OFCCP Ordered to Stop All Enforcement Activity and Close Open Audits Under Revoked Executive Order 11246
In response to President Trump revoking Executive Order 11246, Acting U.S. Department of Labor (DOL) Secretary Vincent Micone issued an Order on January 24th, instructing DOL employees including OFCCP to stop all enforcement activity under the rescinded Executive Order 11246. Specifically, the order instructs 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Cease and desist all investigative and enforcement activity under the rescinded Executive Order 11246 and the regulations promulgated under it.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.
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.
As indicated in the Order, by January 31st federal contractors with open audits or investigations pursuant to EO 11246 should receive communication from OFCCP that their reviews are closed.
Additionally, given Section 503 (Individuals with a Disability) and VEVRAA (Protected Veterans) reviews are on hold until OFCCP and contractors receive further guidance, contractors presumably are under no obligation to submit VEVERAA and Section 503 related materials to OFCCP in connection with any open reviews.
The New Trump Administration’s Immigration Enforcement Policy: What Employers Must Know
On January 20, 2025, President Trump signed numerous executive orders related to his immigration policy objectives, including a declaration of a national emergency at the southern border, which will allow the use of federal funding for border security and the deployment of armed forces to the region as additional resources. President Trump will also enact a mass deportation operation of undocumented immigrants in the U.S. and has vowed to initiate “the largest domestic deportation operation in American history.”
As part of this operation, there is speculation that the U.S. Immigration and Customs Enforcement (ICE) agency, the enforcement branch of the U.S. Department of Homeland Security (DHS), is preparing to take removal actions (informally known as “ICE raids”) in targeted cities. However, the actual date of the operation is unclear. As of the date of publication of this Insight, there has been no significant increase in the number of ICE raids or arrests across the country. Nevertheless, with the new administration’s emphasis on immigration enforcement across all federal agencies, we expect to see an increase in ICE raids imminently.
On January 21, 2025, the Acting Secretary of the DHS, Benjamine Huffman, issued a directive ending the Biden administration’s policy restricting immigration enforcement in or near “protected areas.” This means that ICE agents will have the authority to enter sensitive areas, including hospitals, schools, and churches, and take enforcement actions.
What Happens During an ICE Raid?
In an ICE raid, the agency’s objective is to detain undocumented employees working for employers in the United States. ICE raids are generally targeted, meaning ICE agents may have a list of names of individuals they are looking to detain, or alternatively, the raid may be targeted towards a particular industry that is known to have a high volume of undocumented employees, such as restaurants and the hospitality, construction, cleaning, and agriculture industries.
ICE raids are not announced in advance. Rather, ICE agents are free to enter any public areas of the business, such as a lobby or parking lot. However, in order to enter non-public business premises, the agent must have a signed judicial search warrant or the employer’s consent.
It is important for employers to comply with these investigations to maintain the integrity of their overall immigration programs. However, due to the unannounced nature of ICE raids and the sensitive nature of the information about employees and the company that may be sought, employers must take care not to inadvertently violate laws or privacy protections in their efforts to comply with ICE agents’ requests.
What Can Employers Do Now to Prepare for ICE Raids?
There are several steps an employer can and should take to prepare for a potential ICE raid.
Designate a person within the Human Resources or Legal Department to be the primary point of contact in case of an ICE raid.
Establish basic protocols for the designated company representative to follow in the event of an ICE raid. Also consider providing training to designated company representatives regarding the employer’s records and retention policy, what to expect during an ICE raid, and how to respond (e.g., reviewing the scope of judicial search warrants, communicating with agents and/or affected employees, etc.).
Prepare guidelines or instructions for your front desk receptionist or whomever else is likely to be the first person an ICE agent might come across and speak to so that the person knows who to contact in case an ICE agent enters your business location, as well as what not to do or say.
Conduct an internal audit of I-9 files. In this connection:
retain a completed Form I-9 for all active employees,
make corrections to Forms I-9 as soon as an error is identified, and
also retain I-9s for the mandatory period for terminated employees.
If you are an E-Verify employer:
conduct an audit of your E-Verify cases to ensure compliance,
submit an E-Verify case for one you identify as missing, and
make sure the mandatory E-Verify poster is posted at all worksites.
Conduct an internal audit to ensure immigration petition documents are in line with personnel records, including compensation and work location information.
Conduct a review of employee personnel, I-9, and immigration files and ensure the respective files are kept in separate folders and contain only relevant documents.
Remove or relocate documents that may disclose employees’ personal or protected data and that are not otherwise required to be maintained in the file.
Be mindful, however, of any applicable state personnel file laws that dictate what must be maintained as part of a “personnel file.”
If you have contractors, leased workers, or workers from a temporary staffing agency providing services at your business location(s), review your vendor contract for language requiring the vendor to:
provide contractors who are legally authorized to work in the United States, and
be fully compliant with the I-9 laws and other relevant immigration laws.
Notify managers/supervisors that they must not provide legal advice to employees or customers who are at the business premises and may be affected by immigration enforcement measures.
Instead, employers may wish to make available pamphlets or other literature regarding immigrant rights from immigration support organizations such as the National Immigration Law Center.
In light of the potentially high-profile nature of ICE raids, employers may wish to get ahead of any potential negative press by preparing a statement to be issued to employees and/or the media following an ICE raid.
Connect with an attorney specializing in immigration law to seek guidance on establishing internal protocols and training.
What Else Should Employers Know?
The current Trump administration’s immigration enforcement efforts will likely primarily target undocumented immigrants with criminal histories as well as undocumented immigrants at the southern border. But we may also see additional executive orders affecting policy changes impacting individuals currently protected under programs such as Deferred Action for Childhood Arrivals, Temporary Protected Status, Deferred Enforced Departure, foreign students on F-1 student visas, and humanitarian parole programs established during the Biden administration. We may also see an increase in DHS site visits to employers’ business locations in order to conduct routine audits of immigration visa sponsorship files that have been filed with the immigration agency. Employers that serve members of the public, such as hospitals, schools, and religious organizations, should also be aware that they are generally under no obligation to share the immigration status (if known) of their patients, parishioners, customers, or students unless such information is specifically included in a government agent’s lawful warrant. Relatedly, however, employers should be careful not to be seen as obstructing or interfering in any way with the government’s actions.
Beltway Buzz, January 24, 2025
The Beltway Buzz is a weekly update summarizing labor and employment news from inside the Beltway and clarifying how what’s happening in Washington, D.C., could impact your business.
The Trump Administration 2.0. President Donald Trump began his second term in office this week, and as expected, began with a flurry of actions and executive orders (EOs). Below is a roundup of the key actions President Trump took during this first week.
President Trump’s Executive Order Guts OFCCP, Targets Private-Sector DEI
Rescission of EO 11246. On January 21, 2025, President Trump issued an executive order, entitled, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” The EO makes seismic changes to federal contracting employment policy by revoking Executive Order 11246, issued in 1965, that establishes nondiscrimination and affirmative action obligations for federal contractors. President Trump’s EO further prohibits the Office of Federal Contract Compliance Programs (OFCCP) from promoting diversity, requiring contractors to take “affirmative action” and “[a]llowing or encouraging Federal contractors and subcontractors to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin.”
