the whistleblower alleged that the city of Chicago failed to follow its required affirmative action hiring plan. United States ex rel. Hill v. City of Chicago, Ill., 772 F.3d 455 (7th Cir. 2014). The court in that case held that the city’s implementation of a program that was different from the plan could not trigger the knowing element required for a false claim. Id. at 456.
Notably, the anticipated agreement clause and certification required by the executive order do not prohibit all diversity programs, but only those that “violate any applicable Federal anti-discrimination laws.” Accordingly, to be actionable under the FCA a plaintiff would likely need to show that a defendant knew at the time of its certification that it intended to violate applicable law.
[1] On Friday, January 24, 2025, Acting Secretary of Labor Vince Micone issued Secretary’s Order 03-2025, which directs “all DOL employees” to “immediately cease and desist all investigative and enforcement activity under the rescinded Executive Order 11246.” The order clarified that it applied to “all pending cases, conciliation agreements, investigations, complaints, and any other enforcement-related or investigative activity.” Notably, it provides that investigations or reviews under Section 503 and VEVRAA are “held in abeyance pending further guidance.”
FAR Controlled Unclassified Information Rule Standardizes and Extends Cybersecurity Requirements to All Federal Contractors
Go-To Guide:
New proposed FAR Controlled Unclassified Information (CUI) Rule would standardize cybersecurity requirements for all federal contractors and subcontractors.
Federal agencies and contractors must implement a new Standard Form to identify and safeguard CUI.
The Rule introduces eight-hour reporting requirement for potential CUI incidents or mismarked CUI.
Non-defense contractors and small businesses may face considerable compliance costs for initial setup and annual maintenance.
Public comment period on the proposed rule will remain open until March 17, 2025.
On Jan. 15, 2025, the Department of Defense (DoD), General Services Administration, and NASA, all members of the FAR Council, published a proposed FAR CUI Rule under Title 48 of the CFR. This proposed rule amends the Federal Acquisition Regulation (FAR) to implement the third and final piece of the National Archives and Records Administration’s (NARA) Federal Controlled Unclassified Information (CUI) Program, which dates back to Executive Order 13556 from 2010. A November 2024 GT Alert explains the history and origin of the FAR CUI journey.
As anticipated, the FAR CUI Rule applies to contractors of all federal executive agencies and implements NARA’s policies under 32 CFR part 2002, which codified a standardized approach to designating, handling, and safeguarding CUI. The proposed rule also introduces new procedures, including reporting and compliance obligations, and defines roles and responsibilities for both the government and contractors who use and handle CUI.
All Contractors Must Meet Baseline Cybersecurity Requirements
CUI Standard Form and Contract Clause. To advance uniformity across agencies, the proposed rule introduces a new standard form, SF XXX, which would be included in solicitations and contracts to “determine what information under the contract is considered CUI and how to properly safeguard the CUI.” Contractors that perform under an SF XXX would need to comply with FAR 52.204-XX (a new contract clause), which would further specify CUI requirements, such as NIST SP 800-171, revision 2 security requirements, or NIST SP 800-53 controls, as appropriate. It may also include agency-specific security requirements. The FAR Council also anticipates that a limited number of contractors would be subject to enhanced security requirements under NIST SP 800-172 to protect designated CUI that is associated with a critical program or high-value assets.
SF XXX (90 FR 4302)
To the extent that contractors need to flow down CUI with a subcontractor, contractors must also prepare an SF XXX and distribute it downstream “at all subcontract tiers” to ensure proper safeguarding throughout the supply chain. The expectation and goal are to ensure that all parties are aligned on what information is CUI and what is required to protect that information. The FAR Council estimates that, on average, it would take two hours to review the SF XXX, so both contractors and subcontractors should expect detailed CUI information and safeguarding instructions under each contract.
No CUI Contract Clause—FAR 52.204-YY. Identifying and Reporting Information That Is Potentially Controlled Unclassified Information. The proposed rule introduces a second contract clause that would apply where no CUI is involved in the performance of a contract (if the “No” box is marked in Part A of the SF XXX). Under this clause, contractors would need to notify the government “if there appears to be unmarked or mismarked CUI or a suspected CUI incident related to information handled by the contractor in performance of the contract.” This clause also flows down to subcontractors.
