Labor & Employment – Page 7

Major Changes Ahead: New Jersey Eyes New Rules Clarifying Test for Worker Classification

New Jersey may adopt new worker-friendly regulations for determining whether a worker is an independent contractor or employee that could make it very difficult for businesses to demonstrate that workers are independent contractors and open the door to additional liability for misclassification.
Quick Hits

New Jersey will consider new regulations that could significantly limit the classification of workers as independent contractors by clarifying the state’s “ABC test” for determining employment status.
The proposed rules aim to define the control, independence, and business engagement of workers, raising concerns among business groups about increased liability for misclassification.
The proposed regulations will have a sixty-day public comment period, which began on May 5, 2025.

On April 28, 2025, the New Jersey Department of Labor and Workforce Development (NJDOL) unveiled a notice of proposal for new rules under N.J.A.C. 12:11 to clarify the application of the state’s “ABC test” for determining independent contractor status. The notice was formally published in the New Jersey Register on May 5, 2025, kicking off a sixty-day public comment period.
The NJDOL’s new proposed rules aim to codify the interpretation of the ABC test by the Supreme Court of New Jersey in multiple decisions concerning the test’s prongs. The three-prong test is used to determine if a worker is an employee or an independent contractor under various New Jersey laws, including the Unemployment Compensation Law, Temporary Disability Benefits Law, Wage and Hour Law, Wage Payment Law, and Earned Sick Leave Law.
While the rules are intended to provide clear guidance to employers, business groups have concerns that codifying these interpretations will make it very difficult for businesses to classify workers as independent contractors, even if such workers were previously classified as such.
In announcing the proposed regulations, New Jersey Labor Commissioner Robert Asaro-Angelo touted the regulations as a “critical step” in preventing the “illegal misclassification of employees.”
“Not only would these new rules protect workers’ rights, but they would also ensure that bona fide independent contractors understand what makes them independent contractors, rather than employees, so that they can continue to operate with autonomy,” Commissioner Asaro-Angelo said in a statement.
Proposed Changes
The ABC test uses three prongs: (A) the degree of control the hirer has over the worker; (B) the worker’s independence or degree to which work is performed outside of the usual course of business or outside the business’s location; and (C) the worker’s engagement in an independently established trade, occupation, profession, or business. The proposed regulations would clarify factors for interpreting each prong.
Prong A
The proposed rule would clarify that an employer must establish that it does not exercise control over a worker and does not retain the right to control the manner or means of the work. The rule includes a nonexhaustive list of nine factors to consider the degree of control, including whether:

the individual has set hours;
the putative employer controls the “details and means by which the services are performed by the individual”;
the services are provided personally;
the putative employer negotiates for the work of the individual;
the individual has a fixed rate of pay;
the individual bears any risk of loss;
the individual is required to be on call or available to perform services at times set by the putative employer;
the putative employer restricts the individual’s work for other parties; and
the putative employer provides training.

Finally, the proposal would confirm that when evaluating whether an employer has control over an individual, employers may not use the fact that they reserved the right to exercise control to comply with any other law or regulation as a reason to avoid classifying the individual as an employee. The reason for reserving the right to exercise control would be given the same weight as any other control the employer has reserved or exercised, and will be seen as proof of an employment relationship.
Prong B
The proposed rules would clarify that when evaluating whether a worker has performed work outside of regular business or outside the business’s physical location, a business’s “place of business” refers to where the business has a physical plant or conducts integral parts of its business, including potentially a customer’s residence. The NJDOL explained that “the residence or place of business of the putative employer’s customer” would be considered “among the putative employer’s places of business” when “(1) a service is performed by the worker at the residence or place of business of the putative employer’s customer; and (2) the service performed by the worker is an essential component of the putative employer’s business.”
Prong C
The proposed regulations include a nonexhaustive list of seven factors to determine independence, including the number of customers and volume of business from each customer, whether individuals set their rate of pay, duration strength, and the viability of business independent of the putative employer. The proposed regulations would clarify that receipt of unemployment benefits is irrelevant to Prong C analysis, and proof of license, business registration, or insurance information without more is also insufficient to show independence.
Next Steps
The proposal is the latest attempt in New Jersey to expand the independent contractor test since California established its ABC test in 2019. The prior proposals failed to gain traction. However, Governor Phil Murphy has successfully signed other bills strengthening laws against misclassification and has been making a push to broaden the scope of the ABC test for employees. New Jersey courts have similarly interpreted the ABC test to classify more workers as employees. It is anticipated that the proposed regulations will be finalized in some form.
Further, the proposed independent contractor regulations follow the NJDOL’s September 2024 finalization of regulations implementing New Jersey’s Temporary Workers Bill of Rights (TWBR) law, which enhanced protections for temporary workers and equalized their compensation with permanent employees.
The U.S. Department of Labor (DOL) issued a new independent contractor rule in 2024, which took effect in March 2024. The DOL rule adopted a more intensive totality of circumstances test to classify an independent contractor. However, the Trump administration has indicated that it may reconsider the 2024 rule and issue a new one.