Private-Sector DEI Enforcement. Other aspects of the EO directly target diversity, equity, and inclusion (DEI) programs in the private sector. For example:
The EO requires each federal contractor “to certify that it does not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.”
The EO requires the U.S. attorney general to develop a strategic enforcement plan identifying “up to nine potential civil compliance investigations of publicly traded corporations, large non-profit corporations or associations, foundations with assets of 500 million dollars or more, State and local bar and medical associations, and institutions of higher education with endowments over 1 billion dollars.”
What’s Left? The EO does not address federal contractors’ obligations under the Vietnam Era Veterans’ Readjustment Assistance Act and the Rehabilitation Act of 1973.
Diversity, Equity, and Inclusion
President Trump and most Republicans view DEI efforts with significant skepticism, so it was no surprise that President Trump issued an executive order, entitled, “Ending Radical And Wasteful Government DEI Programs And Preferencing,” on his first day back in the White House.
The EO calls for “the termination of all discriminatory programs, including illegal DEI and ‘diversity, equity, inclusion, and accessibility’ (DEIA) mandates, policies, programs, preferences, and activities in the Federal Government, under whatever name they appear.” (Emphasis added.)
The EO does not directly implicate DEI programs operated by federal contractors. However, the EO does eliminate “DEI or DEIA performance requirements for employees, contractors, or grantees” and requires agencies to submit to the Office of Management and Budget the names of “Federal contractors who have provided DEI training or DEI training materials to agency or department employees.”
More Federal Contractor Issues
President Trump rescinded Executive Order 14055 of November 18, 2021 (“Nondisplacement of Qualified Workers Under Service Contracts”). The EO requires that successor federal contractors offer employment to employees employed under the predecessor contract. This is a bit of déjà vu for President Trump, as he rescinded the same executive order on October 31, 2021. Indeed, this issue has been going back and forth in Washington, D.C., for at least thirty years.
In a housekeeping measure, President Trump revoked Executive Order 14069 of March 15, 2022 (“Advancing Economy, Efficiency, and Effectiveness in Federal Contracting by Promoting Pay Equity and Transparency”). The proposed rule to implement the EO was rescinded on January 8, 2025.
EO Relating to Gender and Employment Policy
President Trump issued an executive order, entitled, “Defending Women From Gender Ideology Extremism And Restoring Biological Truth To The Federal Government.” According to the EO, “It is the policy of the United States to recognize two sexes, male and female” and “the Executive Branch will enforce all sex-protective laws to promote this reality.”
Regarding enforcement of federal employment laws, the EO directs agencies to use “give the terms ‘sex’, ‘male’, ‘female’, ‘men’, ‘women’, ‘boys’ and ‘girls’ the meanings set forth in section 2 of this order when interpreting or applying statutes, regulations, or guidance and in all other official agency business, documents, and communications.” (Emphasis added.)
The EO further instructs the attorney general to issue guidance (1) “to ensure the freedom to express the binary nature of sex and the right to single-sex spaces in workplaces and federally funded entities covered by the Civil Rights Act of 1964” (e.g., bathrooms, locker rooms, etc.); and (2) addressing what the Trump administration believes is the misapplication of the Supreme Court’s decision in Bostock v. Clayton County (2020) beyond the employment context.
The EO directs the U.S. Equal Employment Opportunity Commission (EEOC) to rescind—in its entirety or the relevant provisions—its “Enforcement Guidance on Harassment in the Workplace” (April 29, 2024). With Democrats in the majority at the Commission (see below) this recission is unlikely to happen.
Immigration
As expected, immigration-related executive orders featured prominently this week. In addition to addressing unlawful immigration and the situation at the Southern border, several of President Trump’s actions will have a direct impact on employment-based immigration. Yvonne Toy, Marissa E. Cwik, Christina M. Kelley, and Ashley Urquijo have the details on President Trump’s executive orders relating to birthright citizenship, “Enhanced Vetting and Screening,” and other issues. (A federal judge in Washington has already blocked the implementation of the birthright citizenship executive order for fourteen days, describing it as “blatantly constitutional.” Ashley Urquijo, Brittani B. Holland, and Rosa M. Corriveau have additional details.)
In addition to these EOs, President Trump issued an order rescinding Executive Order 14110 of October 30, 2023 (“Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence”). That EO encouraged multiple agencies, including the U.S. Department of Labor and U.S. Department of State, to streamline their processes to make it easier for experts in artificial intelligence (AI) or other emerging technologies to work in the United States. These initiatives, such as the potential updating of Schedule A of the permanent labor certification process, are unlikely to move forward in the new administration.
Regulatory Orders
Regulatory Freeze Pending Review. This EO is a common practice for new administrations. It immediately pauses any pending or proposed rules, orders the withdrawal of rules sent to, but not published in, the Federal Register, and orders a sixty-day postponement of the effective date of rules that have been published but have not gone into effect.
Rulemaking Transparency. On October 19, 2019, President Trump issued two executive orders (EO 13891, Promoting the Rule of Law Through Improved Agency Guidance Documents, and EO 13892, Promoting the Rule of Law Through Transparency and Fairness in Civil Administrative Enforcement and Adjudication). The EOs state that agency guidance documents should not form the basis of enforcement actions and that agencies should solicit public feedback prior to issuing such guidance documents. These EOs were rescinded by President Biden on his first day in office. This week, President Trump rescinded the rescission, setting the stage for more transparency in agency guidance documents.
Personnel Decisions
National Labor Relations Board (NLRB). Perhaps the biggest news about the Board is that, as of this writing, General Counsel Jennifer Abruzzo is still employed. It was widely believed that firing General Counsel Abruzzo was a top priority during President Trump’s first week. President Trump named Marvin Kaplan chair of the NLRB. The Board currently has a 2–1 Democratic majority with two vacant seats. Despite being designated as chair, Kaplan will not have the votes to reverse recent Board decisions until the two vacancies are filled.
EEOC. President Trump named Andrea Lucas chair of the EEOC. The EEOC currently has a 3–1 Democratic majority that it will enjoy at least until July 2026, when Chair Jocelyn Samuels’s term expires.
The First January Inauguration. On January 20, 1937, President Franklin D. Roosevelt was sworn in as President of the United States. It was Roosevelt’s second inauguration, but the first inauguration of a president to occur in January. All previous inaugurations (with the exception of George Washington) occurred on March 4. The U.S. Congress had set this date as Inauguration Day because it was the day that the U.S. government began operations in 1789 following the ratification of the U.S. Constitution. March 4 was also the date on which new congressional sessions commenced.
This created a very long four-month lame-duck period between November elections and the beginning of a new Congress and new administration. The problems associated with this extended lame-duck period became more pronounced with Roosevelt’s first inauguration—he had to wait four months before he and the 73rd Congress could address the Great Depression. The 20th Amendment—adopted in January 1933 and effective as of October 15, 1933—addressed this lame-duck problem by rescheduling Inauguration Day for January 20 and the commencement of Congress on January 3.
