Pared Back Version of the Texas Responsible Artificial Intelligence Governance Act Signed Into Law
On 22 June 2025, the Texas Responsible Artificial Intelligence Governance Act (TRAIGA) (HB 149) was signed into law by Governor Greg Abbott.1 TRAIGA takes effect on 1 January 2026.
Originally introduced in late 2024 as HB 1709 and touted as the most comprehensive pieces of artificial intelligence (AI) legislation in the country (the Original Bill),2 TRAIGA, in its final form, significantly reduces the law’s regulatory scheme—eliminating most of the private sector obligations contained in the Original Bill and focusing on government agencies’ use of AI systems and the use of AI for certain, limited purposes, such as social scoring and to manipulate human behavior to incite violence, self-harm, or engage in criminal activities.
TRAIGA regulates those who (1) deploy or develop “artificial intelligence systems” in the Texas; (2) produce a product or service used by Texas residents; or (3) promote, advertise, or conduct business in the state.
Under TRAIGA, “artificial intelligence system” means “any machine-based system that, for any explicit or implicit objective, infers from the inputs the system receives how to generate outputs, including content, decisions, predictions, or recommendations, that can influence physical or virtual environments.”
Although this definition is broad, the obligations TRAIGA imposes on private employers are much more limited than in the Original Bill.
Key Provisions for Private Employers3
Eliminates Disclosure Obligations
Under TRAIGA, covered private employers are not required to disclose their use of AI, including to job applicants or employees, as they were under the Original Bill. Instead, only state agencies are required to disclose to “consumers”4 that they are interacting with AI and health care service providers are required to disclose to patients when they are using AI systems in treatment.
Only Prohibits Intentional Unlawful Discrimination
Consistent with Executive Order 14281, TRAIGA only prohibits the use of AI systems that are developed or deployed “with the intent to unlawfully discriminate against a protected class” (emphasis added). Disparate impact alone cannot show an intent to discriminate.
Relatedly, unlike in the Original Bill, employers are no longer required to conduct impact assessments, which were aimed at identifying and mitigating algorithmic bias.
Focuses on Specific, Harmful AI Uses
Instead of broadly regulating the use of AI in Texas, TRAIGA focuses on specific, harmful uses of AI, prohibiting:
The development or deployment of AI systems that are intentionally aimed at inciting or encouraging self-harm or criminal activity;
The development or distribution of AI systems to produce child sexual abuse imagery or deep fake pornography, or that engage in text-based conversations that simulate or describe sexual content while impersonating or imitating a child; and
Government entities’ use of “social scoring,” which means evaluating or classifying people based on social behavior or personal characteristics and assigning them a social score or similar valuation that may result in detrimental or unfavorable treatment of a person or group or that may infringe on someone’s federal or state rights.
Eliminates Risk Mitigation Policy Requirement
AI developers and deployers, such as employers, are not required to implement a risk management AI policy, as they were in the Original Bill.
However, discovering violations by complying with a risk management framework for AI systems, such as the National Institute of Standards and Technology’s “Artificial Intelligence Risk Management Framework: Generative Artificial Intelligence Profile,” can help entities avoid liability if charges for violating TRAIGA are brought against them by the Texas Attorney General’s Office (Texas AG).
Keeps AI Regulatory Sandbox Program
Consistent with the Original Bill, TRAIGA provides that the Texas Department of Information Resources will create “regulatory sandbox program.” Entities that apply for and are accepted into this program can test AI systems without a license, registration, or other regulatory authorization. The program is designed to promote the safe and innovative use of AI systems, encourage responsible deployment of such systems, provide clear guidelines for developing AI systems while certain laws and regulations related to the testing are waived or suspended, and allow entities to research, train, and test AI systems.
Limits Enforcement and Penalties
The Texas AG has exclusive authority to investigate and enforce TRAIGA violations and there is no private right of action. However, consumers may submit complaints to the Texas AG through an online portal.
The Texas AG can bring an action in the name of the state to enforce TRAIGA and seek civil penalties, injunctive relief, attorney’s fees, and reasonable court costs. If a curable violation is found, between US$10,000 and US$12,000 in civil penalties can be imposed. Remedies for uncurable violations can range between US$80,000 and US$200,000. Continuing violations can result in between US$2,000 and US$40,000 in penalties each day the violation continues.
Recommendations for Texas Employers’ Use of AI
Despite its limited applicability to private entities, covered private employers should take the following steps to prepare for TRAIGA’s 1 January 2026 effective date:
Implement AI policies, including an AI risk management policy, and trainings to ensure adequate oversight and understanding of AI use, to mitigate the risk of intentional discrimination through the use of AI systems, and to be able to use the risk management policy as a defense to charges of violations brought by the Texas AG. Employers can use Section 551.008 of Original Bill as a guide when developing their risk management policy.
Audit AI systems and the use of those systems to make decisions to ensure that employers are not intentionally discriminate against job candidates or employees. For example, employers should ask their AI vendors to confirm that the tools do not intentionally discriminate. In addition, employers should include in AI policies and AI-related trainings information about intentional discrimination and the proper use of the AI tools to avoid such discrimination.
Ensure employers have information about the AI decision-making processes so employers can support their nondiscriminatory and otherwise proper use of the AI tools if challenged.
