New Year, New Rules, Workplace Resolutions You’ll Want to Keep in 2025 [Podcast]
The Employment Strategists are kicking off the year with tips to lay the foundation for a compliant, thriving workplace. From refreshing your employee handbook and conducting pay audits to ramping up workplace training, David Harmon and Mariya Gonor guide you through the must-dos to boost workplace culture in 2025.
Lawyer on the Move: Practical Tips for Attorneys Considering a Lateral Move
Question: I’m an associate considering a move to another law firm. Should I use a recruiter in connection with this process?
In my experience, it is helpful to use a recruiter in connection with a lateral move. A recruiter can help assist you with the process, especially if this is the first time you have made a move. The recruiter also can introduce you to firms that you may not have considered and help you prepare for the interview process. A recruiter can provide you with guidance on what is happening in the marketplace and provide you with what to expect in terms of compensation and bonus. Recruiters can also answer your questions regarding current topics such as in office versus remote work and discuss with you the firm’s expectations. The more information you have, the better position you will be in to determine if making a move at this point in your career is right for you.
Most importantly, I recommend finding a recruiter that you like and then developing a relationship with that person. If that means “interviewing” several recruiters to find one that you enjoy working with; then do it. You want the person that will be assisting you with a potential career move to be a trusted advisor. In order for that to happen, you have to be invested in the relationship. The best recruiters also view their relationships in the long-term and are willing to make an investment in their candidates. I’ve been practicing for almost 27 years and some of my longest relationships are with recruiters that I’ve met over the course of my career and stayed in contact with. The great ones are always available for a call and they are a great resource to have in your “tool kit.” So even after you make a move, if you enjoyed working with this person, stay in touch.
Question: I’m a lateral partner that is considering a move to another law firm. I’ve heard that these firms cannot ask me about my current salary. Is this true? If so, and I decide not to disclose my salary, could that have negative implications?
The majority of states have adopted laws that prohibit employers from requesting salary history information from candidates. For example, California, Illinois, and New York have adopted laws prohibiting employers from asking lateral candidates about their salary history information. Some cities have done the same. Certain states, such as Michigan, allow employers to ask about salary history, but only after a conditional job offer is made to the candidate. A few states prohibit employers from relying on a candidate’s salary information in setting compensation if it is discovered or volunteered. Other states have remained silent on the issue. Therefore, the first consideration is where are you barred and does the state in which you practice have any such type of law.
Then once you understand whether such a law applies in your jurisdiction you must then consider whether refusing this information will negatively impact your lateral process. This is likely one of the most difficult questions to navigate as the reality of the lateral process is that the refusal to disclose at least a salary range may preclude the process from moving forward. The law firm or firms that you are interviewing with need to have at least a range with which they can model your candidacy. Absent any salary information, you may wind up with an offer that is not what you are looking for.
Question: I’m a lateral partner that is in the process of looking for a new position at another law firm. I anticipate receiving several offers at the conclusion of this process, should I share those offers with the other firms.
Offers that law firms provide candidates are in most cases confidential. Firms may send offer letters that explicitly state the offer is to remain confidential or may otherwise express to the candidate that the offer is to remain confidential. Regardless, firms keep offers confidential from the public, competitive law firms, and other attorneys and personnel at the firm. This information is, thus, confidential to both the law firm and to the candidate. Other firms do not have a right to it.
Having said that, have I seen instances where a candidate will tell one law firm what the other firm is offering in the hopes of getting the first law firm to increase its offer. The answer is yes. That does happen. But the better way to handle the situation is to tell the firm that is your first choice that you would need a certain level of compensation in order to accept its offer. That is the best way to negotiate an offer. You should not disclose the name of the other firm or disclose details of the other firm’s offer.
Question: I’m an associate that is looking for a new associate position at another law firm. Will the firm I’m interviewing with ask for my performance reviews or self-evaluations? If so, should I disclose them?
Firms should not be asking you for this type of information. Not only is the usefulness of a candidate’s prior law firm performance reviews questionable, but requesting a candidate’s performance review implicates important concerns that you must be mindful of. First, the content of attorney-performance reviews likely contain confidential and privileged information. For example, the review could include confidential client-specific information related to a transaction or ongoing litigation that you worked on. It may also include attorney-client information, attorney-work product, and proprietary firm strategic plans. For these reasons, many law firms have policies in place requiring that performance reviews are to be treated confidential and should not be shared outside of the firm or even within the firm. Another related consideration is your privacy interest and the privacy interest of the reviewers who likely drafted their reviews of you with the expectation that the reviews will remain private. The same considerations apply to your self-evaluations. Second, the performance reviews are likely your firm’s confidential information; prospective employers should not be asking for the current firm’s confidential information in connection with the lateral process. Simply put, these materials are confidential. The materials also may be privileged depending upon their content, and should not be shared outside your current firm.
Trump Fires NLRB General Counsel
In a much-anticipated move, President Donald Trump has fired Jennifer Abruzzo, the general counsel of the National Labor Relations Board (“NLRB”). Trump’s action follows a precedent set by former President Joe Biden. On his first day in office four years ago, Biden ousted Peter Robb, the NLRB’s general counsel during the first Trump administration. During her tenure, Abruzzo aggressively sought to expand workers’ rights under the National Labor Relations Act, empower unions, and protect those seeking to organize workers.
The removal of Abruzzo opens the door for President Trump to appoint a new general counsel for the Board. The White House has yet to announce Abruzzo’s replacement, but the President’s transition team for the NLRB was led by Robb and his former deputy, Alice Stock. The new U.S. Labor Board’s prosecutor is expected to adopt a more pro-business stance. It remains to be seen, however, if that agenda will be influenced by Trump’s campaign rhetoric and promises in support of workers and union members. Many have noted that Trump’s choice to lead the Department of Labor, Representative Lori Chavez-DeRemer, is an unusually pro-union Republican whose candidacy was backed by the International Brotherhood of Teamsters in part because she had backed the Protecting the Right to Organize Act as a Congresswoman.
The dismissal of Abruzzo will undoubtedly bring a shift towards employer-friendly priorities under a Trump-appointed NLRB general counsel. Over the past decade and a half, the labor law pendulum has swung back and forth with increasing momentum under each presidency since Obama. In addition to seeking to roll back many of the labor law changes championed by Abruzzo, whoever Trump appoints as the new general counsel will be taking over at a critical juncture for the future of the NLRB. In 2024, a number of companies filed constitutional challenges to the NLRB’s authority to be prosecutor, judge, and jury violating due process, the Board and its administrative law judges being shielded from removal by the president, and the agency’s administrative proceedings violating employer’s Seventh Amendment right to a jury trial. Companies and unions alike will be closely watching to see how a new NLRB general counsel handles these cases as several of them move to appeals courts in 2025. The outcomes could have far-reaching implications for labor law and the future of the NLRB.
What Every Multinational Company Should Know About … Managing Import Risks Under the New Trump Administration (Part III): A 12-Step Plan for Coping with Tariff and Supply Chain Uncertainties
Our previous article on What Every Multinational Company Should Know About … Managing Import Risks Under the New Trump Administration (Part I) identified the 12 main import-related risks (and opportunities) likely to arise in the new Trump administration. Part II laid out the likely roadmap to the international trade priorities of the Trump Administration in The Implications of President Trump’s “America First Trade Memorandum.” We now complete the series on “Managing Import Risks Under the New Trump Administration” with Part III, which provides practical advice regarding how to navigate these potential major changes in the international trade environment.
With potential tariff increases and USMCA renegotiations on the horizon, and with Customs already devoting considerable resources to blocking goods at the border that are the product of forced labor or human trafficking or that violate the Uyghur Forced Labor Prevention Act (UFLPA), we have put together a 12-step guide to preparing for and adapting to the rapidly shifting importing environment. It focuses on the following areas:
Understanding your company’s importing patterns;
Ensuring that your current import efforts comport with Customs requirements and are not leaving your organization at risk for detentions or penalties;
Evaluating the status of your current USMCA compliance efforts;
Risk planning for potential rapid changes in the tariff environment; and
Ensuring your organization is preparing for the likely focus of the new administration on supply chain integrity.