New Year, New FTC Chair, and Renewed Focus on Non-Compete Agreements
It is nearly impossible to think about the Federal Trade Commission (“FTC”) without thinking about the chaos caused by the non-compete ban it approved last year over vociferous dissent only to have the ban vacated and set aside nationwide by the Northern District of Texas. Curiosity remains about what the impact of the change in administration will have on the FTC’s approach to this issue of paramount importance to employers. But with President Trump’s appointment of Andrew Ferguson to lead the FTC, what follows is some insight on the current state of play and the FTC’s probable mindset.
Where We Were Last Year
As a recap, the FTC’s “Final Rule” announced on April 23, 2024, would have banned nearly all non-compete provisions and provisions functioning as non-competes (in the FTC’s view). That Final Rule, which was set to go into effect on September 4, 2024 (the “Effective Date”), would have impacted not only traditional restrictive covenant agreements with employees and contractors but likely also agreements with employee equity holders as well as claw-back and repayment agreements with employees presented with signing bonuses or training and education opportunities.
As expected, businesses and trade organizations swiftly challenged the Final Rule, with lawsuits filed against the FTC in Pennsylvania, Florida, and Texas seeking to set aside the Final Rule: a lawsuit brought by a tree-service company, ATS Tree Services, LLC in the Eastern District of Pennsylvania; a lawsuit brought by the Properties of Villages Inc.in the Middle District of Florida, and lawsuits brought by tax-advisory firm Ryan, LLC and the U.S. Chamber of Commerce in the Northern and Eastern Districts of Texas, respectively. The lawsuits yielded distinct outcomes. The Texas court preliminarily enjoined enforcement of the Final Rule as to the plaintiff only, pending a final ruling on the merits. The Pennsylvania court upheld the Final Rule. The Florida court preliminarily enjoined the Final Rule as to the plaintiff only, on similar but not identical grounds to the Texas court, even while accepting some of the Pennsylvania court’s analysis.
The limited holdings and contradictory outcomes made the chaos sewn by the FTC even worse in the weeks leading up to the Effective Date. Ultimately, the Texas court provided clarity, issuing its final ruling on the merits and vacating and setting aside the Final Rule nationwide holding that its issuance was outside FTC’s authority granted by Congress and that the Final Rule was otherwise arbitrary and capricious under the Administrative Procedure Act. The FTC has appealed both the Florida and Texas rulings, and the plaintiff in the Pennsylvania ruling voluntarily dismissed its lawsuit after the Texas court ruling.
Where We Are Now
Although the FTC appealed the Properties of Villages Inc. (Florida) and Ryan, LLC (Texas) decisions, with the change of administration this week and the appointment of Ferguson to lead the FTC, many have questioned whether the FTC will proceed with those appeals. Since Ferguson has in the past voiced opposition to the Final Rule and expressed an opinion that the FTC lacks the authority to promulgate such a ban, asserting in his Dissent a view which was nearly identical to the Texas court’s conclusion that “Congress has not authorized [the FTC] to issue it. The Constitution forbids it. And it violates the basic requirements of the Administrative Procedure Act,” it is likely the FTC folds.
Unlike outgoing FTC Chair Lina Kahn, Ferguson has indicated that the FTC will, under his leadership, focus on traditional antitrust issues, as reflected in a post made on social media platform X announcing that the FTC “will end Big Tech’s vendetta against competition and free speech” and will “make sure that America is the world’s technological leader and the best place for innovators to bring new ideas to life.”
With the shift away from Khan and the change in administration, it is likely that the FTC’s pending appeals and its previous focus on a widespread ban of non-competes will fall to the wayside. However, this change in focus does not give employers free reign to craft and enforce non-competition and non-solicitation restrictions without any limitations whatsoever. Instead, the individual states hold the power to restrict the use of restrictive covenant agreements unless and until the U.S. Congress passes a law signed by President Trump or his successor restricting the use and enforcement of non-competes (notably, such legislative proposals and a bi-partisan willingness to address the issue do exist, albeit on a much lesser scale than the FTC’s now vacated Final Rule). As Ferguson noted in his Dissent to the Final Rule, the “established system of sensible state regulations” controls the validity of non-compete agreements. Given the patchwork of state laws addressing the use and enforcement of non-compete and non-solicit agreements—including some states that have significant civil and administrative penalties and fee-shifting remedies for non-compliant agreements and growing efforts at the state level to restrict their use—compliance with that patchwork is a complex undertaking for companies with multistate operations and dispersed workforces.
What Steps Should Employers Take Now?
This change in administration and FTC focus provide an ideal opportunity for companies to re-evaluate existing restrictive covenant agreements and to make necessary changes. We recommend companies consult with counsel to ensure all restrictive covenants with employees (including with employee equity holders) are in compliance with applicable state laws and regulations, especially companies who have or will have employees residing and working in multiple states. It is also notable that the reliance many companies have historically placed upon courts to modify (or “blue pencil”) agreements that are overbroad and unenforceable as written has also been called into doubt lately in courts across the country, affirming the sensibility of such a re-evaluation.
Generally speaking, companies should avoid overbroad and unreasonable restrictions that could be construed as unacceptable restraints of free trade and should limit the use of restrictions to those employees whose roles and responsibilities or access to sensitive, confidential, or trade secret information or customer relationships support them. Companies should take this time to replace potentially unenforceable provisions with narrowly tailored restrictions, with a focus on, among other areas, an appropriate, justifiable duration and geographic and subject matter scope for the restrictions. Companies should also ensure that their implementation procedures comply with relevant states’ requirements on advanced notice, consideration, and compensation thresholds.
Taking the time now to thoughtfully review your restrictive covenant agreements, under appropriate state laws and regulations, will set your company up for success in 2025 and as the new administration gets underway.
EPA and OSHA Renew Cooperation With Memorandum of Understanding on Toxic Substances Control Act
The Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA) have long cooperated with each other and have renewed their commitment to cooperation in a December 2024 memorandum of understanding (MOU) focused on the Toxic Substances Control Act (TSCA).
The EPA routinely recommends new chemicals be subject to TSCA review to determine whether a chemical or significant new use presents unreasonable risk of injury to health or the environment, without consideration of cost or other non-risk factors. The MOU was one of the last acts of the Biden administration’s assistant secretary of labor for workplace safety and health, Douglas Parker.
Quick Hits
A December 2024 memorandum of understanding (MOU) between OSHA and the EPA emphasizes sharing information on inspections, complaints, and potential violations related to Section 6 of the Toxic Substances Control Act (TSCA)
OSHA will encourage states with OSHA-approved state plans to participate in information-sharing activities under the MOU.
In decades’ old agreements, EPA and OSHA have outlined various alliances and agreements to work with each other in their respective inspection and enforcement activities. When personnel associated with the EPA observe workplace health and safety concerns, they are authorized under those agreements to make referrals to OSHA. When OSHA personnel identify potential environmental issues, they are authorized to make referrals to the EPA. OSHA’s process safety management (PSM) rules are the workplace health and safety corollary to EPA’s risk management program rules, both of which relate to processes involving “highly hazardous substances.”
In an MOU from 2021, the EPA and OSHA entered into an agreement related to TSCA, that resulted in:
establishing designated staff and management points of contact from each agency to discuss and resolve workplace exposure issues related to EPA’s review of new chemicals;
providing OSHA with regular updates on EPA’s new chemical determinations, including any necessary worker protection identified during EPA’s review; and
documenting EPA’s role in identifying and notifying OSHA of the need for formal consultation on EPA’s review of new chemicals.