Conclusion
Although TRAIGA does not contain many of its original regulatory burdens, particularly for covered private employers, the law remains focused on preventing intentional discrimination and ensuring government agencies’ transparent use of AI. TRAIGA is now the latest in the growing body of law governing how employers use AI to interact with prospective and current employees.
Footnotes
1 The final bill is available here: https://capitol.texas.gov/BillLookup/History.aspx?LegSess=89R&Bill=HB149.
2 K&L Gates’ 13 January 2025 alert on the original version, HB 1709, is available here: https://natlawreview.com/article/texas-responsible-ai-governance-act-and-its-potential-impact-employers.
3 TRAIGA also contains several provisions that govern state agencies’ use of AI. This alert does not discuss those provisions in depth.
4 TRAIGA, H.B. 149, § 551.001(2), 89th Tex. Leg., Reg. Sess. (2025). “Consumer” means an individual who is a resident of this state acting only in an individual or household context. The term does not include an individual acting in a commercial or employment context.
New York Assembly Passes Bill to Fill Void as NLRB Lacks Quorum, Raising Preemption Concerns
As we previously reported here, since May 22, 2025, the National Labor Relations Board (“NLRB” or “Board”) has lacked a quorum of at least three members after the U.S. Supreme Court stayed the reinstatement of former Board Member Gwynne A. Wilcox following her firing by President Trump. As a result, the NLRB cannot issue decisions in representation and unfair labor practice cases. The Board has also been faced with constitutional challenges to its regime. (See here and here.)
To attempt to fill this void, on June 17, 2025, the New York State Assembly overwhelmingly passed legislation—referred to by the co-sponsors as the “NLRB Trigger Bill”—that would amend the New York Labor Relations Act to expand the jurisdiction of the Public Employment Relations Board (“PERB”) to essentially step into the role of the National Labor Relations Board (“NLRB” or “Board”) for private-sector employers.
Currently, PERB only oversees public-sector employees and private-sector employees that the NLRA (or the federal Railway Labor Act) do not cover, such as agricultural workers.
If signed into law by Governor Hochul, the NLRB Trigger Bill would permit PERB to act in the following ways if the NLRB does not “successfully assert” jurisdiction:
Representation Elections: To certify—upon application and verification—“any bargaining unit previously certified by another state or federal agency.” The plain text of the bill appears to indicate that PERB’s authority would apply only to bargaining units “previously certified” by the NLRB or another state—meaning it could not process representation petitions for new units that have not been certified.
Adjudicating Unfair Labor Practices / Improper Practices: To exercise jurisdiction over any previously-negotiated collective bargaining agreements and ensure those employment terms remain in full force and effect. Similar to the NLRB, PERB adjudicates unfair labor practices by investigating charges and prosecuting those charges before administrative law judges, and then PERB itself.
Under this bill, PERB’s jurisdiction would not apply where the NLRB “successfully asserts jurisdiction” over employees or employers pursuant to an order issued by an Article III federal court. In other words, if / when the NLRB retains a quorum and asserts jurisdiction, then PERB’s jurisdiction would cease.
Potential Preemption Challenges
If this bill become law, then employers likely will challenge it as preempted under the NLRA based on the Supreme Court’s landmark decision in San Diego Bldg. Trades Council v. Garmon, 359 U.S. 236 (1959). In Garmon, the Court held that where there is even the potential for conflict between the NLRA and state or local law, then such state/local law is preempted. The Court in Garmon reasoned that the purpose of a broad preemption doctrine was to ensure a uniform national labor relations policy overseen by the NLRB—not a patchwork of state and local laws.
California and Massachusetts are considering analogous legislation, and we will closely monitor the progress of these bills, as well as any potential challenges that surface.
Employers Modifying Retiree Benefits Provided More Clarity Following SCOTUS Decision (US)
Some employers offer benefits not only to their current employees, but under certain circumstances also offer certain benefits, such as health insurance, to employees who retire from working for them. Employers sometimes modify the terms of benefit policies, programs, and plans for a number of reasons, including to change coverages or eligibility requirements or to adjust contribution rates. Employers looking to make these sorts of changes, or even to discontinue certain retiree benefits, can do so now with more confidence that they won’t violate the Americans with Disabilities Act (ADA) after a recent decision by the United States Supreme Court.
On June 20, 2025, the Court decided in Stanley v. City of Sanford, Florida that retirees, as former employees, are not covered by the ADA’s anti-discrimination provision when applied to receipt of certain post-employment benefits.
The case was brought by Karyn Stanley, a firefighter who worked for a Florida city’s fire department. When she was hired in 1999, the city offered health insurance until age 65 for employees who retired either with 25 years of service and or those employees who retired due to a disability but prior to having 25 years of service. However, a few years later, in 2003, the city changed its retiree health insurance policy to provide health insurance to age 65 only for retirees with 25 years of service. Employees who retired earlier due to disability would receive coverage not until age 65, as previous, but instead only for 24 months post-retirement.