Working through these factors should help most multinational companies with significant international supply chains address the three main risks as we move into the new administration: (1) risks relating to customs underpayments, (2) risks relating to potential tariff hikes, and (3) risks relating to supply chain integrity issues. Because these areas are interrelated, a holistic focus on all five areas listed above is likely to yield the best and most flexible posture to manage a changing international trade landscape.
Understand Your Importing Patterns
Step 1: Identify All Importing Avenues at Your Company. Managing import-related risks begins with a comprehensive understanding of your company’s importing activities. The first step, accordingly, is to get a good handle on your importing patterns by doing the following:
Identify all importer-of-record (IOR) numbers associated with your company at all divisions and subsidiaries.
Identify all customs brokers used by your organization over the last five years, and determine which ones are still active. Determine which types, which product lines, or which divisions each broker is handling.
Pull, or have your customs broker pull, the Automated Commercial Environment (ACE) data with all your company’s identified IORs to gather the data needed to analyze import trends and the accuracy of information submitted to Customs at the time of entry.
Collaborate with procurement teams to anticipate future orders, including for new products, suppliers, and sourcing regions under consideration.
Document all touchpoints in your supply chain, including warehouses, distribution centers, and logistics providers. When paired with importing data, logistics data provides a clear picture of importing patterns, enabling better risk management and modeling.
Ensure Your Imports Are Being Handled with Reasonable Care
Step 2: Ensure Customs Compliance Is Robust. Customs compliance is always important. But in a high-tariff environment, the stakes for missteps are considerably greater, increasing potential penalties and interest for underpayments. For the same reason, the advantages of identifying tariff-saving opportunities are much greater. Some key areas to consider for ongoing customs compliance include:
Ensure Your Company Maintains a Thorough Classification Index to Ensure Proper and Consistent Tariff Coding: Inaccurate classifications can result in incorrect duties or penalties, so confirm your company has procedures to correctly classify goods using the correct Harmonized Tariff Schedule (HTS) codes and maintains a regularly updated import classification index to reflect new products or changes in tariff codes.
Ensure Your Company Maintains a Customs Manual for Consistent Procedures in Importing: Ensure your organization maintains a detailed customs compliance manual that outlines procedures for classification, valuation, origin determination, recordkeeping, interactions with brokers and Customs authorities, and other relevant matters that impact the accuracy of information reported to Customs. A clear, documented import process ensures consistency and reduces the risk of errors.
Ensure Your Company Tracks and Attributes Assists Using a Consistent Methodology: Review and ensure there are procedures to track and properly report assists, royalties, or other costs that might affect the declared value of imported goods. Misreporting these costs could lead to underpayments of duties and penalties.
Ensure Your Company Conducts Regular Post-Entry Audits to Identify Errors in Importation:Ensure there are procedures to regularly review entries after clearance to identify potential errors in valuation, origin declarations, classification, or other entry-specific items that impact how much duties are owed. Do not forget to include areas of tariff savings like duty drawbacks, post-summary corrections, or reconciliation filings to identify and address discrepancies.
Ensure Your Company Maintains Procedures for Overseeing Customs Brokers and Freight Forwarders: Ensure there are written protocols that are consistently followed to ensure there is proper oversight of customs brokers and freight forwarders. Confirm that someone at the company is playing point on this coordination and also has been given ACE access to monitor communications to and from Customs.
Ensure Your Company Maintains Procedures to Monitor Changing Regulations and Importing Requirements: It is important to stay informed about regulatory updates, especially in times when import-related requirements might quickly change. Use tools like ACE data to proactively adjust compliance practices to evolving rules.
Step 3: Address USMCA Compliance. As detailed in Part I, the USMCA is coming up on the deadline for a three-country review, to begin in 2026 (although it is likely that the process will begin earlier). Even in advance of that, we expect Customs to continue prioritizing its review of claims for USMCA preferential treatment, which has been a point of emphasis for CBP over the last few years. Thus, the starting point for USMCA risk planning is to ensure your organization is properly managing its current USMCA posture. Key areas to review include:
Proper Certificates of Origin at Importation: Importers must have a valid certificate of origin to claim duty-free treatment in hand at the time of importation. Lack of documentation at the time of importation may result in denied preferences and cannot be remedied after the fact. This is one of the most common importing errors that we see (along with failure to track assists and misclassifications). Avoid this problem by ensuring certificates are available, complete, and maintained for at least five years. Collaborate with suppliers to provide accurate certificates before shipment.
Compliance with Regional Content Requirements: Products like automobiles must meet specific regional value content thresholds. Conduct a detailed analysis of your supply chain to confirm sourcing meets required content levels.
Proactively Engage with Suppliers: Communicate with suppliers to verify their understanding of regional content requirements and to confirm they are accurately reporting the same to your company. Work with them to resolve discrepancies and improve compliance practices.
Proper Declaration of Country of Origin: Incorrect origin declarations may trigger penalties or loss of USMCA benefits; misclassifications can result in the application of the wrong USMCA classification requirements and also increase scrutiny from CBP. Validate claims of USMCA origin using clear supplier documentation and other supporting information. Ensure employees managing import declarations are trained on proper classification and country of origin rules, which often differ from the normal Customs substantial transformation rules, such as when the USMCA requires a tariff-shift analysis or product-specific requirements.
Step 4: Consider Conducting a Customs Audit. A comprehensive customs audit can be essential for identifying compliance gaps and mitigating risks in an increasingly complex trade environment. Regular audits ensure that your organization adheres to import regulations, minimizes the risk of penalties, and maximizes efficiency in import operations. A well-conducted compliance audit can identify inconsistencies in tariff classifications, valuation, or country-of-origin claims and can streamline processes to avoid unnecessary delays and errors in filings, verify that declared values include all dutiable costs, such as assists and royalties, and ensure your company is maintaining proper documentation. A customs audit also should evaluate the robustness of the importer’s procedures for identifying errors after entry and correcting them using post-entry corrections and protests against liquidation.
Evaluate Tariff-Related Risks
Step 5: Conduct a Comprehensive Risk Assessment. A thorough risk assessment is critical to navigating tariff challenges, geopolitical uncertainties, and supply chain vulnerabilities. This step ensures your business understands where risks lie and enables strategic mitigation measures. Key areas to assess include the following:
Regional Risk: Analyze regions prone to instability, trade disputes, or changing trade agreements. Consider the impact of regional disruptions such as natural disasters or labor unrest.
Political Risk: Evaluate the vulnerability of goods facing political headwinds, especially those from China, Canada, or Mexico.
Product-Related Risk: Identify goods facing high tariff rates or subject to frequent trade policy changes, such as steel and aluminum. Evaluate whether certain products have complex classification issues or are affected by partner agency rules.
USMCA Risk: Evaluate goods from Canada and Mexico that are subject to special rules such as content requirements for automotive goods and heightened rules of origin standards.
Supply-Related Risk: Assess the concentration of suppliers in high-risk regions or for key products. Evaluate supplier compliance with trade regulations and their ability to adapt to policy changes.
Once the data is in place, begin to analyze risk factors. Create risk matrices for products, regions, and suppliers to quantify and prioritize exposures. Also use supply chain mapping to identify the sourcing of key goods, from raw materials to finished products, that the company may not be sourcing directly. Use all data sources to fully understand company sourcing, how goods work through the supply chain, and hidden sources of risk.
Step 6: Model Different Risk Scenarios. The next step is scenario planning. Risk scenario modeling equips your company to anticipate and navigate potential challenges by evaluating various “what if” situations. Risk scenario modeling will help provide visibility into which areas need immediate attention; can provide informed decision making for supplier diversification, tariff mitigation strategies, and contract negotiations; and enhances preparedness to manage disruptions and to maintain compliance while safeguarding profitability. Areas to consider include:
Rising Tariffs on Specific Countries or Goods: Be aware of tariff increases on specific countries or goods such as electronics or steel. Watch for escalation of trade disputes affecting major trading partners like China, Mexico, or the EU.
Adjustments to USMCA Provisions: Track changes to USMCA rules, such as stricter regional content requirements. Be prepared for renegotiations or withdrawal from agreements impacting duty-free access.
Currency and Geo-Political Risks: Currency fluctuations impact the landed cost of goods. Consider the impact of inflationary pressures and potential currency movements on raw materials or finished goods, taking into account the currency used in contractual arrangements.