Solicitation Provision—FAR 52-204-WW. Notice of Controlled Unclassified Requirements. This new solicitation provision would notify “offerors that agencies will provide agency procedures on handling CUI during the solicitation phase if handling CUI is necessary to prepare an offer.” Like the proposed FAR 52.204-YY contract clause, this provision also provides that offerors should notify the contracting officer of any unmarked or mismarked CUI or a CUI incident during the solicitation phase.
Commercially Available, Off-the-Shelf Items. The CUI requirements under the proposed rule would not apply to solicitations and contracts that are solely for acquiring commercially available, off-the-shelf items. However, the new proposed FAR clauses would apply to acquisitions of commercial products and services, as well as to simplified acquisitions for other than commercial products or services.
Proposed Rule Principles
No Independent Certification; Ad-Hoc Verification. The proposed rule is distinct from the DoD’s implementation of its CUI Program and Cybersecurity Maturity Model Certification (CMMC) in that, as a default rule, contractors would not be required to submit evidence they are compliant with the CUI requirements. The FAR Council explains that “defense contractors should have already implemented system security plans in accordance with DFARS clause 252.204-7012 and non-defense contractors have incentive to ensure compliance with the requirements in FAR clause 52.204-XX to avoid liability for breaches of CUI that may result from improperly protecting CUI being handled on the contractor’s information system.” Instead, contractors may be required to furnish certain information upon request, including documentation to verify compliance with system security plans or training requirements in connection with a CUI incident.
Training Requirements. The proposed CUI requirements include minimum training requirements, which contractors and subcontractors would be required to complete as specified on the SF XXX. Agencies may, at their discretion, also require evidence that contractors and subcontractors have provided appropriate employee training on safeguarding CUI, as required under FAR clause 52.204-XX.
Eight-Hour Reporting. Where there is CUI that appears to be unmarked or mismarked, offerors and contractors must notify the contracting officer representative or designated agency official within eight hours of discovery. Further, non-defense contractors and subcontractors that discover a suspected or confirmed CUI incident—where “CUI was or could have been improperly accessed, used, processed, stored, maintained, disseminated, disclosed, or disposed of”—must report the incident to the agency as specified in the SF XXX. Subcontractors are also required to notify the prime or next higher tier subcontractor within the same eight-hour timeframe. (While the proposed rule does not attribute this requirement to defense contractors since they are expected to already comply with DFARS 252.204-7012, the relevant provision to “rapidly report” cyber incidents to DoD specifies a 72-hour timeframe from the time of discovery.)
Compliance Costs and Small Business Contractors. For non-defense contractors and subcontractors, the FAR Council estimates the following labor and hardware (Hw)/software (Sw) costs to comply with NIST SP 800-171, revision 2.
Type of Contractor
Initial Year CostsLabor | Hw/Sw
Recurring Annual CostsLabor | Hw/Sw
Small Business
$148,200 (est. 1,560 hours * $95)
$27,500
$98,800 (est. 1,040 hours * $95)
$5,000
Other Than Small
$543,400 (est. 5,720 hours * $95)
$140,000
$494,000 (est. 5,200 * $95)
$80,000
Separately, the proposed rule estimates that the annual cost to implement and maintain a system security plan is an additional $1,140 (est. 12 hours * $95). These estimates do not account for costs associated with NIST SP 800-53 or FedRAMP Moderate baseline compliance efforts because they are separately addressed under the proposed rule to standardize cybersecurity requirements for unclassified federal information systems (FAR Case 2021-019).
Much like DoD’s response to small business concerns under the CMMC rulemaking activities, as well as the Cybersecurity and Infrastructure Security Agency’s posture under the Cyber Incident Reporting for Critical Infrastructure Act proposed rules, small business contractors may not be granted categorical cost relief under the FAR CUI Rule. “[S]mall businesses that do business with DoD and handle CUI in performance of their contracts are already subject to requirements equivalent to the new FAR clause and provision,” and “small businesses that do business with other agencies that have included similar or overlapping safeguarding requirements under agency-specific contract terms may already be in partial or substantial compliance with the clause requirements.”