Ms. Stanley retired from the city’s fire department in 2018 after developing Parkinson’s Disease. Because she did not have 25 years of service at the time she retired due to her disability, under the 2003 policy, Ms. Stanley was eligible for only 24 months of retiree health insurance, and not coverage until age 65, as would have been the case under the policy in effect in 1999 when she was hired. Ms. Stanley sued the city, claiming that its 2003 change in policy limiting health insurance coverage for disabled retirees to 24 months from the prior policy in effect at the time of her hire which provided coverage until age 65 for disabled retirees regardless of years of service, discriminated against her on the basis of her disability in violation of the ADA.
Writing for the majority – only Justice Jackson dissented from the essential holding of the case – Justice Gorsuch explained that Ms. Stanley could not maintain her ADA claim against the city because the ADA only permits “qualified individuals” – those who held and could perform the essential functions of a position at the time of the alleged discriminatory act – to bring suit. Because Ms. Stanley was no longer working for the city nor able to perform the essential functions of her position when she sued the city, the Court explained that she was not covered by the ADA’s anti-discrimination provision, the plain language of which protects only current employees from disability-based discrimination. The Court did note, however, that although Ms. Stanley could not bring her ADA claim, other statutes, including the Rehabilitation Act and state law, may afford alternative avenues for relief.
In light of Stanley, those employers who provide retiree benefits now have more clarity that making changes to benefits that may negatively impact disabled retirees will not violate the ADA. But, as noted, that does not mean that such changes will necessarily be entirely lawful, as other laws may provide protection to disabled retirees or otherwise limit what sort of changes an employer can make in retiree benefit policies, programs, and plans.
Supreme Court Nixes Retiree’s ADA Benefits Suit
In Stanley v. City of Sanford, Florida, the U.S. Supreme Court held a disabled former employee who neither “holds” nor “desires” a job is not a “qualified individual” under the ADA and, thus, cannot sue for disability discrimination following her employer’s revocation of retiree health benefits.
The plaintiff, Karyn Stanley, was a firefighter for the City of Sanford, Florida (“City”) who retired after she was diagnosed with Parkinson’s disease. When she joined the fire department, disabled retirees received free health insurance until they were 65 years old. While employed and unbeknownst to her, the benefit changed and disabled retirees were eligible for two years of coverage. Following her retirement, the plaintiff learned of the benefit change and received the two years of health insurance coverage.
Stanley, post-retirement, filed a lawsuit against the City alleging that the City violated the ADA and discriminated against her as a disabled retiree when it altered the health insurance plan. The district court dismissed her ADA claim. On appeal, the Eleventh Circuit affirmed, holding that, because Stanley had retired, she could not bring such a suit under the plain language of the statute. The Eleventh Circuit’s decision fell in line with three other circuits (Sixth, Seventh, and Ninth), while two other circuits (Second and Third) held that the ADA’s text is ambiguous and construed the statute in favor of employees.
The Court granted certiorari to determine “whether a retired employee who does not hold or seek a job is a ‘qualified individual.’” In a 7-2 opinion authored by Justice Gorsuch, the Court held that the plain language of the statute protects only “qualified individuals,” which is defined by the statute as those “who, with or without reasonable accommodation, can perform the essential functions of the employment position that [she] holds or desires.” The Court found that the present tense usage of “holds” and “desires” signals that the statute does not reach retirees. The Court found that other ADA provisions governing qualification standards and employment tests similarly convey that the statute “focus [is] on current and prospective employees—not retirees.” The Court also found it notable that the ADA’s retaliation provision protects “any individual,” and thus “different language in these two provisions strongly suggests that [Congress] meant for them to work differently.”
Rejecting arguments from the dissent that the “qualified individual” language could not have been meant to apply to retirees, the majority held that “we do not usually pick a conceivable-but-convoluted interpretation over the ordinary one.” The Court added: “we cannot say Title I’s textual limitations necessarily clash with the ADA’s broader purposes . . . . If Congress wishes to extend Title I to reach retirees like Ms. Stanley, it can.”
The last section of Gorsuch’s opinion was adopted by a four-justice plurality of the Court in which Gorsuch lost support from Justices Roberts, Thomas, Kavanaugh, and Barrett, but added support from dissenting Justice Sotomayor. The plurality addressed an additional question raised by Stanley in her merits briefing. While the Court admitted that it “ordinarily . . . rejects attempts to inject ‘an entirely new question at the merits stage,’” the plurality made “an exception in this case.” In short, the plurality explored potential avenues for retirees, like Stanley, to pursue similar ADA claims, but ultimately held that none provided relief to Stanley in the present procedural posture.
A key takeaway from Stanley is that a majority of the Court supports a textualist interpretation of the ADA even when an argument can be made that such an interpretation clashes with the broader purposes of the ADA.
Best Practices When Taking Voluntary Compliance Steps Using Workforce Analytics
The Trump administration has decisively shifted its approach to enforcing employment discrimination laws, leaving employers grappling for clarity and stability to inform their efforts to prevent and manage legal risks stemming from harassment and discrimination. Workforce analytics, accompanied by privileged legal advice tethered to risk tolerance, can assist employers to identify and address potential workplace discrimination issues minimizing legal risk amid the administration’s shifting enforcement priorities.
Quick Hits
The Trump administration has sought to end both federal enforcement of antidiscrimination laws based on disparate impact theories and to eliminate employer DEI programs.