Long-Term Supply Chain Disruptions: Consider likely increased scrutiny of imports due to UFLPA, forced labor and human trafficking, and other supply chain integrity measures. Evaluate potential long-term disruptions due to geopolitical instability, natural disasters, or pandemics as well as how your company would weather supplier shutdowns due to failure to meet trade or labor standards or for other reasons.
Partner Agency Regulations: Customs acts as the gatekeeper regarding the import-related obligations imposed by several dozen other federal agencies such as the Food & Drug Administration and the Department of Transportation. Failure to meet the requirements of these partner agencies can lead to penalties or detentions of goods at the border. Evaluate whether your organization has identified all potentially applicable partner agency import-related requirements and has taken steps not only to meet these requirements but to document compliance, to allow for a quick response to any detention.
Next, move to modeling scenarios:
Define Scenarios: Collaborate across Procurement, Compliance, and Finance to identify plausible high-impact scenarios such as rising tariffs on key imports, potential filing of antidumping or countervailing duty actions, or revisions to important USMCA preferences. Incorporate external data on policy trends, trade disputes, and economic forecasts.
Quantify Impacts: Calculate financial exposure for each scenario, including additional duties, delays, or penalties. Assess operational impacts such as delays in sourcing or increased compliance burdens.
Develop Response Plans: Create contingency strategies such as diversifying suppliers or renegotiating contracts. Identify alternative sourcing regions with favorable tariff structures, and model how flexibility in supply chains can minimize unexpected international trade developments.
Step 7: Model USMCA Changes. By thoroughly reviewing and modeling current compliance with USMCA, companies can mitigate risks from CBP enforcement. To risk plan for the future and the potential impact of USMCA renegotiations, USMCA modeling should cover the following areas:
Assess Risk of Stricter Rules of Origin: Model scenarios where rules of origin might tighten such as requiring higher percentages of North American content for products like automobiles, machinery, or textiles. Evaluate likely risk points for increased regional content or special rules such as those affecting steel and aluminum. Evaluate whether your existing suppliers and manufacturing processes can meet potential increases in regional content thresholds or how supply chains could adapt.
Anticipate Changes in Sector-Specific Provisions: Monitor developments in sectors like automotive, agriculture, and pharmaceuticals as well as steel, aluminum, and derivative products, which may see targeted updates. Evaluate whether stricter labor or environmental standards could alter sourcing costs and require supplier realignment.
Conduct Supply Chain Reviews: Analyze your supply chain for dependencies on non-USMCA countries that are used as sources of parts and components for USMCA regional production. If rules of origin become more stringent, reliance on these sources might disqualify products from duty-free treatment, thereby increasing costs, so model areas where alternative or secondary suppliers would be prudent.
Prepare for Cost Impact Modeling: Assess how potential changes could affect tariffs, transportation costs, and pricing. Consider consulting trade specialists to evaluate the financial implications of a shift in USMCA provisions.
Implement Tariff-Mitigation Strategies
Step 8: Implement Practical Commercial Strategies. To effectively navigate trade risks and disruptions, companies must adopt pragmatic commercial strategies. These steps aim to strengthen supply chains, ensure continuity, and reduce tariff exposure:
Supplier Diversification: Identify and engage alternative suppliers across various regions to reduce dependency on high-risk countries. Assess supplier capabilities, including production capacity, quality standards, and compliance with trade and labor regulations.
Secondary Sourcing: Establish relationships with secondary suppliers to facilitate rapid transitions if primary sources are disrupted. Prequalify secondary suppliers to ensure readiness for rapid transitions. Develop a database of approved suppliers for critical products to facilitate quick decision making during disruptions.
Proactive Vetting: Use trade fairs, government networks, and supplier databases to vet potential partners. Conduct due diligence on potential suppliers, including labor standards, certifications, and production practices. Consider initiating qualification procedures and measures to ensure potential secondary or alternative suppliers can meet qualification standards.
Safety Stock: Increase inventory for high-priority or tariff-sensitive goods to buffer against supply chain delays or sudden cost spikes. Balance inventory costs with the need for operational flexibility.
Collaboration with Existing Suppliers: Engage in transparent discussions with current suppliers about risks and mitigation strategies. Encourage suppliers to diversify their sourcing of raw materials to prevent cascading disruptions.
Step 9: Review and Update Contracts. Supply chain contracts are pivotal in managing risks associated with tariff volatility and trade disruptions. Regularly revisiting and revising these agreements can provide the flexibility needed to adapt to evolving trade environments. Proactively addressing tariff risks in supply chain contracts reduces financial uncertainty, supports operational continuity, and strengthens relationships with suppliers by fostering transparency and preparedness. Consider the following steps:
Avoid Over-reliance on Force Majeure or Commercial Impracticability Clauses: These legal defenses are often difficult to invoke and generally will not cover tariff-related disputes. Instead, create specific terms addressing trade policy risks, including tariff hikes or supply chain interruptions. Define clear terms to share or distribute the financial impact of tariff increases between the buyer and supplier.
Renegotiate Supply Agreements with Built-in Flexibility for Tariff Increases: Consider implementing proactive contractual arrangements to share in potential increases in tariffs. Where possible, include provisions allowing adjustments for changes in tariff rates. Build in clauses enabling renegotiation or termination in cases of significant trade policy shifts.
Incorporate Alternative Sourcing Requirements: Require suppliers to maintain backup production capabilities or secondary sources to mitigate disruptions. Consider incorporating these requirements into contractual arrangements and establishing penalties or incentives to ensure compliance with these requirements.
Look for Contractual Leverage Points: Suppliers often will be reluctant to renegotiate contracts, particularly if it involves potential price increases or sharing of tariff-related risks. Look for contractual leverage points relating to contract renewals or potential expansion of purchasing patterns. Consider moving up contract renewals to combine term extensions with tariff-related risk sharing.
Look for Tariff-Saving Possibilities
Step 10: Maximize Duty Savings Opportunities. A well-structured strategy to minimize duty costs can significantly offset the financial burden of potentially increasing tariffs and improve overall cost efficiency in import operations. By leveraging available tools and programs, companies can enhance cash flow, lower landed costs, and reduce their tariff liabilities while ensuring compliance with Customs regulations. Key duty saving measures to consider using include:
Customs Bonded Warehouses: Customs bonded warehouses allow importers to defer duties by storing imported goods until they are needed. This approach provides cash flow advantages, particularly for products that may be reexported without duty payment.
Foreign Trade Zones (FTZs): FTZs allow companies to store, assemble, or process goods with deferred or reduced tariffs. Goods within FTZs can be reexported duty-free or entered into the U.S. market with reduced duties based on final product classification.
Duty Drawback Programs: Duty drawback programs allow importers to recover up to 99% of duties paid on goods that are later exported. This is especially beneficial for businesses with significant reexport activities or defective goods returns.
Temporary Importation Bonds (TIBs): TIBs allow the importation of goods temporarily without paying duties, provided the goods are reexported within a specified timeframe. TIBs are useful for items like trade show samples, prototypes, or tools of the trade.
Free Trade Agreements (FTAs) and Special Trade Programs: FTAs, such as the USMCA, provide potential access to preferential duty rates. Importers should investigate eligibility for programs such as the Generalized System of Preferences (GSP) for duty-free treatment on qualifying imports.
Apply Tariff Engineering: Importers can legally reduce tariffs by modifying supply chains or the manufacturing steps of products. Tariff engineering can include adjusting production processes to qualify goods under preferential trade agreements, shifting sourcing to countries with lower tariff rates, and implementing minor product changes that result in more favorable classifications. Ensure all changes comply with U.S. Customs and partner agency regulations.
Take Care of Your Supply Chain
Step 11: Identify Your Complete Supply Chain and Map It Out. Supply chain mapping is the process of documenting all suppliers and the flow of goods and products in a supply network. A clear picture of one’s supply chain allows importers to identify efficiency-enhancing opportunities and mitigate the risk of supply chain disruptions. It is possible to create a visual representation of your supply chain using diagrams or software tools, to easily identify connections and pressure points and ensure full knowledge of sub-suppliers, which often is the key compliance risk point for many multinational companies. Some best practices for supply chain mapping include:
Define Your Product: Clearly identify the products you are mapping, as different products may have different supply chains.