It bears noting that the term “new chemicals” does not mean newly developed chemicals, but instead chemicals that are not on the TSCA inventory. In 2024, EPA issued draft and final risk assessments related to formaldehyde, 1,1 dichloroethane, and 1,3 butadiene. Five commonly used chemicals, acetaldehyde, acrylonitrile, benzenamine, vinyl chloride, and 4,4’-methylene bis(2-chloroaniline) (MBOCA), were designated as high-priority substances, which prioritizes the risk assessment of those chemicals. A change to the TSCA rules also resulted in all new per and polyfluoroalkyl substances (PFAS) being subject to a full safety review process under TSCA.
The 2024 MOU built on the 2021 MOU, but focused on the sharing of information and data concerning each agency’s focus areas for inspections, complaints, potential violations, and EPA’s planned enforcement pertaining to TSCA’s section 6 rulemaking and enforcement. While the MOU portends potential changes in substances that might fall under OSHA’s control, such as the list of highly hazardous chemicals related to PSM, it is not clear that OSHA will act to make any changes related to TSCA determinations.
The two agencies agreed to share information on complaints, inspections, potential violations, and EPA’s planned enforcement, as appropriate, related to TSCA section 6 activities in workplaces where areas of mutual interest exist. Each organization will exercise its independent jurisdiction to enforce applicable regulations and laws. EPA and OSHA agreed to mutually refer potential violations under TSCA section 6 and OSHA standards in workplaces within their respective jurisdictions, and, for cases of joint interest, take other cooperative steps to share information on such potential violations.
Regarding coordination with states with OSHA-approved state plans:
OSHA intends to share this MOU with state plans and encourage state plans to refer applicable potential violations to EPA.
OSHA intends to encourage states with OSHA-approved state plans to participate in all information-sharing activities established under this MOU.
Latest Changes to ISS and Glass Lewis Proxy Voting Guidelines
Institutional Shareholder Services (ISS) and Glass Lewis, two leading proxy advisory firms, recently announced updates to their U.S. proxy voting policies in advance of the 2025 proxy and annual meeting season. Public companies need to consider how these updates could impact voting recommendations and any governance changes that could be implemented to improve the likelihood of favorable recommendations.
Background on Proxy Advisory Firms
ISS and Glass Lewis have risen to prominence for making proxy voting recommendations to their investor clients ahead of shareholder meetings for public companies.
ISS and Glass Lewis publish their respective proxy voting guidelines and policies that describe the factors that it will take into consideration in making voting recommendations. While these policies remain largely consistent year over year, the annual updates often address new and emerging issues, such as artificial intelligence, or revise or clarify existing stances on evolving matters of corporate governance, such as executive compensation, director independence, and environmental, social, and governance (ESG) policies and disclosures. These changes can be based on a number of factors, such as changing shareholder attitudes, new legislation or exchange rules, or general industry trends.
These proxy voting guidelines can be used by institutional investors as either determinative or informative of their voting decisions, and the recommendations by ISS and Glass Lewis can significantly sway the outcome of shareholder voting proposals.
2025 ISS Proxy Voting Guideline Changes
Executive Compensation
In addition to revisions to its proxy voting guidelines, ISS also updated its FAQs on executive compensation policies:
Computation of Realizable Pay – The realizable pay chart will not be displayed for companies that have experienced multiple (two or more) CEO changes within the three-year measurement period.
Pay-for-Performance Qualitative Review – ISS will place greater focus on performance‑vesting equity disclosures and plan designs, especially for companies with a quantitative pay-for-performance misalignment. Existing qualitative considerations around performance equity programs will be subject to greater scrutiny in the context of a quantitative pay‑for‑performance misalignment. ISS provided a non-exhaustive list of typical considerations for such analysis, including:
Non-disclosure of forward-looking goals (note: retrospective disclosure of goals at the end of the performance period will carry less mitigating weight than it has in prior years);
Poor disclosure of closing-cycle vesting results;
Poor disclosure of the rationale for metric changes, metric adjustments or program design;
Unusually large pay opportunities, including maximum vesting opportunities;
Non-rigorous goals that do not appear to strongly incentivize for outperformance; and/or
Overly complex performance equity structures.
Evaluation of Incentive Program Metrics – ISS reaffirmed its stance that it does not favor total shareholder return (TSR) or any specific metric in executive incentive plans, holding that the board and its compensation committee are best suited to choose metrics that lead to long-term shareholder value. However, ISS acknowledged that shareholders prefer an emphasis on objective metrics that lead to increased transparency in compensation decisions. In evaluating the metrics of an incentive program, ISS may consider several factors, including:
Whether the program emphasizes objective metrics linked to quantifiable goals, as opposed to highly subjective or discretionary metrics;
The rationale for selecting metrics, including the linkage to company strategy and shareholder value;
The rationale for atypical metrics or significant metric changes from the prior year; and/or
The clarity of disclosure around adjustments for non-GAAP metrics, including the impact on payouts.
Changes to In-Progress Incentive Programs – ISS reiterated its position against midstream changes to ongoing incentive programs, such as metrics, performance targets, and/or measurement periods). Similar to other kinds of unusual pay program interventions, ISS states that companies should disclose a compelling rationale for such actions and how they do not circumvent pay-for-performance outcomes.
Robust Clawback Policies – This year, ISS added a new FAQ concerning the requirements for a clawback policy to be considered “robust” under the “Executive Compensation Analysis” section of the ISS research report. In order to qualify, a clawback policy must:
Extend beyond minimum Dodd-Frank requirements; and
Explicitly cover all time-vesting equity awards.
Poison Pills
ISS made significant revisions to its voting policies concerning shareholder rights plans, more commonly referred to as “poison pills,” which are used by boards of directors to prevent hostile takeovers. Currently, when considering whether or not to vote for director nominees who have adopted a short-term poison pill (one year or less) without shareholder approval, ISS evaluates director nominees on a case-by-case basis. This year, ISS revised its guidelines to increase transparency surrounding the factors considered in this evaluation.
The revised list of factors now includes (changes as marked):
The trigger threshold and other terms of the pill;
The disclosed rationale for the adoption;
The context in which the pill was adopted (e.g., factors such as the company’s size and stage of development, sudden changes in its market capitalization, and extraordinary industry-wide or macroeconomic events);
A commitment to put any renewal to a shareholder vote;
The company’s overall track record on corporate governance and responsiveness to shareholders; and
Other factors as relevant.
Natural Capital
Next, ISS renamed references to “General Environmental Proposals” with “Natural Capital‑Related and/or Community Impact Assessment Proposals.” ISS also revised the list of factors considered when voting requests for reports on policies and/or the potential (community) social and/or environmental impact of company operations.
The revised list of factors now includes (changes as marked):
Alignment of current disclosure of applicable company policies, metrics, risk assessment report(s) and risk management procedures with any relevant, broadly accepted reported frameworks;
The impact of regulatory non-compliance, litigation, remediation, or reputational loss that may be associated with failure to manage the company’s operations in question, including the management of relevant community and stakeholder relations;
The nature, purpose, and scope of the company’s operations in the specific region(s);
The degree to which company policies and procedures are consistent with industry norms; and
The scope of the resolution.