Even with these shifting priorities, it remains critically important for employers to collect and study applicant and employee demographic data to maintain compliance with equal opportunity and antidiscrimination laws, as well as to be prepared for scrutiny under the Trump administration’s shifting policies.
Employers may want to consider proactive collection and analysis of workforce demographic data, barrier analyses, and enhanced training programs to ensure compliance with equal employment opportunity and antidiscrimination laws.
The administration—largely through the issuance of executive orders (EO)—has prioritized merit-based opportunity, sought to end usage of disparate impact theories of discrimination, rescinded federal contractor obligations to provide affirmative action and discrimination protections for women and minorities, sought to eliminate “illegal” diversity, equity, and inclusion (DEI) initiatives, and focused on stopping anti-American and anti-Christian bias and combating antisemitism. The Equal Employment Opportunity Commission (EEOC), the U.S. Department of Labor (DOL), and the U.S. Department of Justice (DOJ) have all taken actions to advance the Trump administration’s policy objectives, but questions remain.
In particular, the Trump administration’s focus on discouraging the collection of applicant data related to race, ethnicity, and sex, coupled with its messaging on unlawful race and sex discrimination in DEI programs, has many employers hesitant to collect, maintain, and analyze demographic information from their applicants and employees.
This legal landscape is especially confusing for federal contractors given the wind down of EO 11246 obligations, but the administration’s new focus impacts all employers. As a result, employers face challenges complying with legal obligations and effectively managing risks associated with workplace discrimination and harassment.
However, a close review of the EEOC’s Fiscal Year 2026 Congressional Budget Justification submitted to Congress in May 2025 reveals that EEOC investigations will continue to focus on employer data. According to the budget justification, the EEOC is committed to educating and informing its own staff to “combat systemic harassment, eliminate barriers in hiring and recruitment, recognize potential patterns of discrimination, and examine and analyze these often large or complex investigations effectively.” The agency said that in fiscal year (FY) FY2026, it plans to “conduct mid and advanced level training for field staff and assist with the development of class investigations, data requests, and data analysis for pattern and practice disparate treatment cases.” (emphasis added).
The EEOC’s characterization of budget funds sought for its litigation program is also instructive. As of March 31, 2025, 46 percent of the EEOC’s litigation docket involved systemic discrimination or class lawsuits. Citing efforts to enforce EO 14173, the Commission contemplates involving “expert witnesses” and “the discovery of large-scale selection data to prove the existence and extent of a pattern or practice of discrimination.” The Commission justifies its resource request “to remedy discrimination on prioritized issues,” and argues aggressive enforcement will result in “a strong incentive for voluntary compliance” by employers.
Shifting Enforcement Targets
Employers may see an increase in EEOC charges from charging parties and Commissioner’s as well as other enforcement activities that align with the current administration’s priorities, including enforcement regarding DEI programs, so-called anti-American bias, national origin discrimination, and anti-Semitism. As just one example, the EEOC recently settled a systemic investigation into national origin and anti-American bias for $1.4 million dollars.
EEOC Acting Chair Andrea Lucas has repeatedly warned employers that EEOC focus will be on intentional disparate treatment cases where there has been a “pattern or practice” of discrimination. Like disparate impact, “pattern or practice” claims are rooted in systemic issues and typically involve the use of statistical evidence related to allegedly aggrieved individuals.
The 2024 Supreme Court decision in Muldrow v. City of St. Louis (rejecting a heightened bar for alleging an employment decision or policy resulted in an adverse impact on terms and conditions of employment) and the 2025 decision in Ames v. Ohio Department of Youth Services (rejecting a higher evidentiary standard for employees from majority groups to prove employment discrimination), have made it easier for plaintiffs to plead and prove employment discrimination claims under Title VII. The decisions seemed to have widened the doorway for more claims from individuals from majority groups (so-called reverse discrimination claims) and potentially made it easier to evade summary judgment and reach a jury trial if litigation ensues.
Moreover, federal contractors, institutions relying on federal contracts or grants, and federal money recipients face additional concerns with False Claims Act (FCA) liability. President Trump’s EO 14173, which seeks to require entities to certify for purposes of the FCA that they do not maintain unlawful discriminatory policies, namely illegal DEI policies. The DOJ has launched an initiative to use the FCA to investigate civil rights violations committed by federal fund recipients, expanding legal exposure to such employers.
Proactive Steps
Given the current legal landscape, employers may want to take proactive steps to ensure compliance with equal employment opportunity and antidiscrimination laws. These steps may include:
Collect and Analyze Demographic Data: Collecting and analyzing demographic data can be crucial for identifying and addressing disparities within the workplace and for documenting and demonstrating reasons for employment decisions or policies. While there may be concerns about collecting demographic data, such concerns may be alleviated by keeping data confidential and analyzing it under attorney-client privilege.
Barrier Analysis: Barrier analysis involves identifying and addressing obstacles that may prevent equal employment opportunities. This can include reviewing hiring practices, promotion policies, and other employment decisions that cover all aspects of the employment life cycle to ensure they do not disproportionately impact certain groups. By conducting a thorough barrier analysis, employers can proactively address potential issues before they become legal problems and remove barriers.