Identify Stakeholders: Identify all individuals, suppliers, and contractors who contribute to the production, storage, or distribution of your product.
Understand Supplier Relationships: Get your first-tier suppliers involved in the mapping process and ask them to bring forward knowledge regarding second-tier and third-tier suppliers. Have each entity detail what they sell and what they buy next in the chain from others. As the map expands, you will get a better view of potential risks, bottlenecks, and dangers of relying on single suppliers or businesses with long lead times.
Document the Flow of Materials and Information: Trace the movement of raw materials through each stage of production, including processing, transportation, and storage, while also documenting the flow of information between stakeholders.
Evaluate Supplier Capabilities: Assess each supplier’s production capacity, quality control measures, and compliance with relevant regulations.
Step 12. Conduct a Supply Chain Integrity Check. Compliance with labor and transparency requirements is integral to tariff management. After mapping your supply chain, conducting integrity checks or audits of your suppliers can help your company stay abreast of new developments and comply with laws — especially in the areas of forced labor, human trafficking, modern slavery, and environmental regulations — thus avoiding potential fines or blockages of goods at the border.
Risk Assessment: Once your supply chain map from Step 11 is complete, conduct evaluations of your suppliers and analyze potential risks at each stage of the supply chain, considering factors like geographical location, political instability, regulatory compliance, labor practices, cybersecurity, and financial stability.
Update All Terms and Conditions: Make sure your contracts are up to date, and clearly define expectations of your suppliers regarding quality control, documentation responsibilities, labor practices, and environmental impact.
Incorporate Third-party Audits to Verify Supplier Practices: Use third-party audits, including onsite audits, to help evaluate your suppliers and to assess their compliance with environmental and labor laws and the company’s standards regarding product quality, safety, ethical practices.
Build and Maintain Supplier Relationships: Foster open communication with suppliers and encourage them to disclose any potential issues before they become significant issues. Offer to help address concerns and implement improvements proactively throughout the supply chain system.
Continuous Monitoring: Implement systems and regularly monitor your suppliers’ performance and compliance. Evaluate your supply chain for new potential risks that might arise.
The issuance of President Trump’s “America First Trade Policy” underscores just how far ranging the potential changes to the international trade environment may be. The triple pressures of rising tariffs, likely changes to USMCA requirements, and an increasing focus on supply chain integrity underscore the need for importers to adopt a proactive, multifaceted approach to managing import-related risks. By focusing on risk assessment, supplier diversification, compliance audits, and duty savings, importers can not only weather upcoming challenges but also turn them into opportunities for operational resilience and competitive advantage. Under the Trump administration’s trade agenda, businesses should expect heightened scrutiny of imports and expanded enforcement of customs and labor practices. Preparing now ensures resilience and competitiveness in the face of uncertainty.
QUOTEWIZARD LOSES AGAIN: Court Denies Company’s Effort to Re-Open Discovery to Defend Itself in Massive Certified Class Action
One of the most important things for TCPA class action defense attorneys to keep in mind is the CRITICAL importance of keeping discovery open after certification.
I have seen so many cases recently where Troutman Amin, LLP has been brought in to take over a case only to find that previous counsel has agreed to a schedule with all discovery closing before class certification is sought.
That is absolutely insane is my opinion.
And here’s an example of why that is.
As TCPAWorld readers well know QuoteWizard is facing MASSIVE exposure in a certified TCPA class action out in Massachusetts.
Read article on this here.
As if the situation weren’t bad enough already, QuoteWizard apparently allowed discovery to close before certification was sought.
As a result Plaintiff moved for certification on a revised class definition that QuoteWizard had never seen– terrible, but it happens all the time which is why moving to strike errant class definitions from the pleadings is so critical and assuring discovery remains open past certification is necessary.
Once the Plaintiff actually revealed the class, however, QuoteWizard realized it needed additional information from class members it didn’t have.
So last month it asked the court to re-open discovery so it could send some questions to class members to learn about their claims (QuoteWizard cannot unilaterally contact members of the class after certification because they are technically represented by Class Counsel.)
QuoteWizard wanted to ask class members the following:
Interrogatory No. 1: Have you ever made or received calls, texts, appbased messages (e.g., Teams, Discord, Slack), or emails, or attended virtual meetings (e.g., Zoom, Teams), on your cellular telephone related to your occupation or business?
Interrogatory No. 2: Have you ever used your cellular telephone for any purpose other than personal use? If so, please describe how you have used for cellular telephone for purposes other than personal use.
Interrogatory No. 3: Has an employer ever contributed in whole or in part to your cellular telephone bill or have you ever claimed a tax deduction related to your cellular telephone bill as a business expense?
Interrogatory No. 4: Have you ever signed up to receive insurance comparison information or insurance quotes and been contacted by QuoteWizard as a result of that request?
Interrogatory No. 5: Have you ever received text messages from QuoteWizard? If so, how many text messages have you received from QuoteWizard and when?
Well last week the Court denied QuoteWizard’s efforts reasoning that the discovery should have been conducted during the discovery phase:
Defendant could have (1) sought this information during discovery, or (2) upon receiving the expert report from Plaintiff in September 2023. Defendant did neither. Instead, Defendant elected to litigate other discovery issues and class certification before deciding to seek to reopen discovery.
Eesh.
Think ahead folks.
NEVER let discovery close before certification has been decided.
We will, of course, keep an eye on QuoteWizard and see if it survives this class action.
BlueCrest – The Court of Appeal Considers Condition B of the Salaried Members Rules
The Court of Appeal has remitted the case of BlueCrest Capital Management (UK) LLP (BlueCrest) v HMRC back to the First-tier Tribunal (FTT) regarding the application of the UK’s salaried members rules (the Rules) to certain members of BlueCrest, an asset manager engaged in the provision of hedge fund management services, following a finding that the FTT and the Upper Tribunal erred in law with regard to the interpretation of Condition B of the Rules.
The Rules recharacterise certain members of a UK limited liability partnership (LLP) as employees (“salaried members”) rather than members of the LLP for income tax purposes. Condition B essentially prevents recharacterisation as an employee/salaried member if the LLP member in question has, in broad terms, significant influence over the affairs of the LLP. In this judgment, the Court of Appeal considered the interpretation of Condition B.
In summary, the Court of Appeal found that – contrary to the position of the FTT and the Upper Tribunal and to HMRC’s published guidance – significant influence for the purposes of this test needed to derive from the legal and contractual framework of the LLP and it was not enough that an LLP member had de facto influence, even if that de facto influence was significant. The Court of Appeal has asked the FTT to reconsider the case using this narrower interpretation. However, this decision itself might be appealed to the Supreme Court.
LLPs which rely on Condition B/significant influence for any of their members in relation to the Rules should be aware of this development but should also be aware that the case is likely to still have a long way to run.
Overview of the Rules and prior decisions of the FTT and Upper Tribunal
A high-level summary of the relevant aspects of the Rules under consideration in this decision is set out below, together with a summary of the previous decisions in this case. For more information on the background of the Rules and the FTT decision (June 2022) and the Upper Tribunal decision (September 2023), please refer to our Tax Talks blog posts as linked here: BlueCrest FTT Decision – Salaried Member Rules and Asset Managers – Insights – Proskauer Rose LLP and BlueCrest– the Upper Tribunal considers the salaried member rules – Insights – Proskauer Rose LLP.
For UK tax purposes, the general position is that members of UK LLPs are treated as self-employed partners who each carry on the business of the LLP. However, the Rules were introduced to prevent employment relationships being disguised through the use of LLPs to avoid payment of employment-related taxes. In short, the Rules set out three conditions, one of which must be satisfied (or strictly speaking “failed” because the conditions are drafted in the negative) in order for an LLP member to avoid being recharacterised as an employee/salaried member.
The FTT and Upper Tribunal in the BlueCrest case were both concerned with the application of Condition A and Condition B, two of the three conditions referenced above.