NIST SP 800-171 Revision 3 Updates. NIST issued revision 3 to SP 800-171 in May 2024, and as the publication nears its one-year anniversary, agencies will be required to meet the updated standards and guidelines (OMB Circular No. A-130 “Managing Information as a Strategic Resource”). The proposed rule acknowledges this and anticipates future rulemaking to incorporate the latest version. In doing so, the FAR Council explicitly notes the need to “immediately implement requirements to protect CUI on non-Federal information systems; therefore, this proposed rule does not seek to implement NIST’s most recent revision.”
Requirements for Federal Information Systems. Where the SF XXX specifies a federal information system using cloud computing services, the contractor must meet any agency-specified requirements and, at a minimum, must comply with the FedRAMP Moderate Baseline security controls. Where a contractor operates a non-federal information system but uses a cloud service provider to store, process, or transmit CUI, that cloud service provider must also meet FedRAMP Moderate Baseline standards.
Takeaways
While the new administration issued the standard regulatory freeze pending review, the order does not pause the public comment period, which will run through March 17, 2025, as scheduled. Moreover, federal contractors are advised that many of the obligations under the proposed rule are modeled after the established DFARS 252.204-7012, “which introduced many of these compliance requirements on defense contractors and subcontractors in 2015 and required compliance not later than December 31, 2017.” Interested parties should submit comments by March 17, 2025.
U.S. Supreme Court Urged to Extend ADA Protections to Former Employees
The U.S. Supreme Court heard oral arguments on Jan. 13, 2025, in Stanley v. City of Sanford (No. 23-997), which addresses whether former employees have a right to sue their former employer under the Americans with Disabilities Act (ADA) for discrimination relating to receipt of post-employment fringe benefits.
Factual Background
Karyn Sanford is a former firefighter for the City of Sanford, Florida. In 2016, Sanford was diagnosed with Parkinson’s disease. Two years later, in 2018, she retired from the fire department as a result of her condition. During her employment with the City, the City’s benefit policy provided a health insurance subsidy to employees until the age of 65 who had retired after 25 years of service or because of a disability. In 2003, the City’s policy was amended to provide this subsidy until the age of 65 only to employees who retire after 25 years of service. The policy was further changed to provide the subsidy to those who retire as a result of disability for a period of only 24 months or until they became eligible for Medicare. As a result, Stanley ceased to receive this subsidy beginning in 2020.
In April 2020, Stanley filed suit against the City alleging the City discriminated against disabled retirees in its administration of these retirement benefits in violation of the ADA. It is the City’s position that former employees, including Ms. Stanley, lack standing to bring discrimination claims under, among others, the ADA for post-retirement fringe benefits.
Procedural History
The U.S. District Court for the Middle District of Florida dismissed Stanley’s complaint, holding that the alleged discrimination relating to cessation of the health insurance subsidy payments occurred after Stanley was employed by the City, thus Stanley was not a “qualified individual” covered by the ADA. The Eleventh Circuit Court of Appeals affirmed the lower court’s decision, finding Stanley was not a “qualified individual” under the ADA as she was not employed by the City when her benefits were terminated, nor did she desire such employment.
Arguments
Before the Court, Stanley’s counsel and the Solicitor General’s office argued the alleged discriminatory actions related to benefits that Stanley earned while employed as a “qualified individual” under the ADA, thus the protections of the ADA extend beyond a period of active employment, including as it relates to post-retirement fringe benefits.
On the other hand, the City’s counsel argued that Stanley could not establish the City discriminated against her as the ADA protections extend only to current employees or applicants, and thus Stanley lacked standing to pursue her ADA claim. Counsel further argued that extending these protections to “unqualified individuals” would impose an undue burden on employers and an influx of litigation relating to post-employment benefits.
Court’s Inquiries
During the argument, the justices peppered both sides with various questions concerning the scope of ADA protections, including whether “former employees” are not afforded such protections in any context. Additionally, Justice Samuel Alito questioned Stanley’s counsel on the complex issues that would be presented to courts in analyzing whether the distinction between an individual who works for 25 years and somebody who works a shorter period of time and retired based on a disability is unlawful. Finally, the justices raised questions concerning the possible impact a decision in Stanley’s favor could have with respect to administration of benefits.