Review and Update Policies: Regular reviews of and updates to employers’ antidiscrimination and harassment policies can help ensure they align with current laws and the administration’s priorities, as well as employers’ values, goals, and objectives. Such reviews may include policies related to DEI, national origin discrimination, and anti-Semitism.
Provide Training: Implementing regular training programs for company leaders, managers, and employees on new antidiscrimination enforcement developments can help prevent discriminatory behavior and ensure that all employees understand their rights and responsibilities. Updating modules and examples to reflect changing priorities may help employers remain compliant. Likewise, covering a wide variety of scenarios and examples, including majority characteristics, can be important to review and include.
Next Steps
The shifting landscape of employment law presents both challenges and opportunities for employers. To be prepared, employers can stay informed on the latest actions and consider which proactive steps may be best to avoid potential liability and achieve their goals and objectives.
Ohio Leads the Way Allowing Employers to Post Digital Labor and Employment Notices
On July 20, 2025, Ohio will officially become one of the first states to allow employers to provide digital—rather than physical—copies of certain labor law notices required under Ohio law.
Specifically, under changes imposed by Senate Bill 33 (SB 33), Ohio will soon allow employers and businesses to post the following Ohio notices digitally:
Minor Labor Laws
Minimum Fair Wage Standards Law
Civil Rights Law
Prevailing Wage Law
Workers’ Compensation Law
Public Employment Risk Reduction Program Law
Employers who choose to adopt a digital format must do so in a way that is accessible to all employees, such as posting the notices to an intranet site, an employee portal, or an employee accessible webpage (in each case, ensuring accessibility for employees with disabilities). Importantly, if an employer elects to provide digital notices, SB 33 requires an employer to also post the Ohio Civil Rights Law notice on the internet “in a manner that is accessible to the public.”
In contrast to a similar law enacted by New York State in 2022, SB 33 does not require Ohio employers to use digital notices; instead, employers may still choose to post physical copies of the notices in high traffic areas such as break rooms or on bulletin boards. Additionally, SB 33 does not change any requirements under federal law to physically post certain employment-related notices.
In determining whether to provide digital notices, employers should consider:
how the employer intends to communicate any changes to its workforce. For instance, employers may want to incorporate the notices and directions on how to access the notices in their onboarding materials;
whether the employer’s digital platform is reliable; employers should avoid using systems that frequently render the notices inaccessible or unavailable; and
whether the employer needs to maintain physical postings to comply with other state or federal laws.
Reminder: California Healthcare Minimum Wage Increase Effective July 1, 2025
Employers in the healthcare industry in California are subject to a separate minimum wage from other employers.
Effective July 1, 2025, certain healthcare facilities will see an increase in their minimum wage rates. The following is a summary of the increases based on the type of employer.
Type of Healthcare Employer
Current Rate
Increased Rate
Hospitals or Integrated Health Systems with 10,000 or more full-time employees, including skilled nursing facilities operated by these employers
$23
$24
Dialysis Clinics
$23
$24
Covered Health Care Facilities run by large counties with more than five million people as of January 1, 2023
$23
$24
Hospitals with 90% or more of their patients paid for by Medicare or Medi-Cal
$18
$18.63
Independent Hospitals with 75% or more of their patients paid for by Medicare or Medi-Cal
$18
$18.63
Rural Independent Covered Health Care Facilities
$18
$18.63
Covered Health Care Facilities run by small counties with fewer than 250,000 people
$18
$18.63
While several categories of healthcare employees will receive a minimum wage increase in July 2025. The following categories of healthcare employers will not have a minimum wage increase until July 2026:
Intermittent clinics, community clinics, rural health clinics, or urgent care clinics associated with community or rural health clinics
Covered Health Care Facilities run by Medium Sized Counties (250,000 to five million people as of 1/1/23)
Skilled Nursing facilities not owned, operated, or controlled by a hospital, integrated health care delivery system, or health care system
All other covered health care facilities not listed in the other categories and not run by Counties
Who is Covered?
The definition of “health care employee” is broad, encompassing a wide range of roles within healthcare facilities. This includes employees who provide patient care, health care services, or services supporting the provision of health care. Examples of covered roles include:
Nurses
Physicians
Caregivers
Medical residents, interns, or fellows
Patient care technicians
Janitors
Housekeeping staff
Groundskeepers
Guards
Clerical workers
Non-managerial administrative workers
Food service workers
Gift shop workers
Technical and ancillary services workers
Medical coding and billing personnel
Schedulers
Call center and warehouse workers
Laundry workers.
DC District Court Dismisses SOX Whistleblower Retaliation Claim Where Plaintiff Was Employed Abroad And His Employment Contract Was Not Governed By U.S. Law
In Jefferson v. Science Apps. Int’l Corp., et al.,[1] the U.S. District Court for the District of Columbia dismissed the plaintiff’s whistleblower retaliation claim brought under Section 806 of the Sarbanes-Oxley Act (“SOX” or the “Act”), holding, in line with courts across the country, that the statute does not apply extraterritorially and that there can be no domestic application of the statute when the employee lived and worked abroad.