Condition A requires that at the beginning of the relevant tax year, it is reasonable to expect that more than 20% of the total amount to be paid by the LLP to an individual member in the next tax year would not be “disguised salary”. This includes fixed amounts, and amounts which are variable, unless these amounts vary by reference to the overall profits or losses of the LLP. So, to satisfy this condition, it must be reasonable to expect at the beginning of the tax year that at least 20% of the member’s pay will vary by reference to the overall profitability of the LLP.
Condition B is considered satisfied if the mutual rights and duties of the members and the LLP give the individual significant influence over the affairs of the LLP.
The FTT found that the BlueCrest senior investment managers had significant influence over the affairs of the LLP based on their financial influence over a material part of BlueCrest’s overall business, which was sufficient to disapply Condition B. This ran contrary to the elements of HMRC’s published guidance which suggested that Condition B required significant influence over the affairs of the LLP as a whole. In relation to Condition A, the FTT determined that all of the members’ remuneration was disguised salary, because bonuses were calculated by reference to individuals’ performance, not in relation to the profitability of the LLP.
The Upper Tribunal upheld the decision of the FTT, concluding on Condition B that the FTT was entitled to find that (i) the significant influence did not have to extend to all of the affairs of the LLP, as this was an unrealistic approach and would give rise to strange results for larger partnerships, and (ii) that HMRC’s argument that influence should be limited to managerial influence was attempting to read words into the statute. The FTT’s decision on Condition A was also upheld as bonuses were set initially without reference to the overall profitability of the LLP and so were disguised salary.
The Court of Appeal findings on Condition B and significant influence
HMRC argued that the Upper Tribunal made an error of law in its interpretation of Condition B by relying on the de facto position without regard first to what the rights and duties of the LLP members were as a matter of law, and that the decision of the Upper Tribunal should therefore be overturned.
The Court of Appeal agreed and confirmed that, on a proper construction, the test for significant influence was (i) whether the individual had influence over the affairs of the LLP, (ii) whether the source of that influence was the mutual rights and duties of the members of the LLP, in which case it was qualifying influence, and (iii) whether that qualifying influence was significant.
On the first point, influence over the affairs of the LLP, as interpreted by the Court of Appeal, was to be viewed as broader than influence over the business of the LLP and meant the affairs of the LLP generally viewed as a whole and in the wider context of its group. The definition of business in the relevant LLP Agreement should also be taken into consideration. The Court of Appeal considered that the Tribunals had been wrong to confine the test to parts of the affairs of the LLP without a focus on the decision making at a strategic level.
The main focus of the Court of Appeal in their decision related to the second point. The Court of Appeal held that Condition B requires the relevant influence to derive from the “mutual rights and duties” of the members of the LLP and the LLP itself based on the statutory and contractual framework applying to it. In practice, this would mean the influence must derive from the rights and duties of the members as set out in the LLP Agreement and, if not excluded by virtue of that LLP Agreement, the provisions of the LLP Regulations 2001.
Neither HMRC nor BlueCrest had made this argument in the FTT or Upper Tribunal. It had been raised by the Upper Tribunal but in the context of it being “common ground” between the parties that the FTT was entitled to consider the actual position and any de facto influence held by members in addition to the terms of the LLP Agreement. Despite this – and despite acknowledging that HMRC’s own guidance accepted the possibility that the influence in question could derive from the de facto position (an approach which still forms the basis of HMRC’s guidance in its Partnership Manual today) – the Court of Appeal held that it was incorrect to ignore the need for the influence to derive from the legal framework, i.e. the LLP Agreement and the LLP Regulations 2001 (if relevant).
Finally, in relation to the third point that any influence must be significant, the Court of Appeal held that BlueCrest and HMRC had been correct to present evidence on any de facto influence wielded by members, but this should have been used only to evaluate whether qualifying influence was significant.
In light of these points, the decisions of the FTT and Upper Tribunal were set aside and the case remitted to the FTT for consideration of the evidence in light of the correct statutory interpretation of the test.
The Court of Appeal also rejected BlueCrest’s procedural objection that HMRC had been allowed to rely on a new point of law. In doing so, the Court highlighted the public interest in taxpayers paying the correct amount of tax and ensuring justice is balanced with requirements of fairness and case management.
Cross Appeal by BlueCrest – Condition A: variable remuneration
Although the main focus of the case was on Condition B, BlueCrest appealed on whether the portfolio managers and supervisors of portfolio managers could avoid recharacterisation as salaried members by virtue of Condition A. The Court of Appeal upheld the decision of both Tribunals and confirmed they came to substantially the right conclusion.
The question under Condition A related to whether the definition of “disguised salary” was met. Portfolio managers and supervisors of portfolio managers had three elements of remuneration, one of which was a discretionary allocation akin to a bonus. BlueCrest argued that this had a real link to the profits of the LLP, though the bonuses were not computed by reference to the profit and losses of the LLP.
The Court of Appeal agreed with HMRC’s argument that, on the facts, the overall amount of profits of the LLP merely functioned as a cap on remuneration which was variable without reference to overall profits. Therefore, the Court upheld the Tribunals’ decisions that the individual members of the LLP, including portfolio managers and supervisors of portfolio managers, could not avoid recharacterisation as salaried members/employees by virtue of Condition A.
Conclusion
The Court of Appeal’s interpretation of what constitutes significant influence for the purposes of Condition B of the Rules is narrower than (i) the position set out in the prior judgments in this case and (ii) the relevant guidance in HMRC’s published manuals. This narrower interpretation ignores de facto influence which is not derived from the mutual rights and duties of the LLP member as set out in the LLP Agreement and, if not excluded by virtue of that LLP Agreement, the provisions of the LLP Regulations 2001.
The Court of Appeal have sent the case back to the FTT for the FTT to reconsider the case in light of this narrower interpretation. It is possible, and perhaps likely, that BlueCrest will decide to appeal the decision to the Supreme Court. In that case, if permission to appeal is granted, the next step would be for the Supreme Court to consider the points raised in this Court of Appeal judgment, rather than the FTT reconsidering the case. We will continue to monitor the proceedings until the final position is known.
LLPs which place reliance on Condition B and their members having significant influence may wish to refresh whether that position would still be appropriate if the narrower interpretation of the test applies, particularly if the members’ position under the salaried member rules relies solely on Condition B.
New Wave of Executive Orders Seek to Redirect EPA’s Focus
Within hours of taking office, President Trump issued a flurry of Executive Orders (EO), including several that will undoubtedly affect a wide range of environmental policies nationwide. While the full implications of these EOs, as well as potential additional actions, are far from clear at this early stage, there are several takeaways for those who are in the environmental-regulated community to consider.
While reviewing the summary below of a limited sampling of recent EOs touching on environmental policy, it is important to remember that a significant portion of environmental policy, regulation, and enforcement occurs at the state level and impacts from federal policies and approaches can take many years to be felt, if at all. In fact, in some instances, the policies and strategies at the federal level can produce the opposite approach at the state level. Therefore, it is crucial for any regulated entity to have a strong comprehension of the federal and state landscape as it may apply or interact with its operations, permits, and compliance.
Environmental Justice
With just one EO—Initial Recission of Harmful Executive Orders and Actions—nearly 80 EOs from the prior administration were revoked. The list included several EOs related to environmental justice, such as the “whole of government” approach and the “Justice40” initiative. Environmental justice was also singled out in “Ending Radical and Wasteful Government DEI Programs and Preferencing,” which ordered federal agencies to terminate all environmental justice offices and positions.
Greenhouse Gases and Energy Resources
An EO entitled “Unleashing American Energy” directs the Environmental Protection Agency (EPA) and other agencies to review actions “that impose an undue burden on the identification, development, or use of domestic energy resources — with particular attention to oil, natural gas, coal, hydropower, biofuels, critical mineral, and nuclear energy.” The apparent purpose here is to reverse course on greenhouse gas and other federal rules on various energy sources. Furthermore, EPA has been directed, within 30 days, to provide recommendations on the “legality and continuing applicability” of EPA’s 2009 GHG risk finding, which is the underpinning of EPA’s climate rules. Similarly, this EO does away with the “social cost of carbon” metric that was intended to monetize the benefits of policies that curb emissions.