Potential Impact
The decision in this matter, expected this summer, could have significant and wide-ranging consequences for employers around the country. The decision will likely provide guidance to employers as to the limits on ADA protections, especially as it relates to the administration of post-employment fringe benefits.
DOL Ceases All Contractor Enforcement Activity Under EO 11246
Following President Trump’s rescission of Executive Order 11246, on January 24, 2025, the Acting Secretary of Labor issued Secretary’s Order 03-2025 (the “Order”), which orders all Department of Labor employees, including those in the OFCCP, to:
“Cease and desist all investigative and enforcement activity under the rescinded Executive Order 11246 and the regulations promulgated under it. This includes all pending cases, conciliation agreements, investigations, complaints, and any other enforcement-related or investigative activity,” and
“Notify all regulated parties with impacted open reviews or investigations by January 31, 2025, that the EO 11246 component of the review or investigation has been closed and the Section 503 and VEVRAA components of the review or investigation are being held in abeyance pending further guidance.”
Accordingly, contractors currently under an OFCCP audit or selected for a future audit have clarity that the race and sex discrimination elements of those compliance evaluations will be closed by the end of the month. However, it remains to be seen whether and how the agency decides to proceed with the disability and protected veterans components of those evaluations, as those aspects have only been “held in abeyance.”
California Pay Data Report Filing Platform Opens on February 3, 2025: A Preview of What Is to Come
Now that the holiday season is over, what better way to start the new year than talking about the filing of 2024 California pay data reports? The California Civil Rights Department (CRD) recently updated its pay data filing website to show that the 2024 filing platform will open on February 3, 2025, and all filings are due by May 14, 2025. While we wait for CRD to publish updated guidance and templates for the 2024 filings, there are several areas that we expect to continue to remain important for filers.
Quick Hits
The deadline for filing the 2024 California pay reports is May 14, 2025, and the filing platform will open for new filings on February 3, 2025.
California requires covered employers to file payroll employee reports for their own employees and requires covered employers to file labor contractor employee reports for their labor contractor employees.
The California Civil Rights Department has taken legal action against employers that have failed to file payroll employee reports and encourages client employers to report labor contractors that fail to provide necessary information.
California law mandates that private employers with one hundred or more employees, including those hired through labor contractors, must annually submit a pay data report to CRD, detailing employee pay, demographics, and other workforce data, including mean and median hourly wages broken down by race, ethnicity, and gender for each job category; failure to comply can result in penalties of up to $100 per employee for the first offense and $200 per employee for subsequent violations.
Continued Pressure on Labor Contractor Reporting
California began requiring the filing of labor contractor employee reports during the 2022 filing cycle. These reports require private employers with one hundred or more workers hired through labor contractor employers in the prior calendar year with at least one labor contractor employee based in California during the applicable snapshot period to file a labor contractor employee report with California. These reports also provide a window into the pay and demographic information for California labor contractor workers, and an expansion of CRD’s view of employers’ pay practices. This additional reporting requirement complicates the pay data reporting process for California employers because while they are required to file the labor contractor employee reports they must rely on labor contractors to supply this information. This has placed California employers—referred to as “client employers” in the labor contractor employee context—in a difficult position as they are dependent on an outside party to provide detailed demographic, pay, and hours worked information that they must file with CRD. If client employers do not file this information with CRD, they are subject to fines and legal action.
While labor contractors are legally required to provide this information to client employers, labor contractors do not always supply the data. If a labor contractor refuses or fails to provide the necessary information, the client employer may be unable to file its required report or be able to file only a partially complete report. This can occur despite the client employer’s best efforts to obtain the necessary information. In recognition of this issue, in last year’s pay reporting frequently asked questions (FAQ) guidance, CRD stated that while the client employer would ordinarily be assessed for applicable penalties for failing to file a labor contractor employee report if the labor contractor fails to provide the necessary data to the client employer the penalties “may be apportioned to the labor contractor instead.”
The FAQs also state that CRD does not intend to pursue penalties where the client employer can show they made “a timely, good-faith effort” to obtain the required information, but the labor contractor failed to provide the information in a “timely fashion.” The guidance also notifies such client employers that they “should” email CRD to report such labor contractors providing names, addresses, and FEINs/SEINs of the labor contractor, as well as documentation of the effort to obtain the required information.