SPAC Extensions
ISS also revised its policies with respect to SPAC termination dates and extension requests. Now, ISS will generally recommend that shareholders vote in favor of requests to extend the termination date of a SPAC by up to one year from the SPAC’s original termination date, inclusive of any built-in extension options, and accounting for prior extension requests.
ISS may also consider the following factors:
Any added incentives;
Business combination status;
Other amendment terms; and
If applicable, use of money in the trust fund to pay excise taxes on redeemed shares.
2025 Glass Lewis Proxy Voting Guideline Changes
Approach to Executive Pay Program
Glass Lewis provided clarification on its pay-for-performance policy to emphasize Glass Lewis’ holistic approach to analyzing executive compensation programs. Glass Lewis’ analysis reviews pay programs on a case-by-case basis, and there are few program features that, standing alone, will lead to an unfavorable recommendation from Glass Lewis on a say-on-pay proposal.
Glass Lewis does not utilize a pre-determined scorecard approach when considering individual features such as the allocation of the long-term incentive between performance-based awards and time-based awards. Unfavorable factors in executive compensation programs are reviewed in the context of rationale, overall structure, overall disclosure quality, the program’s ability to align executive pay with performance and the shareholder experience, and the trajectory of the pay program resulting from changes introduced by the board’s compensation committee, all as reflected in the compensation disclosures in the company’s proxy statement.
Additionally, while regulatory disclosure rules may allow for the omission of key executive compensation information, such as for smaller reporting companies, Glass Lewis believes that companies should use proxy statements to provide sufficient information to enable shareholders to vote in an informed manner.
Glass Lewis also revised how it identifies peer groups for its pay-for-performance model, including with reference to the peers of a company’s self-disclosed peers.
Board Oversight of Artificial Intelligence
Glass Lewis has adopted new guidelines dedicated to board oversight of AI, similar to the oversight of cybersecurity that was added in 2023. Glass Lewis believes that boards should take steps to mitigate exposure to material risks that could arise from their use or development of AI.
In the absence of material incidents related to a company’s use or management of AI-related issues, Glass Lewis’ policy will generally not make voting recommendations on the basis of AI‑related issues. However, when there is evidence that there is insufficient oversight and/or management of AI technologies that has resulted in material harm to shareholders, Glass Lewis will review a company’s overall governance practices and identify which directors or board-level committees have been charged with oversight of AI-related risks. Glass Lewis will also closely evaluate the board’s management of this issue, as well as any associated disclosures, and Glass Lewis may recommend against directors it deems appropriate should it find the board’s oversight, response, or disclosure concerning AI-related issues to be insufficient. Glass Lewis recommends that all companies that develop or use AI in their operations disclose the board’s role in AI oversight and how they are ensuring their directors are fully educated on this topic.
Change-in-Control Procedures
Glass Lewis also has updated the policies surrounding the change-of-control provision to clarify that companies that allow for committee discretion over the treatment of unvested awards should commit to providing clear rationale for how such awards are treated in the event that a change in control occurs. This change underscores the importance of clear disclosure surrounding equity awards.
Board Responsiveness to Shareholder Proposals
Glass Lewis revised its policy for shareholder proposals to clarify that when shareholder proposals receive “significant” shareholder support (generally more than 30%, but less than a majority of votes cast), boards should engage with shareholders on the issue and provide future disclosure addressing shareholder concerns and outreach initiatives.
Reincorporation
Glass Lewis also revised its policy on reincorporation to reflect that Glass Lewis reviews all proposals to reincorporate to a different state or country on a case-by-case basis. Glass Lewis considers a number of factors, including the changes in corporate governance provisions, especially those relating to shareholder rights, material differences in corporate statuses and legal precedents, and relevant financial benefits, among other factors, resulting from the change in domicile.
Key Takeaways
You can find copies of the 2025 polices of ISS and Glass Lewis on their respective websites, as well as summaries of their 2025 policy updates. These policy updates will be important as public companies prepare for their 2025 proxy statements and annual shareholders’ meetings. Companies should review these voting guidelines to proactively make disclosures necessary to secure favorable voting recommendations from ISS and Glass Lewis. Companies may also want to consider changes in governance and compensation practices to decrease the likelihood of an adverse voting recommendation from ISS or Glass Lewis, although any such change should also be weighed against the overall governance needs and strategy of the company.
In addition to ISS and Glass Lewis and other third-party proxy advisory firms, companies should review the voting policies of any large institutional investors who have significant shareholdings in the company. These institutional investors often have their own voting policies that can change over time, like ISS and Glass Lewis.
Navigating Executive Orders: Insights and What Lies Ahead
On January 20, 2025, a new administration took control of the Executive Branch of the federal government, and it has signaled that it will make aggressive use of executive orders.
This would be a good time to review the scope of executive orders and how they may affect employers and health care organizations.
Executive orders are not mentioned in the Constitution, but they have been around since the time of George Washington. Executive orders are signed, written, and published orders from the President of the United States that manage and direct the Executive Branch and are binding on Executive Branch agencies. Executive orders can be used to implement or clarify existing federal law or policies and can direct and manage the way federal agencies interact with private entities. However, executive orders are not a substitute for either statutes or regulations.
The current procedure for implementing executive orders was set out in a 1962 executive order that requires that all such orders must be published in the Federal Register, the same publication where executive agencies publish proposed and final rules. Once published, any executive order can be revoked or modified simply by issuing a new executive order. In addition, Congress can ratify an existing executive order in cases where the authority may be ambiguous.
Although the President has extensive powers under Article II of the Constitution, that does not necessarily mean that executive orders can be issued and enforced on a whim. Over time, federal courts have reviewed executive orders and typically base their decisions on three questions: (1) has Congress delegated any authority to the President to act through an executive order?; (2) if so, what is the scope of any delegation?; and (3) did the President act within the scope of that delegation?
In a seminal case, Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579 (1952), the Supreme Court reviewed an executive order signed by President Truman directing the Secretary of Commerce to take possession of and operate most of the nation’s steel mills to prevent a strike from disrupting steel production during the Korean War. On appeal, the Court ruled that the executive order was not authorized under the Constitution or any statute, and that the President lacked any legislative power. It also rejected the argument that the President had an implied authority to issue the executive order under the military powers delegated to the President, as that did not extend to labor disputes.
More recently, during the COVID-19 pandemic, an executive order used the authority delegated in the Defense Production Act to address potential national defense and food supply disruptions. Nevertheless, deference to an executive order should not be presumed. Even at the height of the pandemic, the Sixth Circuit ruled that the President lacked the authority to issue an executive order mandating that federal contractors be vaccinated against the COVID virus. In Kentucky v. Biden, 23 F.4th 585 (6th Cir. 2022), the Sixth Circuit ruled that the President’s reliance on the Federal Property and Administrative Services Act of 1949 (“FPASA”) was misplaced and did not authorize issuing an executive order binding on federal contractors; it determined that the act’s goal of improving economy and efficiency in federal procurement of property and services applied to the government itself and did not extend to issuing directives that may “improve the efficiency of contractors and subcontractors.”