Hiring Freeze and Return to Office
While not EOs, two executive memoranda will surely influence EPA through workforce impacts, resources, and management of priorities. The first, entitled “Return to In-Person Work,” directs all federal agencies, including the EPA, to terminate remote work arrangements and require employees to return to work in person on a full-time basis. The second, entitled “Hiring Freeze,” freezes federal civilian employee hiring, including EPA staff. The Office of Management and Budget is tasked with delivering a plan within 90 days to further shrink the federal workforce “through efficiency improvements and attrition.” It is very likely that staffing levels at the EPA will be reduced significantly, which could impact the EPA’s capacity to keep up with permitting and enforcement matters.
Updates for Employers Using Private Plans to Comply with Minnesota’s Paid Leave Law
Minnesota is one of a dozen states that have enacted a statewide program providing compensation to employees during family and medical leaves. Minnesota’s law provides job protection and payment of benefits through a state-run insurance program to qualifying employees to take up to 12 weeks of leave for family and/or medical reasons (or a combined total of up to 20 weeks of leave if the employee qualifies for both types of leave in one benefit year) (“the Paid Leave Law”). The insurance program will be funded through employer and employee contributions beginning on January 1, 2026. Employees can also begin applying for compensation beginning on January 1, 2026.
Recently, the Division outlined how employers can use self-insured plans or plans from an insurance carrier to comply with the Paid Leave Law. The Division refers to insurance plans providing coverage for Minnesota’s Paid Leave law as “Equivalent Plans.”
Equivalent Plans must allow for the same, or more comprehensive, coverage than is expressly required by the Paid Leave Law. The Division details the conditions that an Equivalent Plan must meet to comply with the Paid Leave Law. As explained by the Division, employers can choose to use an Equivalent Plan to cover one leave category (family or medical) and can participate in Minnesota’s Paid Leave program to cover the other leave category (family or medical). The Minnesota Department of Commerce will begin accepting applications from employers to use Equivalent Plans “in the spring of 2025” according to the Division. The Minnesota Department of Commerce recently published a checklist for employers to submit along with their Equivalent Plan application.
The Division is set to provide more information about Equivalent Plans soon. According to the Division, the information is likely to include a cost estimation calculator for employers and employees, and more details about the application process employers must follow to secure an approved Equivalent Plan.
Minnesota’s Paid Leave Division published final proposed rules in December, that, if adopted, will regulate the state’s Paid leave Law. We are monitoring these developments and will continue to provide updates as we approach the January 2026 rollout.
Hadley M. Simonett contributed to this article.
EPA Proposes Risk Management Rule to Protect Workers from Inhalation Exposure to PV29
On January 14, 2025, the U.S. Environmental Protection Agency (EPA) issued a proposed rule to address the unreasonable risk of injury to human health presented by Color Index (C.I.) Pigment Violet 29 (PV29) under its conditions of use (COU) as documented in EPA’s January 2021 risk evaluation and September 2022 revised risk determination. 90 Fed. Reg. 3107. The proposed rule states that the Toxic Substances Control Act (TSCA) requires that EPA address by rule any unreasonable risk of injury to health or the environment identified in a TSCA risk evaluation and apply requirements to the extent necessary so the chemical no longer presents unreasonable risk. To address the identified unreasonable risk, EPA proposes requirements to protect workers during manufacturing and processing, certain industrial and commercial uses of PV29, and disposal, while also allowing for a reasonable transition period prior to enforcement of said requirements. Comments are due February 28, 2025. EPA notes that under the Paperwork Reduction Act (PRA), comments on the information collection provisions are best assured of consideration if the Office of Management and Budget (OMB) receives comments on or before February 13, 2025.
As reported in our January 25, 2021, memorandum, pursuant to TSCA Section 6(b), EPA determined that PV29 presents an unreasonable risk of injury to health, without consideration of costs or other nonrisk factors, including an unreasonable risk to potentially exposed or susceptible subpopulations (PESS) identified as relevant to the 2021 risk evaluation for PV29 under the COUs. EPA notes that the term “conditions of use” is defined in TSCA Section 3(4) to mean the circumstances under which a chemical substance is intended, known, or reasonably foreseen to be manufactured, processed, distributed in commerce, used, or disposed of. To address the unreasonable risk, EPA proposes, under TSCA Section 6(a), to:
Require use of assigned protection factor (APF) 50 respirators and equipment and area cleaning to address the risk from inhalation exposure to dry powder PV29 (also referred to as regulated PV29), where dry powder PV29 is expected to be present, for the following COUs:
Domestic manufacture;
Import;
Incorporation into formulation, mixture, or reaction products in paints and coatings;
Incorporation into formulation, mixture, or reaction products in plastic and rubber products;
Intermediate in the creation or adjustment of color of other perylene pigments;
Recycling;
Industrial and commercial use in automobile (original equipment manufacturer (OEM) and refinishing) paints and coatings;
Industrial and commercial use in coatings and basecoats paints and coatings;
Industrial and commercial use in merchant ink for commercial printing; and
Disposal.
Require manufacturers (including importers), processors, and distributors in commerce of regulated PV29 to provide downstream notification of the requirements.
Require recordkeeping.
EPA notes that not all TSCA COUs of PV29 are subject to the proposed rule. As described in the 2021 risk evaluation and the September 2022 revised unreasonable risk determination, four COUs do not contribute to the unreasonable risk: distribution in commerce; industrial/commercial use in plastic and rubber products — automobile plastics; industrial/commercial use in plastic and rubber products — industrial carpeting; and consumer use in professional quality watercolor and acrylic artist paint. Consumer use in professional quality watercolor and acrylic artist paint was the only consumer COU evaluated as part of the 2021 risk evaluation. More information on EPA’s September 2022 revised unreasonable risk determination is available in our September 9, 2022, memorandum.
EPA requests public comment on all aspects of the proposed rule. According to EPA’s December 20, 2024, press release, EPA “is especially interested in hearing perspectives from the public on the feasibility and effectiveness of the proposed requirements for worker protections, including from workers and entities that would be required to implement the workplace protections.”
Commentary
EPA’s evaluation of PV29 was expected to be “easy” when it was identified as one of the first ten chemicals selected for risk evaluation. PV29 is a poorly soluble, low toxicity (PSLT) particle. EPA’s approach to PSLTs has been evolving over the years and has been the subject of controversy, including whether carcinogenicity in rats from “kinetic lung overload…[where the] dust overwhelms the lung clearance mechanisms over time” is relevant to humans.
Since EPA first issued its 1994 document titled “Methods for Derivation of Inhalation Reference Concentrations (RfCs) and Application of Inhalation Dosimetry,” scientific advances in mechanistic modeling of inhalation dosimetry have matured. The scientific understanding of the most appropriate dose metric for PSLTs (i.e., retained dose, not deposited dose) has also evolved. In 1994, EPA developed the regional deposited dose ratio (RDDR) model, an empirical model that provides predictions of deposited dose. In 2021, EPA developed an update to the multiple-path particle dosimetry (MPPD) model (i.e., MPPD EPA 2021 v.1.01). This model is an improvement over the RDDR model because it incorporates the best available science, including “some dose metric predictions…based on mechanistic descriptions instead of empirical fitting…[and] providing prediction of retained mass….” Prior to this update, MPPD was already recognized as a superior model versus RDDR for inhalation dosimetry. For example, EPA’s Integrated Risk Information System used MPPD when developing an inhalation reference concentration for benzo[a]pyrene in January 2017; the National Institute for Occupational Safety and Health also used MPPD for developing its recommended exposure limit for carbon nanotubes in April 2013.
EPA used the MPPD model in the revised draft risk evaluation for PV29. EPA subsequently used the RDDR model in the Final PV29 risk evaluation. EPA stated that “The change in model [i.e., RDDR rather than MPPD] resulted in unreasonable risk determinations for all [occupational nonusers] ONUs and industrial and commercial use in automobile paint [original equipment manufacturer] OEM and refinishing condition of use” (emphasis added). EPA justified this change by stating “The MPPD model was not thought to be appropriate because the particle size data was not robust enough and the MPPD model cannot calculate [human equivalent concentrations] HECs for the hamster data…, while the RDDR model can accept hamster data input.” We find this justification hollow. EPA did not state why the particle size data were robust enough for the RDDR model but not the MPPD model. Further, EPA did not use the hamster data as the basis for its point of departure (POD) in the Final PV29 risk evaluation. We suspect this change was based on a preferred outcome (i.e., unreasonable risks), rather than an objective scientific evaluation to determine if there is unreasonable risk.