In Jefferson, the plaintiff worked as a Cyber Security Systems Administrator in Germany at a U.S. military base for Science Applications International Corp. (“SAIC”), a publicly traded U.S. company. Jefferson alleged, among other things, that while working for SAIC he reported to management the company’s use of incorrect metrics in reporting to the U.S. Securities and Exchange Commission and shareholders. Jefferson asserted that he faced escalating retaliation for his complaints, including a demotion, and, ultimately, termination of his employment. Following his termination, Jefferson brought suit under SOX, among other legal theories, and SAIC moved to dismiss under Rule 12(b)(6).
On May 6, 2025, the Court dismissed Jefferson’s SOX claim because it constituted an impermissible extraterritorial application of the SOX whistleblower provision. In reaching its conclusion, the Court applied the test established by the DC Circuit Court of Appeals in Garvey v. Admin. Rev. Bd., United States Dep’t of Lab.[2] for assessing whether a plaintiff has sought to invoke an impermissible extraterritorial application of SOX. In so doing, the court considered the following factors: (1) the locus of an employee’s work, and (2) the terms of the employee’s employment contract. The Court found that since Jefferson worked exclusively in Germany, the locus of his employment was in Germany and not the U.S. The Court also determined that since Jefferson did not allege that his employment contract was governed by U.S. law, there was no presumption that U.S. law applied. The Court thus dismissed the claim.
As we have previously reported, courts like this one continue are tending to coalesce around a bright line rule for dismissing SOX whistleblower retaliation claims brought by employees working outside the United States.[3]
[1] No. CV 24-1692 (SLS), 2025 WL 1305245 (D.D.C. May 6, 2025.)
[2] 56 F.4th 110, 115 (D.C. Cir. 2022)
[3] See Proskauer Whistleblower Defense Blog: DC Circuit: SOX’s Anti-Retaliation Provision Does Not Apply Extraterritorially | Proskauer Whistleblower Defense; CA District Court: SOX and Dodd-Frank’s Whistleblower Provisions Do Not Apply To Individual Employed Abroad. But See Washington Federal Court Refuses to Dismiss SOX Whistleblower Claim Despite Plaintiff Working Abroad | Proskauer Whistleblower Defense.
Minnesota Expands and Strengthens Meal and Rest Break Rules
New law effective in 2026 imposes minimum break times, expands eligibility and introduces penalties for noncompliance
New standards go into effect on January 1, 2026, for Minnesota employers.
Requires minimum 15-minute rest breaks and 30-minute meal breaks
Adds penalties for missed or insufficient breaks
Minnesota has enacted new requirements for employee meals and rest breaks, expanding existing protections and imposing penalties for noncompliance. The amendments to Minnesota Statutes §177.253 and §177.254 will take effect on January 1, 2026.
Under the current law, employers are required to provide “adequate time” for a restroom break at least once every four-hour shift. The new law clarifies that “adequate time” cannot be less than 15 minutes. Beginning in 2026, employers must offer either a 15-minute rest break or enough time to use the restroom — whichever is longer.
Similarly, the law will change the unpaid meal break requirement from “sufficient time to eat a meal” to a minimum length of 30 minutes. In addition, employers will be required to provide a meal break for every employee working a shift of six hours or more, as opposed to the current law requiring meal breaks for shifts of more than eight hours.
For both paid rest breaks and unpaid meal breaks, the new law adds a remedy for violations. Employees who do not receive the required breaks will be eligible to receive damages equal to two times the amount earned during the missed break at the employee’s regular rate of pay.
The practical impact of these provisions will vary by workplace, but all Minnesota employers should assess whether their current practices align with the new standards and make adjustments as needed before the law takes effect.
The POWER Act: Strengthening Worker Protections
On May 27, 2025, Philadelphia enacted the Protect Our Workers, Enforce Rights Act (“POWER Act”), amending Title 9 of The Philadelphia Code as it pertains to the following sections: “Promoting Healthy Families and Workplaces,” “Wage Theft Complaints,” “Protections for Domestic Workers,” “Protecting Victims of Retaliation,” and “Enforcement of Worker Protection Ordinances.”
Amendments to Chapter 9-4100 Promoting Healthy Families and Workplaces
The definition of who may file a wage theft complaint has been broadened. Now, any “employee” (including independent contractors misclassified as such) who performs work in Philadelphia is explicitly authorized to file a complaint for unpaid wages, regardless of immigration status. Additionally, the Office of Worker Protections (OWP), as opposed to just the offices the Mayor designates, may now initiate investigations based on information, even if a formal complaint has not yet been filed—allowing the City to proactively enforce the law in high-risk industries.
The POWER Act also changes the calculation for Paid Sick Time (PSL) for tipped employees (i.e., employees who customarily and regularly receive more than fifty dollars ($50) a month in tips from the same employment). Paid sick time means time that is compensated at the same hourly rate and with the same benefits, including health care benefits, as the employee normally earns from the employee’s employment at the time the employee uses the paid sick time and is provided by an employer to an employee. Under the Act’s new calculation method for tipped employees, the hourly rate of pay shall be the numerical average of the hourly wage for “Bartenders,” Waiters & Waitresses,” and “Dining Room & Cafeteria Attendants & Bartender Helpers,” as published by the Pennsylvania Department of Labor and Industry.