Importantly, the 2023 FAQs did not require client employers to report such labor contractors but encouraged client employers to do so. There are indications that client employers are increasingly open to reporting labor contractors that fail to provide necessary information, but client employers may be hesitant to do so because they are required to provide documentation of their efforts to obtain this data.
It is possible that this directive could be strengthened in the 2024 guidance to say that client employers must report labor contractors that fail to provide necessary data, but we will have to see. Regardless, it is likely that CRD will continue to pressure both labor contractors to supply full data and client employers to report labor contractors that fail to provide the necessary data for reporting.
Remote Worker Reporting Focus
For the first time during the 2023 reporting cycle, CRD required additional information concerning remote workers. The 2023 payroll employee and labor contractor employee upload templates added new columns requiring that information be added to each row showing the number of employees who did not work remotely, the number of remote employees located within California, and the number of remote employees located outside California. This breakdown allows CRD to see how many employees worked in person at the establishment as well as seeing the home state for all establishment remote employees.
The 2023 FAQs define remote workers as employees who “are entirely remote, teleworking, or home-based, and have no expectation to regularly report in person to a physical establishment to perform their work duties.” The FAQs make it clear that employees in “hybrid roles or (partial) teleworking arrangements expected to regularly appear in person to a physical location to perform their work duties” are not “considered remote workers for pay data reporting purposes.” These new requirements place a greater burden on employers to track their remote employees and review these details closely when completing the required California pay data reporting.
Enforcement Activity
The CRD states on its website: “Employers should be aware that CRD is actively pursuing non-filers.” On July 5, 2023, CRD announced that it had sued Cambrian Homecare, Inc., for failing to report employee pay data “[d]espite repeated warnings.”
While we wait for CRD to publish updated 2024 reporting guidance and templates, now may be a good time for employers to assess their preparations to file the 2024 payroll employee and labor contractor employee pay data reports.
Corporate Transparency Act Reporting Remains Stayed—For Now
What Happened
On January 23, 2025, the United States Supreme Court granted the federal government’s request to stay the nationwide injunction on the enforcement of the Corporate Transparency Act (“CTA”) issued by the United States District Court for the Eastern District of Texas in Texas Top Cop Shop v. Garland et al. (Case 4:24-cv-00478).
On January 24, 2025, FinCEN posted the following update to its website:
On January 23, 2025, the Supreme Court granted the government’s motion to stay a nationwide injunction issued by a federal judge in Texas (Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland). As a separate nationwide order issued by a different federal judge in Texas (Smith v. U.S. Department of the Treasury) still remains in place, reporting companies are not currently required to file beneficial ownership information with FinCEN despite the Supreme Court’s action in Texas Top Cop Shop. Reporting companies also are not subject to liability if they fail to file this information while the Smith order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.
The court in the Smith litigation (Smith v. US Department of Treasury, No. 6:24-cv-00336 (E.D. Tx. 2025)) issued an order on January 7, 2025, granted a preliminary injunction staying all reporting under the CTA.
Although FinCEN may provide additional guidance to reporting companies to modify this guidance, for now, reporting companies are still not required to file beneficial ownership information with FinCEN.
The Road Ahead
The lifting of the Texas Top Cop Shop stay and the conflict with the Smith stay is another twist in the road of what are likely to be continued protracted legal battles in these cases and in other pending lawsuits around the country that are challenging the CTA.
A three-judge panel at the Fifth Circuit in Texas Top Cop Shop will hear oral arguments on the constitutionality of the CTA on March 25, 2025. The plaintiffs may also pursue a writ of certiorari and ultimate ruling by the Supreme Court on the merits.
The government will also presumably appeal the injunction in the Smith case as well (citing the rationale of the Supreme Court’s order in the Texas Top Cop Shop case), which will introduce another round of briefing and potentially impactful orders at the appellate levels.
Additionally, the new Trump administration may take steps to limit the CTA administratively, or Congress may revoke the CTA altogether, adding another layer of uncertainty for businesses.
We’re Here to Help
We understand that many of our clients’ needs and transaction structures may require deeper analysis and that updates from FinCEN will be forthcoming. Navigating the intricacies of the CTA can be complex and our team is available to provide counsel tailored to your specific needs. We can assist you in understanding the implications of the CTA for your entities and transactions, and we can provide guidance in ensuring compliance with the new regulatory framework.