Interestingly, EPA calculated an existing chemical exposure limit (ECEL) of 0.014 mg/m3 for PV29, but it did not provide the underlying documentation for this value. Instead, EPA only stated that it chose not to propose an ECEL for PV29 because EPA was unable to identify a “method with a limit of detection lower than the calculated ECEL….” Without the underlying documentation, it is impossible to determine if EPA’s proposed regulatory action is based on the best available science or if the protective measures meet the requirement to protect workers “to the extent necessary” to mitigate the risk identified.
EPA derived PODs based on the HEC of 0.28 mg/m3 derived from rats and the HEC of 0.16 mg/m3 that it derived from hamsters, but these PODs are based on a dose metric (i.e., deposited dose) that does not represent the best available science (i.e., retained dose). EPA should have used the results of the rat inhalation study (the most sensitive species) and calculated the HEC based on the retained dose. That would provide a POD that would be both health protective and based on the best available science. Without that POD and an appropriate benchmark margin of exposure (MOE), EPA cannot justify its proposed regulatory action.
The proposed PV29 risk management rule has the potential to be more impactful than other EPA risk management rules because of the thousands of PSLTs listed on the TSCA Inventory. If either of EPA’s proposed risk management options is issued in final, it will set a bad precedent by serving as the basis for all of EPA’s risk evaluations for PSLTs when respirable particles are formed. Stakeholders need to be aware and be engaged. It is critically important that the rule be based on the best available science. This is a good opportunity for EPA to work with the U.S. Occupational Safety and Health Administration (OSHA) to revise the permissible exposure limit (PEL) for particulates not otherwise regulated (PNOR) (PSLTs fall into this category), given the immense number of opportunities for exposure to PSLT dust in the workplace, many of which are not under TSCA authority.
Tax Proposals Potentially Being Considered by the U.S. House Budget Committee in Reconciliation
On January 17, 2025, multiple news outlets and other sources reported the existence of a memorandum circulated by the U.S. House of Representatives Budget Committee to the House Republican Caucus (the “Memorandum”) containing an extensive list of budget proposals that may be considered in connection with the new Congress’s widely expected budget reconciliation legislation. The Memorandum, which is publicly available via link from a number of news outlets,[1] contains approximately fifty pages of proposals covering a wide range of policy areas and enumerating scores of potential specific legislative proposals (along with estimated budget effects in most cases), some of which are seemingly mutually exclusive. Included in the memo are a number of tax-related proposals, including tariff proposals, which are briefly set forth below.
It is not possible to know whether any or all of these proposals will ultimately be included in the budget reconciliation bill (or any other proposed legislation). It is also very possible that any number of other proposals may be considered in what is expected to be a lengthy legislative process. Additionally, the expiration of a sizable number of the tax provisions of the 2017 Tax Cuts and Jobs Act (“TCJA”) may further affect the development of several of these proposals. However, potentially affected taxpayers should be aware of these tax-related proposals and closely monitor all developments involving the budget reconciliation legislation.
Although the Memorandum presents the proposals in no particular order, for ease of reference this blog post organizes the proposals as:
Tax Proposals Involving Tariffs and Trade;
Tax Proposals Affecting Businesses;
Tax Proposals Affecting Employees and Unions;
Tax Proposals for Business Tax Credits;
Tax Proposals Relating to Municipal and other Tax-Exempt Bonds;
Tax Proposals Relating to the Deductibility of State and Local Taxes (“SALT”);
Other Tax Proposals Affecting Individual Taxpayers and Households;
Tax Proposals Affecting Exempt Organizations; and
Tax Proposals Affecting the Internal Revenue Service.
Notably, the Memorandum includes no current proposals relating to the taxation of partnerships and very limited proposals related to international taxation other than as related to trade. Although the proposals in the Memorandum generally do not reference particular sections of the U.S. Internal Revenue Code (“IRC”), where the relevant Section cross-reference is sufficiently clear it is included here to aid the reader.
Tax Proposals Involving Tariffs and Trade
A “Border Adjustment Tax” that would “create a new tax on goods where they are consumed, not purchased” resulting in a “shift from an origin-based tax to a destination-based tax.”
Codify and increase “Section 301 Tariffs” on products from China.
Require “de minimis” value shipments to pay existing “Section 301 Tariffs.”
Create a 10% across the board tariff on all imports.
Tax Proposals Affecting Businesses
Lower the corporate income tax rate to 15%. (IRC Section 11)
Lower the corporate income tax rate to 20%. (IRC Section 11)
Repeal the 15% corporate alternative minimum tax. (IRC Section 55)
Return to immediate expensing of research and development (“R&D”) costs, which under the TCJA are required to be amortized. (IRC Section 174)
Implement “Neutral Cost Recovery for Structures,” to allow businesses to index the value of deductions to inflation and a real rate of return (to address the time value of money).
Subject credit unions (exempt from income tax under current law) to the federal income tax. (IRC Section 501(c)(1))
Tax Proposals Affecting Employees and Unions
Subject employees to tax on employer-provided transportation benefits (such as transit passes and parking) that are excluded from income under current law. (IRC Section 132)
Subject employees to tax on all employer-provided meals and lodging, other than for the military that are excluded from income under current law. (IRC Section 132)
Subject employees to tax on the value of on-site gym facilities intended for employee and family use that are excluded from income under current law. (IRC Section 132)
Impose a federal excise tax on “non-representation spending” by federal unions.
Impose “new limits” on the deductibility of “DEI training” by federal unions.
Tax Proposals for Business Tax Credits
Proposed repeal of tax credits for carbon oxide sequestration, zero-emission nuclear power production and clean fuel production (IRC Sections 45Q, 45U and 45Z), as well as the electric vehicle (“EV”) tax credit. (IRC Section 30D)
Changing the EV credit to be available only to EV buyers, not lessors. (IRC Section 30D)
Repeal of “Green Energy” tax credits “created and expanded” under the Inflation Reduction Act (“IRA”). The discussion of this proposal identifies these credits as including those “related to clean vehicles, clean energy, efficient building and home energy, carbon sequestration, sustainable aviation fuels, environmental justice, biofuel and more.”
Ending the Employee Retention Tax Credit (“ERTC”), by extending the moratorium on claims processing and eliminating the ERTC for claims submitted after January 31, 2024, along with stricter penalties for fraud. (Section 2301 of the CARES Act)
Tax Proposals Relating to Municipal and other Tax-Exempt Bonds
Eliminate the exclusion of interest on municipal bonds. (IRC Section 103)
Eliminate the exclusion of interest on private activity bonds, Build America bonds and other non-municipal bonds. (IRC Sections 103, 141-150)
Tax Proposals Relating to the Deductibility of State and Local Taxes (“SALT”) (IRC Section 164)
Under the TCJA, the SALT deduction is limited to $10,000 per taxpayer, and married persons filing jointly are subject to the same $10,000 limitation as a single filer. This statutory limitation is scheduled to expire in 2025. The memorandum lists five alternative approaches to SALT, four applicable to individual SALT deductions and two to SALT deductions for business:
Make the TCJA $10,000 limitation permanent but double the limitation (to $20,000) for “married couples”.
Make the general provisions of the TCJA provision permanent, but increase the thresholds to $15,000 for individuals and $30,000 for married couples.
Eliminate the deductibility of state and local income or sales taxes, but preserve the deductibility of property taxes. In this proposal, the TCJA $10,000 limitation would be allowed to expire in 2025.
Eliminate the SALT deduction for businesses (presumably including eliminating the pass-through entity tax (“PTET”) workaround), and the individual SALT deduction would be “unchanged from current law.”
Repeal the SALT deduction, in its entirety, for both individuals and businesses (presumably including eliminating the PTET workaround).