Amendments to Chapter 9-4300 Wage Theft Complaints
The original chapter—enacted in 2020—established protections for domestic workers, including mandatory contracts, rest breaks, and anti-retaliation provisions. The POWER Act strengthens those rights by incorporating them into the city’s broader labor enforcement framework. As with the amendments to the wage theft portions of the law, the Act empowers the OWP to actively investigate complaints and impose penalties against employers who violate domestic workers’ rights.
Amendments to Chapter 9-4500 Protections for Domestic Workers
The OWP also aligns domestic workers’ sick leave rights with the city’s paid sick leave (“PSL”) ordinance, ensuring they now accrue and use paid time off, with a centralized portable benefits system to be developed, regardless of how many employers they work for. The Act further clarifies that live-in domestic workers are fully entitled to these PSL benefits, including protections against retaliation, wage theft, and coercion. Finally, employers must provide written contracts outlining leave time.
Enhanced Anti-Retaliation Provisions
The POWER Act reinforces protections against retaliation for workers who assert their rights under Title 9. Additionally, the Act prohibits employers from retaliating against employees for exercising their rights to use sick time and specifies that employers may not consider paid sick leave covered absences as part of any absence control or disciplinary action. It also places a rebuttable presumption of unlawful retaliation on any employer in certain circumstances.
Notice & Retention of Employer Records Obligations:
Employers are required to provide a written notice of rights to employees, including leave entitlements. Employers must also create and maintain contemporaneous records for a period of three years regarding the hours worked by an employee, including dates, and hours of sick time taken by an employee and payments made to an employee for the sick time.
Penalties:
If the OWP determines that an employer has violated the Act, the agency can seek civil penalties. The OWP also provides for the recovery of liquidated damages and other consequences for repeated violations.
Employers are reminded to review their policies for compliance with these latest legislative updates.
First Circuit Concludes Employee’s Wrongful Termination, Other State Law Claims are Preempted by Federal Law
The U.S Court of Appeals for the First Circuit (covering Maine, Massachusetts, New Hampshire, Puerto Rico, and Rhode Island) recently awarded a victory to employers litigating claims “related to” certain employer-sponsored benefit plans.
On June 16, 2025, the court affirmed an award of summary judgment in favor of Santander Bank N.A. (“Santander”) in Orabona vs. Santander Bank, N.A., an action brought by a former employee who alleged the company terminated her employment in an effort to avoid paying her severance benefits. In rendering its decision, the First Circuit reaffirmed that employees cannot assert state law claims against employers if the resolution of such claims requires the analysis or interpretation of an Employee Retirement Income Security Act (ERISA) plan. The court reasoned that because Congress has promulgated federal laws governing the legal standards and enforcement remedies for disputes concerning ERISA benefits, any state law claim related to such benefits is “preempted,” i.e., superseded, by federal law, and therefore nonviable.
I. Background
Plaintiff Lorna Orabona began working as a high-earning mortgage development officer for Santander’s predecessor in 2008. In 2022, the company terminated her employment “for cause” after it determined that she had sent company emails to her private email address in violation of Santander’s Code of Conduct. Around the time of Orabona’s termination, Santander also instituted a large-scale national layoff — which Orabona was not a part of. The “for cause” nature of Orabona’s termination rendered her ineligible for severance benefits under the company’s ERISA Severance Policy.
Though the Severance Policy included a mandatory administrative grievance procedure, Orabona did not take any steps to appeal her termination or apply for benefits. Instead, she brought various state law claims, including wrongful termination, against Santander which were premised upon the allegation that Santander terminated her employment to avoid paying her severance benefits. Orabona claimed that her failure to appeal her termination or apply for benefits was caused by her reliance on certain statements by Santander to the effect that the company would report her to the licensing board if she attempted to do so.
II. The First Circuit’s Decision
On appeal, the First Circuit Court of Appeals affirmed the District Court’s finding in favor of Santander, agreeing with the lower court that all of Orabona’s claims were preempted by section 514(a) of ERISA. ERISA, the federal law that sets minimum legal standards for most voluntarily established retirement and health plans in the private sector, provides that the federal statute “shall supersede any and all State laws insofar as they may now or hereafter relate to any” ERISA plan. A claim “relates to” an ERISA plan when a court must evaluate or interpret the terms of the plan to determine liability. The Supreme Court, the First Circuit Court of Appeals, and other federal courts of appeals have concluded that state law claims “relate to” ERISA where the employer is alleged to have taken actions to prevent the employee from receiving ERISA plan benefits.
Because determination of both liability and damages in this matter would require the review of the Severance Policy, each of Orabona’s claims “relate[d] to” the Severance Policy such that they were superseded by federal law. In particular, reference to the ERISA plan would be necessary to determine, among other things, whether:
Orabona was ineligible for benefits because of the grounds Santander gave for her termination;
Orabona violated the Code of Conduct; and
Orabona would have been eligible for benefits had her employment been terminated as part of the national layoff rather than for cause.
The court further concluded that Orabona’s claims seeking recovery of damages were separately preempted by the civil enforcement provision of ERISA. In so doing, the court categorized Orabona’s assertion that her failure to exhaust the remedies set forth in the Severance Policy was caused by Santander’s misrepresentations as an “attempt[ed]… end run around ERISA” and rejected her effort to escape ERISA’s “exclusive cause of action.” The fact that Orabona sought remedies, including punitive damages, beyond the scope of the statute did not save her claims. Rather, the court explained, the issue of punitive damages actually supported a finding of preemption to achieve Congress’ intent to make the ERISA civil enforcement mechanism the exclusive remedy for such claims.