Jane Hinton, Amy McDaniel Williams, and Conor Shary contributed to this article
FTC and DOJ Jointly Issue ‘Antitrust Guidelines for Business Activities Affecting Workers’ on Eve of Trump Administration
Less than a week before the inauguration of President Donald Trump, the Federal Trade Commission (FTC) and U.S. Department of Justice’s (DOJ) Antitrust Division jointly published guidelines on assessing whether business practices affecting workers violate antitrust laws.
Quick Hits
On January 16, 2025, the FTC and DOJ issued their “Antitrust Guidelines for Business Activities Affecting Workers.”
The guidelines identify five nonexhaustive types of agreements and policies that may constitute violations of antitrust laws by hindering commercial competition and restricting the free movement of employees.
The dissenting statement issued by two FTC commissioners indicates the guidelines may be short-lived. Following the recent change in presidential administrations, employers are likely to see new guidance from the FTC and/or DOJ in the coming months.
The Trump administration has signaled it is interested in antitrust enforcement. Notably, the October 2016 FTC Antitrust Guidance for Human Resource Professionals remained in effect during President Trump’s first administration, and the first Trump DOJ pursued (unsuccessful) criminal cases in this area. Any new guidelines may be closer to the 2016 guidelines.
The guidelines were adopted in a 3–2 vote along partisan lines, with the dissenting Republican-appointed FTC commissioners questioning the timing of these efforts and stating that the guidelines were not necessary. While this internal FTC criticism plus a new presidential administration seems to place enforcement of the guidelines in a state of limbo, employers may still want to exercise caution about noncompliance. The guidelines are the rule until they are changed or there is an announcement that they will not be enforced as revised.
The Guidelines and the Dissent
The recently adopted guidelines emphasize that “antitrust laws protect competition for labor, just as they protect competition for goods and services that companies provide.” To that end, “[b]usiness practices may violate the antitrust laws when they harm the competitive process[.]” The guidelines were issued to “promote clarity and transparency” by identifying ways that business practices affecting workers might run afoul of antitrust laws.
In their dissenting statement, the two Republican-appointed FTC commissioners criticized the “lame-duck Biden-Harris FTC” for issuing the guidelines at the eleventh hour, calling it a “senseless waste of Commission resources.” These statements indicate the guidelines will likely be short-lived, at least in their current form.
The guidelines identify five broad categories of agreements and employment policies that may violate antitrust laws:
“No-Poach” and “Wage-Fixing” Agreements Between Companies. Employers may be engaged in an antitrust crime if they enter into agreements “not to recruit, solicit, or hire workers or to fix wages or terms of employment.” Even if not styled as a “no-poach” or “wage-fixing” agreement, companies may violate antitrust laws if they “agree to align, stabilize, or otherwise coordinate” to set wages, including through the use of pay ranges, ceilings, or benchmarks. These types of formal and informal agreements are illegal and may be subject to criminal penalties, even if no actual harm results. On this issue, the guidelines largely reiterate prior guidance issued by the DOJ and FTC in their October 2016 guidelines for human resources professionals.
“No-Poach” Agreements in Franchise Agreements. The guidelines extend the prohibition on “no-poach” agreements beyond business competitors by applying it to franchise agreements. Because franchisors (and even other franchisees) often compete with franchisees for workers, they sometimes agree not to hire one another’s workers. The guidelines conclude that such agreements “can be per se illegal under the antitrust laws.”
Exchanging “Competitively Sensitive Information” About Workers. The guidelines declare that sharing competitively sensitive information about the terms and conditions of employment (such as compensation, benefits, and other key terms) may violate antitrust laws. This may occur “when the exchange has, or is likely to have, an anticompetitive effect, whether or not that effect was intended.” The guidelines emphasize that sharing this information through a third party (such as through an algorithm or other software) may constitute an antitrust violation, and that is true “even if the exchange does not require businesses to strictly adhere to those recommendations.”