The question of a delegation of authority to a President is not necessarily solved with an executive order directing an agency to issue regulations. For example, President Biden signed an executive order directing the Secretary of Labor to publish regulations setting a minimum wage of $15 per hour for federal contractors, based on his reading of FPASA. The regulations were challenged, and two Courts of Appeal reached opposite conclusions. In Bradford v. U.S. Dep’t of Labor, 101 F.4th 707 (10th Cir. 2024) the Tenth Circuit ruled that Congress had delegated broad authority under FPASA to the President in the language setting out the act’s purpose, and that he was justified in determining that a $15 minimum wage was consistent with the act’s goals. Nevertheless, in State of Nebraska v. Su, 121 F.4th 1 (9th Cir. 2024), the Ninth Circuit determined that the minimum wage mandate did exceed the authority granted to the President and the Department of Labor. That decision relied on a narrow reading of FPASA, and concluded that the intent of the statute was limited to ensuring that the federal government received value in contracts with private entities, and that setting a minimum wage for the employees of those contractors fell outside the reach of FPASA. Although there was a clear split among the circuits, the Supreme Court declined to resolve the matter. For now, disputes involving executive orders may have to be resolved on a case-by-case basis.
In the future, employers and health care organizations that supply goods or services to federal agencies or federally-funded programs should be concerned that if there are executive orders that affect their business, those orders should be examined carefully to evaluate not only the content of those orders, but whether they are authorized by law. EBG intends to monitor these developments along with any relevant rulemaking by federal agencies.
Wearable Technologies in the Workplace May Implicate Nondiscrimination Laws
The U.S. Equal Employment Opportunity Commission (EEOC) recently released a fact sheet that explains why employers need to be careful in using wearable technologies so they do not violate federal nondiscrimination laws.
Companies in the warehousing, package delivery, construction, manufacturing, and healthcare industries are most likely to rely on wearable technologies and be impacted by federal enforcement of nondiscrimination laws.
Quick Hits
An increasing number of employers are requiring workers to use wearables to track their movements and location for safety and productivity purposes.
A new fact sheet from the EEOC describes how the use of wearables in the workplace could violate federal nondiscrimination laws.
When relying on wearables, employers may need to make reasonable accommodations for workers with disabilities.
On December 19, 2024, the EEOC published “Wearables in the Workplace: Using Wearable Technologies Under Federal Employment Discrimination Laws” to help employers prevent legal challenges related to using wearables.
The EEOC fact sheet defines wearables as “digital devices embedded with sensors and worn on the body that may keep track of bodily movements, collect biometric information, and/or track location.” Wearables include GPS trackers, smart watches, smart rings, smart glasses, smart helmets, and proximity sensors. They may monitor eye movements, blood pressure, heart rate, body temperature, or physical location.
Collecting Medical Information
The fact sheet advises that using wearables to collect information about an employee’s physical or mental condition, or to conduct diagnostic testing, could constitute “medical examinations” under the Americans with Disabilities Act (ADA).
The fact sheet also advises that requiring workers to provide medical information in connection with using wearables could constitute “disability-related inquiries” under the ADA. The EEOC reminds employers that the ADA bars disability-related inquiries unless they are job-related and consistent with business necessity.
If an employer collects medical or disability-related data from wearable devices, the ADA requires the employer to store that data in separate medical files and treat it as confidential medical information.
The EEOC confirmed that an employer may violate federal nondiscrimination laws if it uses information collected from wearables to make decisions that have an adverse impact on protected classes. The EEOC’s examples include using wearables’ information to determine that an employee is pregnant and treat her differently because of the pregnancy, or to fire an employee with an elevated heartbeat that a heart condition causes.
Reasonable Accommodation Issues
The EEOC advised that employers may have to provide employees with the reasonable accommodation of excusing them from utilizing wearable devices. The EEOC posited that an employer might have to excuse workers whose religion prevented them from wearing the device, or make a reasonable accommodation based on pregnancy and/or disability.
Next Steps
Employers that rely on, or are considering using, wearable technologies may wish to review their policies and practices to ensure they comply with federal nondiscrimination laws, particularly the ADA’s requirement that collecting medical information and making disability-related inquiries must be job-related and consistent with business necessity.
Employers that use data from wearables in their employment-related decision-making may wish to examine whether their use adversely impacts individuals in protected groups.
Navigating New DOL Opinion Letters: Implications for Tip Pooling and Coordinating Paid Family Leave Benefits With FMLA Leave
On January 14, the US Department of Labor’s (DOL) Wage and Hour Division (WHD) published two opinion letters, FLSA2025-1, which addresses tip pooling under the Fair Labor Standards Act (FLSA), and FMLA2025-1-A, which provides guidance on how employers may coordinate paid family leave benefits with leave taken under the Family Medical Leave Act (FMLA).
FLSA2025-1: The Tip Pooling Letter
In restaurants and other service-based establishments, customer tips are often collected and pooled for employees to share. It is well understood that employees working in a management capacity cannot share in tip pools under the FLSA. FLSA2025-1 focuses on whether managers and supervisors can lawfully share in tips when they work in a non-management capacity. The following two scenarios were discussed in the letter:
Can a Team Lead or Assistant Team Lead who is a manager for purposes of the FLSA, but who clocks in and works a shift in a non-management capacity, participate in a tip pool for that particular shift?
Can a Shift Lead, who is not a manager for purposes of the FLSA, but who is the highest-ranking employee during a particular shift, participate in a tip pool during that shift?
Regarding Team Leads and Assistant Team Leads, the WHD determined that, if the manager in question qualifies as an exempt executive employee and, therefore, is primarily engaged in exempt-level duties, then they may not receive any tips from a tip pool. To permit an individual whose primary duty is management (based on their job as a whole) to receive tips from a tip pool simply because the employee happened to engage in non-management duties on a particular shift would circumvent the FLSA’s general prohibition against allowing managers to draw from employee tip pools.
However, the WHD found that if the Shift Leads in question do not qualify as exempt executive employees, then they may share in a tip pool, even on those shifts when they are the most senior employee working at the establishment. Unlike an exempt Team Lead or Assistant Team Lead, their primary duty is not management-level work. As such, allowing a non-exempt Shift Lead to share in a tip pool would not circumvent the goals of the FLSA.
The key takeaway from FLSA2025-1 is that employers should remain extremely cautious when it comes to allowing management-level employees to share in tip pools. If those employees qualify as exempt for overtime purposes, they should not be permitted to share tips even when they perform non-exempt tasks.
FMLA2025-1-A: Coordination of FMLA and Paid Family Leave Benefits
The second opinion letter, FMLA2025-1-A, focuses on the coordination of benefits employees receive from paid family leave programs with protected leaves of absence under the FMLA. A growing number of state and local governments have implemented paid family leave benefits where employees receive paid time off (PTO) for reasons such as personal medical issues, family care, and parental bonding. These plans vary widely in their scope and the duration of benefits they provide.