The decision serves as a reminder to employers to review their employer-sponsored benefit plans for compliance with federal law and to beware of ERISA considerations when deciding whether a particular employment termination is in the context of a severance-triggering layoff. Given the complexity of the ERISA statutory scheme, employers are encouraged to consult with legal counsel for guidance in such matters.
California Appellate Court Finds Prior PAGA Statute Provided Standing for Former Employee More Than Year Later
On May 27, 2025, the California Court of Appeal for the Second Appellate District held that a former employee retains standing to bring California Private Attorneys General Act (PAGA) claims against an employer more than a year after separation, even though PAGA’s statute of limitations for civil penalties is one year. This decision is rooted in the statutory language prior to the July 2024 PAGA reforms and contrasts with the new, narrower standing requirements. Additionally, the decision directly contradicts other recent decisions reaching the opposite conclusion.
Quick Hits
The appellate court confirmed that, under the law as it existed prior to July 2024, a former employee could file PAGA claims even eighteen months after leaving employment, regardless of the one-year PAGA statute of limitations for civil penalties.
The decision focused on the definition of “aggrieved employee” under the former version of Labor Code Section 2699, emphasizing that standing depended on whether the claimant suffered a Labor Code violation while employed, not on the timing of the claim relative to the statute of limitations.
The court’s interpretation suggests that, before the 2024 reforms, the timing of the alleged violation was not a barrier to standing, so long as the claimant was employed by the alleged violator and suffered at least one Labor Code violation. However, this interpretation is contradicted by other, recent appellate authority.
In Osuna v. Spectrum Security Services, Inc., a former employee, Edgar Osuna, brought a lawsuit alleging various Labor Code violations against his former employer, including representative PAGA claims, eighteen months after his employment ended. The trial court dismissed the PAGA claims, finding that Osuna lacked standing because he filed his PAGA notice more than one year after his separation, outside the statute of limitations for civil penalties.
The appellate court reversed, holding that the relevant inquiry under the former California Labor Code Section 2699, which addressed standing under PAGA, was whether Osuna was an “aggrieved employee”—that is, whether he was employed by the alleged violator and suffered one or more Labor Code violations. The court found the statutory language “clear and unambiguous” on this point and noted that the legislature could have imposed a stricter requirement if it had intended to do so.
The court also rejected arguments that only current employees could bring PAGA claims, emphasizing that continued employment was not required for standing. The decision further noted that Osuna alleged ongoing violations, including the employer’s continued failure to pay all wages due, which supported his standing.
Impact of AB 2288 and the 2024 PAGA Reforms
In Osuna, a panel for the Second Appellate District held that a PAGA plaintiff who brings representative claims on behalf of other aggrieved employees does not need to suffer the alleged Labor Code violation within the one-year limitations period to have standing under PAGA. The ruling contradicts the April 2025 holding in Williams v. Alacrity Solutions Group, LLC.
In Williams, a separate Second Appellate District panel held that “the statute of limitations is tied to the PAGA plaintiff’s individual claims, and that the PAGA plaintiff must bring a PAGA action … within one year of the last Labor Code violation he or she individually suffered.” The court held that a PAGA action must include both an individual claim component and a representative claim component, and timely individual claim is necessary for a PAGA action to proceed (i.e., the individual claim satisfies the statute of limitations).
Thus, these two cases present conflicting interpretations of PAGA standing requirements under the former statutory scheme, with Osuna rejecting the necessity of a violation within the one-year period for standing, and Williams mandating it.
The Osuna decision is also notable in light of recent legislative changes. In July 2024, California enacted Assembly Bill (AB) 2288, which amended Section 2699 to require that a PAGA claimant must have “personally suffered” a Labor Code violation within the statute of limitations period. The appellate court in Osuna observed that this amendment was intended to “supersede” the broader standing recognized in prior case law, including the standard recently applied in Williams.
Practical Implications
The Osuna decision reflects one interpretation of PAGA standing under the law prior to July 2024, holding that former employees could bring PAGA claims even if filed more than a year after separation. However, this view is in direct conflict with the Williams decision, which required that a PAGA plaintiff must have personally suffered a Labor Code violation within the one-year limitations period. As a result, there is a split in authority regarding the proper standard for standing under the pre-2024 statutory scheme.
The 2024 reforms, specifically AB 2288, now require that PAGA claimants have personally suffered a violation within the statute of limitations, significantly narrowing the pool of potential claimants.
Employers should be aware that claims filed before the effective date of the 2024 reforms may be subject to differing interpretations of the standing requirements, depending on which appellate authority is followed.
Next Steps
The Second Appellate District’s decision in Osuna underscores the importance of understanding both the historical and current requirements for PAGA standing. Employers may want to carefully review the timing of alleged violations and the employment status of claimants in light of the recent statutory changes. Employers may further want to consider ongoing monitoring of appellate decisions and further legislative developments to ensure compliance with the evolving PAGA landscape.