Noncompete Agreements. Consistent with the FTC’s approach to noncompete agreements under the Biden administration, the guidelines state that “[n]on-compete clauses that restrict workers from switching jobs or starting a competing business can violate the antitrust laws.” The guidelines acknowledge the FTC final rule banning most noncompete agreements has been enjoined by courts and is currently on appeal, but emphasizes that “the FTC retains legal authority to address non-competes through case-by-case enforcement actions under the FTC Act, as it has done in the past.” The guidelines also note the FTC’s view that other federal laws may be implicated by noncompete clauses, including the National Labor Relations Act and the Packers and Stockyards Act.
Other Restrictive Employment Conditions. The guidelines identify several other employment practices and conditions that may be “restrictive, exclusionary, or predatory,” and thus violative of antitrust law:
Overbroad nondisclosure agreements that function to prevent workers from seeking or accepting other work or starting a competitive business.
Training repayment agreement provisions that function to prevent workers from working for another company.
Overbroad nonsolicitation agreements that prohibit workers from soliciting former clients or customers may restrict workers from seeking or accepting another position.
Exit fee and liquidated damages provisions that require workers to pay a financial penalty for leaving their employer.
In addition to these five categories, the guidelines also note that antitrust laws may be implicated where companies “make false or misleading claims about potential earnings that workers (including both employees and independent contractors) may realize” in their positions. According to the guidelines, these “false earnings promises” can make it more difficult for “honest businesses” to fairly compete in the marketplace.
Conclusion
With the recent change in presidential administrations, the FTC and DOJ composition and policy initiatives are very likely set to change. Notably, however, the dissent readily acknowledges that “antitrust laws protect employees from unlawful restraints of the labor markets, and guidance reflecting the Commission’s enforcement position on these issues promotes important transparency and predictability to market participants.” The FTC and DOJ may issue new guidelines on these topics under the new administrative regime.
Regardless of whether the guidelines survive, employers considering the types of agreements and employment practices identified in the guidelines should carefully review them and confer with counsel to minimize risk to their business.
5 Trends to Watch in 2025: AI and the Israeli Market
Israel’s AI sector emerging as a pillar of the country’s tech ecosystem. Currently, approximately 25% of Israel’s tech startups are dedicated to artificial intelligence, according to The Jerusalem Post, with these companies attracting 47% of the total investments in the tech sector (Startup Nation Finder). This strong presence highlights Israel’s focus on AI-driven innovation and entrepreneurs’ belief in the growth opportunities related to AI. The Israeli AI market is expected to grow at a compound annual growth rate of 28.33% from 2024 through 2030, reaching a value of $4.6 billion by 2030 (Statista). This growth is driven by increasing demand for AI applications across diverse industries such as health care, cybersecurity, and fintech. Government-backed initiatives, including the National AI Program, play a critical role in supporting startups by providing accessible and non-dilutive funding for research and development (R&D) purposes. Despite facing significant challenges since the start of the war in Gaza, Israel has continued to produce cutting-edge technologies that are getting the attention of global markets. Additionally, Israel’s highly skilled workforce and partnerships with academic institutions provide a steady supply of talent to meet the sector’s demands. With innovation, resilience, and collaboration at its core, the Israeli AI landscape is poised to remain a global force in 2025 and beyond.
Mergers and acquisitions to remain a cornerstone of deals. According to IVC Research Center, 47 Israeli AI companies successfully completed exits in 2024, showcasing the global demand for AI-driven innovation. Investors are continually identifying the differences between companies whose foundations were built on AI, versus those leveraging AI to enhance other core elements of their value proposition—sometimes only marginally. Savvy buyers look beyond the “AI label” and seek out companies with genuine, scalable AI solutions rather than superficial integrations, understanding that value lies in robust and transformative applications. AI is also sector agnostic and may disrupt virtually every vertical. From health care and finance to retail and manufacturing and others, numerous industries are increasingly leveraging AI to enhance or even change their core competency to gain competitive advantages. Deals in this space are coming from strategics such as automobile manufacturers, banks, digital marketing companies and life science firms, among others. As AI continues to permeate multiple sectors, Israeli companies are poised to receive increased attention from strategic M&A buyers looking to unlock new technologies and business opportunities in the market.