Under the FMLA, if an employee’s protected leave is unpaid, the employer may require the employee to use any accrued vacation, PTO, or sick time the employee may have. However, the rule has long been that, if the employee’s protected FMLA leave is paid through workers compensation or disability benefits, then the employer may not require the employee to use any of their accrued vacation, PTO, or sick time.
In FMLA2025-1-A, the WHD decided that employers are likewise prohibited from requiring employees to use accrued vacation, PTO, and sick time if they are on a protected FMLA leave while receiving compensation from a paid family leave program. For example, if the employee is on a 12-week FMLA leave and the first four weeks are paid through a state-law family leave program, the employer cannot require the employee to use their vacation/PTO/sick hours (although the employee and the employer may voluntarily agree to such an arrangement). However, for the last eight weeks of the FMLA leave, which are unpaid through the state benefits program, the employer can require the employee to use their accrued time off hours.
With the ever-expanding number of both paid and unpaid employee leave programs under state and local laws, it is important to stay abreast of how those rights interact with the rights under the FMLA. FMLA2025-1-A highlights when employers may lawfully require employees to use their accrued vacation, PTO, and sick hours, an issue that regularly causes confusion for many human resources and payroll professionals. It is thus an appreciated piece of guidance.
First Days: Initial Executive Orders on Immigration and Border Security
Highlights
On Jan. 20, President Trump issued several executive orders that have a wide-ranging impact on U.S. immigration and border security
These executive orders, which attempt to reshape the definition of American citizenship, have resulted in immediate litigation
They also could result in new travel restrictions and additional delays for travelers seeking visas at U.S. Consulates abroad
Nationals of certain countries admitted to the U.S. since Jan. 20, 2021, could be at risk of removal proceedings
Shortly after his inauguration on Jan. 20, President Donald Trump issued several significant executive orders (EOs). While these EOs covered several areas of American society, a very significant number focus on immigration and border security. This alert summarizes several of these EOs with a particular focus on their prospective effect on employers and the foreign nationals they employ.
Executive Order on Birthright Citizenship Titled Protecting the Meaning and Value of American Citizenship
On Jan. 20, the EO on Protecting the Meaning and Value of American Citizenship was issued. This EO seeks to limit birthright citizenship to children of U.S. citizens or lawful permanent residents and sets forth the policy of limiting the scope of individuals to be recognized as American citizens.
As background, the 14th Amendment’s citizenship clause grants citizenship to almost all children born in the U.S. (children of foreign diplomats are not conferred U.S. citizenship). It states, “All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside.” In essence, if you’re born here, you’re an American. The principle of birthright citizenship is long-standing and has been confirmed in multiple U.S. Supreme Court rulings.
This EO is not retroactive but would apply to all children born in the U.S. on or after Feb. 19, 2025, who do not have at least one U.S. citizen or lawful permanent resident parent.
Multiple states and civil rights organizations have jointly filed a lawsuit challenging the constitutionality of the EO. As of Jan. 23, a federal court in Washington has granted a 14-day injunction on enforcement of the order, calling it “blatantly unconstitutional.” During this 14-day period, the court will determine whether to issue a permanent injunction. It is likely this matter will be litigated all the way to the Supreme Court.
Importantly, an EO titled Protecting the United States From Foreign Terrorists and Other National Security and Public Safety Threats directs relevant federal agencies to identify countries that may warrant restrictions affecting the ability of foreign nationals to travel to the U.S. or gain an immigration benefit while in the U.S. The agencies have 60 days to review current status and then recommend to President Trump the countries that should have a travel ban imposed.
For employers and their foreign national employees this likely means:
a) In-person interviews of all visa applicants at consulates abroad, prolonging wait times for appointment and processing.
b) In-person interviews for all “green card” applicants, further prolonging final approval for employment-based cases.
c) Restrictions on international travel for employees of countries under a travel ban.
d) Increased delays at all levels of the process.
We recommend employers consider notifying any employees from a designated country who were admitted on a visa or granted residency after Jan. 20, 2021, of possible issues.
Other important orders issued covering immigration and border security are:
Executive orders declaring a national emergency at the southern border and a separate executive order to the military prioritizing U.S. border security titled Clarifying the Military’s Role in Protecting the Territorial Integrity of the United States
An executive order instructing the U.S. Department of Homeland Security (DHS) to restore the full scope of expedited removal and rescind guidance limiting the scope of expedited removal issued by the Biden administration. Anybody encountered anywhere in the U.S. within two years of their entry is now subject to expedited removal.
Executive order titled Designating Cartels and Other Organizations As Foreign Terrorist Organizations and Specially Designated Global Terrorists, which could affect individuals seeking admission to the U.S. who’ve had any prior contact with drug cartels.
Executive order titled Realigning the United States Refugee Admissions Program, which suspends the admission of any new refugees and directs greater state and local involvement in refugee placement decisions once the program resumes.
Biden Orders Reversed: Initial Rescissions of Harmful Executive Orders and Actions
President Trump also issued an EO titled Initial Rescissions of Harmful Executive Orders and Actions, which rescinds a number of EOs on various topics, including many on immigration issued by President Biden. One of the Executive Orders issued by President Biden aimed to ensure that immigrant communities feel welcomed, valued, and fully integrated into U.S. society. However, as a result of these rescissions, certain public charge and naturalization processes may be affected, potentially introducing more restrictive requirements.
Asylum: EO Titled Protecting the American People Against Invasion
This EO, also issued on Jan. 20, revokes many of the Biden administration’s EOs related to asylum seekers and family reunification. It also enhances the civil and criminal enforcement priorities of DHS and the agencies and departments under it. This EO directs the Attorney General and the secretary of DHS to establish enforcement task forces and to coordinate with state and local law enforcement.
Importantly for employers, there is direction to prioritize human smuggling with a focus on children and to use “all available law enforcement tools” in this effort. This likely means increased worksite raids and investigations – including those involving both Homeland Security and the Department of Labor (responsible for enforcement of child labor laws).
Additional key provisions that could affect employers include direction to:
a) Relevant agencies to consider withholding federal funds from “sanctuary jurisdictions” that will not cooperate in the increased enforcement efforts. Employers at organizations supporting “sanctuary” processes may be at risk.
b) The agencies to assess and consider limiting the length and scope of Employment Authorization Documents (EAD)s and the suspension of parole programs, which would result in the loss of employment authorization for workers with EADs pursuant to such parole.
c) Ensure all grants of Temporary Protected Status (TPS) are “consistent” with the statute, which could result in the revocation of TPS for some countries, which would then result in the loss of employment authorization for workers from those countries.
d) Review and audit all agreements pursuant to which non-governmental organizations supporting or providing services – directly or indirectly – to “removable” people in the country illegally do not promote or violate immigration laws. Nonprofit services organizations, universities and colleges, and hospitals could all be at risk under this provision to audits and possibly loss of federal funding.
The sections of the EO mandating that U.S. Immigration and Customs Enforcement (ICE), Customs and Border Patrol, and U.S. Citizenship and Immigration Services prioritize the enforcement of immigration laws and prosecution of offenses related to individuals’ unauthorized entry or presence in the U.S. are likely to result in a significant increase in worksite enforcement actions. This could include I-9 enforcement, wage and hour audits of employers that hire H-1B workers, and potential reverse discrimination claims by the DOJ’s Civil Rights Division.