Other Tax Proposals affecting Individual Taxpayers and Households
Entirely eliminate the federal estate tax. (IRC Sections 2001-2210)
“Fully repeal” the home mortgage interest tax deduction. (IRC Section 163)
Lower the home mortgage interest deduction cap from the TCJA level of $750,000 to $500,000. (IRC Section 163)
Eliminate the deduction for contributions to qualifying health organizations (patient advocacy groups, professional medical associations and “other U.S.-based charitable organizations with [IRC Section] 501(c)(3) tax status.” (See also Tax Proposals Affecting Hospitals and Health Organizations). (IRC Section 170)
Either raise or eliminate the foreign earned income exclusion on Americans residing overseas. (IRC Section 911)
Replace Health Savings Accounts with a $9,100 “Roth-style” Universal Savings Account indexed to inflation.
Make certain changes to HSAs to increase their availability and flexibility. (IRC Section 223)
Permit a deduction for auto loan interest payments.
Eliminate the deductibility of interest on student loans. (IRC Section 163)
Eliminate the income tax on tips, which are currently subject to income and payroll taxes.
Create a “blanket exemption” on the taxation of “overtime earnings.”
Eliminate the “head of household” filing status. (IRC Section 1)
Eliminate the exclusion of scholarship and fellowship income used for tuition and related expenses. (IRC Section 117)
Eliminate the American Opportunity Credit for qualified educational expenses. (IRC Section 25A)
Eliminate the Lifetime Learning Credit for a portion of certain qualified tuition and related expenses. (IRC Section 25A)
Eliminate the maximum $2,100 credit for child and dependent care. (IRC Section 21)
Requiring both children and parents have a social security number to claim the Child Tax Credit. (IRC Section 24)
Restructure the Earned Income Tax Credit in certain ways. (IRC Section 32)
Tax Proposals Affecting Exempt Organizations
Eliminating nonprofit status for hospitals, and taxing hospitals as “ordinary for-profit businesses.” (See also Tax Proposals Affecting Individuals). (IRC Section 501(c)(3))
Expanding the excise tax on the net investment income of certain university endowments by increasing the rate tenfold, from 1.4% to 14%. (IRC Section 4968)
Expanding the criteria to impose the university endowment excise tax to effectively require certain universities to either “enroll more American students or spend more of their endowment funds on those students,” or become subject to the endowment tax. (IRC Section 4968)
Tax Proposals Affecting the Internal Revenue Service
Repeal remaining increased IRS funding from the Inflation Reduction Act.
FOOTNOTES
[1] See, e.g.,House Budget Committee Circulates New Detailed List of Budget Reconciliation Options Including Draconian Medicaid Cuts Within House Republican Caucus , last visited January 27, 2025. This article contains an embedded link to both the original Politico article reporting the Memorandum (subscription required) and the Memorandum itself.
Corporate Transparency Act Reporting Remains Voluntary
This Corporate Advisory provides a brief update on recent litigation regarding the Corporate Transparency Act (CTA) and its reporting requirements. It is not intended to, and does not, provide legal, compliance or other advice to any individual or entity. For a general summary of the CTA, please refer to our prior CTA Corporate Advisories from November 8, 2023, and September 17, 2024. Please reach out to your Katten attorney for assistance regarding the application of the CTA to your specific situation.
As of January 24, 2025, the Corporate Transparency Act’s (CTA) reporting requirements remain voluntary. On January 23, 2025, the Supreme Court of the United States (SCOTUS) issued an order that granted the US government’s motion to stay the nationwide injunction issued by the US District Court of the Eastern District of Texas in the case of Texas Top Cop Shop, Inc. v. McHenry (formerly Texas Top Cop Shop, Inc. v. Garland). This headline appeared to have the effect of reinstating the CTA’s reporting requirements and deadlines. However, such SCOTUS order does not appear to impact a separate stay issued against the enforcement of the CTA’s reporting rules issued by the US District Court of the Eastern District of Texas in Smith v U.S. Department of the Treasury. The US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has interpreted the SCOTUS ruling similarly. Specifically, FinCEN noted: “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.” Accordingly, the CTA’s reporting requirements remain on hold, and reporting companies are not currently required to file Beneficial Ownership Information Reports with FinCEN, and FinCEN has stated that reporting companies are not subject to liability if they fail to file Beneficial Ownership Information Reports with FinCEN while the Smith order remains in force.
Note that this SCOTUS order relates solely on the nationwide injunction and was not a ruling on the constitutionality of the CTA.
The Supreme Court order is available here.
The FinCEN alert is available here.
Our updated CTA Corporate Advisory providing background on the Texas Top Cop Shop case is available here.
A Little Too Late: The Department of Justice and Federal Trade Commission’s Last Minute New Antitrust Guidelines for Business Activities Affecting Workers
In a last-ditch effort (just days before the change of administration), the Federal Trade Commission (FTC) and the Department of Justice (DOJ) issued new Antitrust Guidelines for Business Activities Affecting Workers (“2025 Guidelines”) on January 16, 2025, replacing the 2016 “Antitrust Guidance for Human Resource Professionals.”
Outgoing FTC Chair Lina Khan, the force behind the FTC’s Noncompete Ban, explained “These antitrust guidelines provide clarity to businesses about the practices that can violate the law—from agreements between firms to fix workers’ wages to coercive noncompetes.”
But exactly what role — if any — the 2025 Guidelines will play in the future remains in the air. Incoming FTC Chairman Andrew Ferguson vehemently dissented to the release of the new 2025 Guidelines just days before the change in administrations, labeling them “a senseless waste of Commission resources.” His comments signal that the 2025 Guidelines may be ignored or even replaced in the near future.
What’s Not Allowed?
The 2025 Guidelines provide a non-exhaustive list of seven different forms of business practices that, under certain conditions, can run afoul of the antitrust laws.
Agreements between companies not to recruit, solicit, or hire workers, or to fix wages or terms of employment, may violate antitrust laws and may expose companies and executives to criminal liability. Oral or written understandings to set wage ceilings or informally agree not to cold-call employees can be illegal, even if they do not result in actual harm (such as lost wages).
Agreements in the franchise context not to poach, hire, or solicit employees of the franchisor or franchisees may violate antitrust laws. Written or oral no-poach and similar agreements are subject to antitrust scrutiny even if they are between a franchisor and a franchisee or, for example, among the franchisees of the same franchisor.
Exchanging competitively sensitive information with companies that compete for workers may violate antitrust laws. Exchanging wage and benefit information with competing employers may be illegal even if companies use a third party or intermediary — including a third party using an algorithm — to share such information.
Employment agreements that restrict workers’ freedom to leave their job, such as noncompete provisions, may violate the antitrust laws. The 2025 Guidance highlights the use of noncompetition covenants used in mergers and the all-but-failed attempt by the FTC to administratively legislate a noncompete ban. As we previously reported, the FTC Noncompete Ban was blocked in August 2024. New FTC Chairman Ferguson has been openly critical of the FTC Noncompete Ban since its inception, foreshadowing the end of the fight over the ban.
Other restrictive, exclusionary, or predatory employment conditions that harm competition may violate the antitrust law.
Overly broad nondisclosure agreements that prohibit employees from disclosing information that “relates to” or is “usable in” an industry are potentially unlawful.
Non-solicitation covenants that restrict a person from working in an industry may be unlawful.
Requiring an employee to repay expensive training costs that prohibit the employee from competing in a new business may result in increased scrutiny.
Independent contractors used as replacement labor. The 2025 Guidelines specifically highlight the use of technology and smartphone apps that match independent contractors, rather than employees, with consumers for services. Collusion between competitors to set rates for these independent contractors can be a per seviolation per the 2025 Guidelines.
False earnings claims. Businesses that advertise higher compensation or benefits than are available are in jeopardy of engaging in unfair or deceptive business practices. When workers are lured to businesses that advertise significantly more compensation than the worker is likely to receive, honest businesses are less able to fairly compete for those workers.
What Businesses Should Do Now
Even with the uncertainty over the 2025 Guidelines’ fate, their publication provides a good reminder and opportunity for businesses to assess policies and strategize on employment agreements.
Employers should review employment agreements, compensation practices, and hiring policies to ensure compliance with antitrust laws.
Businesses engaging in joint ventures or collaborations should ensure that any restrictive covenants are narrowly tailored and reasonably necessary to the partnership’s goals.
Legal counsel is strongly recommended to assess practices such as noncompetes, information sharing, and hiring restrictions to ensure compliance with applicable law.