Intersection of PropTech and AI to further revolutionize the global real estate industry. Israeli innovation is expected to be at the forefront of this trend. According to IVC Research Center, over 70 PropTech companies headquartered in Israel are leveraging AI to develop cutting-edge technologies that are reshaping the industry on a global scale. We anticipate these companies will continue advancing AI-driven tools and third-party solutions to streamline acquisition strategies, enhance underwriting processes, and drive operational efficiencies. By harnessing AI to identify leasing opportunities, forecast rental trends, and optimize costs, Israeli PropTech firms are set to solidify their position as global leaders in real estate innovation in the year ahead.
AI to become increasingly important across global industries. Israeli companies have demonstrated genuine thought/R&D leadership in AI innovation. Some of the AI-centric legal trends that may stand out in 2025 include (1) a greater focus on data rights management as Agentic AI continues to carve new learning standards; (2) regulatory advancements in science, highlighted by two AI-related Nobel Prizes in science, that will likely materialize in the U.S. Food and Drug Administration adopting new rules for AI-driven drug approvals, as well as new AI patenting standards and requirements; (3) greater emphasis on responsible AI usage, particularly around ethics, privacy, and transparency; (4) the adoption of quantum AI across many industries, including in the area of securities trading, which will likely challenge securities regulators to address its implications; and(5) turning to AI-powered LegalTech strategies (both in Israel and in other countries). Israeli entrepreneurs are likely to continue working within each of these industries and help drive the AI transformation wave.
AI-based technology to continue changing how companies handle recruitment and hiring. While targeted advertising enables employers to find strong talent, and AI-assisted resume review facilitates an efficient focus on suitable candidates, the use of AI to identify “ideal” employees and filter out “irrelevant” applicants may actually discriminate (even if unintentionally) against certain groups protected under U.S. law (for example, women, older employees, and/or employees with certain racial profiles). In addition, AI-assisted interview analysis may inadvertently use racial or ethnic bias to eliminate certain candidates. Israeli companies doing business in the United States should not assume their AI-assisted recruitment and hiring tools used in Israel will be permitted to be utilized in the United States. Also, Israeli companies should be mindful of newly enacted legislation in certain U.S. states requiring companies to notify candidates of AI use in hiring, as well as conduct mandatory self-audits of AI-based employee recruitment and hiring systems. AI regulation on the state level in the United States is likely to increase, and Israeli companies that recruit and hire in the United States will be required to balance their use of available technology with applicable U.S. legal constraints.
White House “Regulatory Freeze” Directive Pauses Most Federal Rulemaking
As expected, the White House issued a directive to the heads of all executive departments and agencies within the first few hours after President Trump’s inauguration on January 20, requesting that they halt all non-emergency rulemaking and regulatory activity pending review by the new administration.
The order directs the executive agencies, which include the U.S. Department of Labor (DOL), to immediately:
propose or issue no rule in any manner until a department or agency head appointed or designated by President Trump reviews and approves the rule;
immediately withdraw any rules that have already been sent to the Office of the Federal Register (OFR) for publication but that have not yet been published; and
consider postponing by 60 days the effective date of any such rules already sent to OFR for publication (or otherwise issued) but which have not yet taken effect, “for the purpose of reviewing any questions of fact, law, and policy the rules may raise.”
The Director or Acting Director of the Office of Management and Budget may exempt any rule deemed necessary to address “emergency situations or other urgent circumstances.”
Unlike four years ago, when the lame-duck Trump DOL’s paradigm-shifting Final Rule on independent contractor classification was scheduled to take effect weeks after Inauguration Day, no federal wage and hour rules impacting private employers are awaiting an effective date in the near future. The DOL’s Wage and Hour Division is in the middle of rulemaking with respect to a single rule—to phase out the issuance of certificates authorizing employers to pay subminimum wages to certain workers with disabilities under section 14(c) of the Fair Labor Standards Act (FLSA). Under the proposed rule, employers currently holding such certificates would have up to three years to transition to paying the full minimum wage to impacted workers. We wouldn’t count the rule out forever—there’s a long history of bipartisanship on disability rights issues, and this rule is being framed as such. Section 14(c), included in the FLSA’s original text in 1938, was intended to create job opportunities for disabled workers with otherwise impaired earning capacities. Opponents of the certificate program argue it promotes the suppression of wages for disabled workers who wouldn’t otherwise be shut out of the American workforce.