Of note for employers, President Trump also has ordered DHS to ensure the assessment and collection of fines and penalties authorized under the law for ICE enforcement efforts against people unlawfully present in the U.S. and from those who facilitate their presence. This could have significant implications for employers found to have knowingly hired unauthorized workers or situations involving constructive knowledge.
Takeaways
Cumulatively, these EOs intend to reshape immigration law and are likely to result in significant additional changes across federal agencies such as the Department of Homeland Security, the Department of State, the Department of Labor, and the Department of Justice, among others. Some are also likely to be the subject of litigation.
Classification of App-Based Couriers as Employees in Mexico
App-based couriers in Mexico are now classified as employees under an amendment to the Federal Labor Law published on December 24, 2024, in the Official Gazette of the Federation (Diario Oficial de la Federación). The reform introduces a new regulatory system that protects couriers and the industries involved in digital platforms and aims to provide them with legal certainty.
Quick Hits
A new Mexican law states that app-based couriers that meet certain requirements established under this law will be considered employees of digital platforms when they provide their services through the apps.
The law also provides that only workers who generate at least a daily minimum wage per month will be entitled to social security and benefits.
Digital platforms acting as employers must determine in writing the working conditions and must meet the general requirements that the Federal Labor Law establishes for an individual employment agreement.
The amendment defines “digital platform work” as “the subordinate employment relationship for the performance of remunerated activities that require the physical presence of the employee for the provision of the service, and which are managed by an individual or legal entity in favor of third parties through a digital platform.”
Requirements for App-Based Couriers to Be Considered Employees
The amendment provides that all couriers will be considered employees of digital platforms when they provide their services through the apps, but only those who generate at least a daily minimum wage per month will be entitled to social security and benefits.
Couriers who do not meet the minimum wage per month will be considered independent workers and will only be entitled to insurance or protection against personal accidents regardless of the income generated.
The secretary of labor and social welfare will be in charge of publishing the general provisions that will define the calculation of net income to determine an employee’s category and benefits.
Employment Agreements and Employer Policies
The amendment states that the digital platform, which can be understood as the employer, must determine in writing (execute a contract) the working conditions and must meet the general requirements that the Federal Labor Law establishes for an individual employment agreement (e.g., the name of the employee, CURP number, RFC number, employee’s nationality, the services to be rendered, and work shifts).
Employers may also execute policies to describe processes and how services are rendered to third parties, among other things.
The reform provides that the salary for employees may be stipulated by the trips provided, by actual delivery, by unit of work, or any other method agreed upon by the parties. Whenever a wage is considered, compensation shall include the proportional weekly rest day, vacations, vacation premium, Christmas bonus, and overtime.
Employees on the platform will determine their own work shifts and will have complete freedom to determine their own shifts without fixed schedules. Employees will also be able to connect and disconnect at their own discretion when required.
The Official Gazette of the Federation grants a 180-day period, as of the publication date, to comply with all the obligations stated in the amendment.
Fourth Circuit Approves Award of Estimated Delinquent Contributions
Multiemployer benefit plans generally require contributing employers to submit “remittance reports” that identify the employees that performed covered work, the type of work performed, and the amount of time worked. Plans rely on the timely and accurate submission of these reports to ensure employers remit all required contributions and that participants accrue all benefits owed. Most plans will also require contributing employers to submit to periodic audits to identify any discrepancies between the submitted reports and the employer’s records. Even though employers are generally required to maintain accurate records by contract and applicable law, some employers fail to do so. Additionally, records may be destroyed, or employers may refuse to provide them. To address these situations, many plans have adopted rules and procedures permitting them to collect “estimated” contributions, typically by allowing the plan’s auditor to extrapolate from the employer’s past contribution history. In Sheet Metal Workers’ Health & Welfare Fund of N. Carolina v. Stromberg Metal Works, Inc., 118 F.4th 621 (4th Cir. 2024), the Fourth Circuit joined a number of other Circuits that have endorsed this practice, holding that the plan could collect estimated delinquent contributions because the employer’s records made it impossible to determine the precise amount of contributions due for each employee.
Background
Stromberg Metal Works is a commercial sheet metal fabrication and installation company that employs union sheet metal workers. Stromberg signed collective bargaining agreements that require it to pay contributions to various multiemployer benefit plans for health, pension, and other fringe benefits. The amount of contributions depends on each employee’s job classification, with lower contribution rates for non-journeymen (i.e., those with less experience) than journeymen. Pursuant to the CBAs, Stromberg agreed to refer employees to the local union for classification. Stromberg also agreed to a “default” two-to-one staffing ratio of non-journeymen to journeymen and a “modified” four-to-one staffing ratio for two specific projects. In 2017, Stromberg hired temporary sheet metal workers for various projects and did not refer them to the local union for classification; instead, Stromberg remitted contributions to the plans using the lowest contribution rate for non-journeymen. When the plans subsequently initiated an audit, Stromberg failed to provide the plan’s auditor with documentation necessary to determine how much time the employees worked on each project, and because it had failed to refer the employees to the local union, it was unknown how they should have been classified. In the absence of this information, the auditor assumed that the employees were staffed in accordance with the default ratio, and calculated that over $823,000 was owed on account of Stromberg remitting contributions at the lowest contribution rate for non-journeymen.
In the plans’ subsequent collection action, the district court sustained the auditor’s assumptions and entered judgment in favor of the plans for the delinquent contributions and accumulated interest and liquidated damages. The court rejected Stromberg’s arguments that the plans must determine the actual classification for each employee or use the modified staffing ratio instead of the default ratio. The court pointed out that it was Stromberg who had failed to comply with the obligation to refer these employees to the local union for classification and to maintain records necessary to determine which staffing ratio should apply.
On appeal, the Fourth Circuit affirmed that the plans were entitled to use the default staffing ratio to estimate the amount of delinquent contributions. The Court reasoned that an employer cannot be heard to complain that damages lack exactness when such imprecision is the result of its own failure to keep adequate records. Joining the Sixth, Ninth, and Eleventh Circuits, the Court adopted the following burden-shifting framework: once a plan shows that an employer owes delinquent contributions and has failed to maintain pertinent records, “the burden shifts to the employer to prove the precise amount of damages” and, if it cannot, the “fund is entitled to a damages award in an amount approximated as a matter of just and reasonable inference.” Applying that standard, the Court affirmed that Stromberg failed to satisfy its burden to prove the precise amount of contributions owed, and therefore, the auditor’s “estimated” contributions remained unrebutted. Because, however, Stromberg had identified “computational and methodological errors” in the auditor’s work, the Court remanded to the district court to address those errors.
Proskauer’s Perspective
Multiemployer plan trustees have a fiduciary obligation to collect the contributions owed to the plans they oversee, and the Fourth Circuit’s decision is a reminder that an employer’s failure to maintain accurate records is not likely to deter plans from enforcing those obligations. In fact, such a failure may prevent the employer from setting forth the facts necessary to rebut determinations by the plan’s auditor and expose the employer to interest, liquidated damages, and attorneys’ fees and costs incurred by the plan to collect any delinquent contributions.