Philadelphia Enacts POWERful New Worker Protection Ordinance

On May 27, 2025, Mayor Cherelle Parker signed the Protect Our Workers, Enforce Rights (“POWER”) Act into law, which expands the Philadelphia Department of Labor’s enforcement options for violations of the City’s expanding roster of worker protection laws. Under this new ordinance, which is now in effect, workers in Philadelphia have expanded protection against labor infractions; and employers face a host of new and enhanced compliance requirements.
Key provisions of the new legislation include:

Expanded Definitions and Coverage. The ordinance broadens the definitions of “employee,” “employer,” and “domestic worker,” ensuring coverage for a wider range of workers, including part-time, temporary, and live-in domestic workers.
Paid Sick Leave and Leave Accrual. The legislation specifies that employees, including domestic workers, accrue paid sick time, compensated at their regular rate of pay, with specific calculation methods for tipped employees. Employers are prohibited from counting sick time as an absence leading to discipline and must provide notice of rights in multiple languages. Employers must also maintain contemporaneous records of hours worked, sick time taken, and payments for at least three years.
Wage Theft Protections. The ordinance expands the definition of wage theft to include violations of state and federal wage laws where work is performed in Philadelphia, or the employment contract is made in the City. The Department of Labor will be authorized to investigate complaints, with a three-year statute of limitations for filing. Employers failing to maintain required payroll records face an affirmative presumption that they have violated the Act.
Domestic Worker Protection. Employers must provide written contracts to domestic workers (excluding casual work), detailing job duties, wages, schedules, leave, benefits, and termination terms, in English and in the worker’s preferred language. Domestic workers are entitled to paid rest periods and meal breaks and will accrue paid leave, with a centralized portable benefits system to be developed for aggregation across multiple employers. Employers must also provide minimum notice periods (two weeks for most, four weeks for live-in workers) for termination without cause, with severance pay and, for live-in workers, continued housing or its value if notice is not provided.
Anti-Retaliation Protections. The ordinance prohibits retaliation against workers for exercising rights under any worker protection ordinance, including filing complaints, seeking information, or participating in investigations. It also places a rebuttable presumption of unlawful retaliation on any employer who discharges, suspends, or takes other adverse action against an employee within 90 days of the employee engaging in protected conduct.
Expanded Enforcement and Private Right of Action. The Department of Labor will be empowered to investigate, mediate, and adjudicate complaints, with authority to issue subpoenas and expand investigations to cover pattern or practice violations. Workers may also bring private civil actions without first exhausting administrative remedies, subject to a 15-day notice and cure period. Prevailing workers are entitled to legal and equitable relief, including attorney’s fees and costs.
Notice, Posting, and Outreach Requirements. Employers must provide written notice of rights to employees in relevant languages or post notices conspicuously. Failure to provide notice tolls the statute of limitations for any claims and may subject an employer to a civil penalty of up to $2,000 per violation.
Public Reporting. Employers with repeated or unresolved violations may be listed in a public “Bad Actors Database,” face license revocation, and be deemed ineligible for City contracts.

The POWER Act significantly enhances protections for many workers in Philadelphia. Employers and hiring entities must review and update their policies, contracts, and recordkeeping practices to ensure compliance. The expanded enforcement powers, increased penalties, and public reporting mechanisms underscore the City’s intention to take stronger action to enforce its growing list of worker protection laws and hold noncompliant employers accountable.

Maryland Enacts Earned Wage Access Law

On May 28, Maryland Governor Wes Moore signed House Bill 1294 into law, establishing a comprehensive regulatory framework for Earned Wage Access (EWA) providers operating in the state. Effective October 1, the new law provides for licensing of both employer-integrated and consumer-directed EWA providers under the Maryland Consumer Loan Law, while also introducing a host of new consumer protection requirements.
The law is a response to prior regulatory guidance that restricted EWA services in the state and prompted many providers to exit the market. Like previous bills passed by other states, the bill codifies permissible EWA practices by formally defining employer-integrated and consumer-directed models (previously discussed here), clarifying that these services are not loans if providers do not charge interest and comply with specific statutory conditions. It also creates a special licensing framework that enables complaint providers to legally reenter the Maryland market while adhering to detailed operational requirements designed to protect consumers.
To address compliance and consumer protection concerns, the law includes the following key provisions:

Mandatory licensing of EWA providers. All EWA providers must be licensed under Maryland’s Consumer Loan Law unless exempt, and are subject to oversight by the Office of Financial Regulation (the “OFR”). In addition, there is annual reporting to the OFR.
Non-recourse obligations. EWA transactions are non-recourse and a user can cancel their EWA transaction at any time.
Coverage of both EWA models. The law applies to both “employer-integrated” and “consumer-directed” EWA models. Employer-integrated models involve arrangements where the provider contracts directly with the employer and receives payroll data from the employer or its processor. Consumer-directed models rely on employment and income data provided by the worker without any employer relationship.
No-cost option requirement. Providers must offer at least one “reasonable” no-cost method for consumers to access their earned wages, regardless of whether fee-based options are available.
Fee limitations for expedited delivery. Fees for expedited delivery are capped at $5 for transfers of $75 or less and $7.50 for amounts above $75.
Tip regulation. Providers that solicit tips must treat them as voluntary, set default amounts to zero, ensure they do not influence access or terms, and refund any portion that would result in impermissible interest charges.
Prohibition on traditional lending practices. Providers are prohibited from charging interest or late fees, conditioning service on tipping, using or furnishing credit reports, or enforcing repayment through litigation, collections, or debt sales.
Disclosures and consumer rights. Providers must disclose all fees and changes clearly, explain how to select the no-cost option, allow users to cancel without penalty, and reimburse overdraft fees caused by failed repayment attempts, unless due to fraud.

Putting It Into Practice: Maryland becomes the latest state to adopt EWA-specific regulations (previously discussed here, here, here, and here). Maryland’s framework affirms that EWA products are not loans when structured in compliance with statutory safeguards. As more states implement similar statutes, EWA providers should continue to monitor evolving regulatory trends and adapt their compliance practices accordingly.
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Executive Use of Corporate Aircraft: Navigating Tax, SEC Disclosure and Other Key Considerations

Companies are increasingly allowing their chief executive officers and, in certain circumstances, other executives to use corporate jets (which may be chartered flights or fractionally or fully owned aircraft) for personal use due to various reasons. Although this benefit may be a relatively small percentage of an executive’s overall compensation package, it is still likely significant to the executive and may assist companies in attracting and retaining top talent. Further, commercial travel can pose security risks for high-profile executives; some companies permit these executives to use corporate jets due to safety and privacy concerns. Lastly, flying private may allow executives to save time and work more productively while traveling. For example, while traveling for personal reasons, executives may be able to conduct meetings and attend to any pressing business matters that arise mid-flight.
Despite these benefits, executive use of corporate jets may have complex implications, including tax consequences, SEC disclosure (publicly traded companies only) and other key considerations. As discussed in a separate Proskauer blog post, the IRS also recently announced a new audit campaign targeting the use of corporate jets, although it is unclear whether this will remain a focus of the new administration.
Tax Considerations for Private and Public Companies
Private and public companies, including private equity sponsors and other investment managers, and their employees must consider the tax consequences of allowing an executive or investment professional to use corporate jets for personal use. Specifically, under IRS rules, the value of an executive’s personal use of a corporate aircraft is treated as imputed income to the executive and is taxable compensation, subject to tax reporting and withholding. The most common method for calculating the value of the imputed income is by using the Standard Industry Fare Level (SIFL) method, which is based, among other things, on the distance flown, aircraft weight and number of passengers on a private jet. The value calculated under the SIFL method is reported as W-2 income to the executive and is subject to payroll taxes, although this amount is often significantly less than the fair market value of the benefits provided to the executive or the actual cost to the company of operating the jet. Additionally, although an employer’s cost of operating a non-commercial aircraft is generally deductible as an ordinary business expense, employers may not be able to deduct any entertainment expenses associated with personal travel under the Tax Cuts and Jobs Act (TCJA).
In order to determine the potential tax consequences of allowing an executive to use a corporate jet for personal use, companies must separately evaluate whether each passenger on a corporate jet is flying for a valid business purpose (e.g., while an executive may have a valid business purpose for flying on a corporate jet, the executive’s spouse may be traveling for entertainment in certain circumstances). If certain passengers (but not others) are traveling for entertainment, the portion of flight expenses allocated to those guests traveling for entertainment may be considered a taxable fringe benefit to the executive hosting the guests and, as an entertainment-related expense, may not be deductible to the employer under the TCJA. Importantly, these tax implications would apply even if a corporate jet has empty seats available for use at no additional cost.
SEC Disclosure Obligations for Public Companies
In addition to the foregoing tax implications, with respect to public companies only, personal use of company aircraft by the company’s named executive officers (NEOs) must also be disclosed in the company’s proxy statement under SEC rules. In particular, Item 402 of Regulation S-K requires disclosure of perquisites and other personal benefits if the total value exceeds $10,000 in a fiscal year. Importantly, the incremental cost to the company of providing this benefit, and not the value imputed to the executive, is used for purposes of this disclosure. As a result, this disclosure typically includes the cost of fuel, maintenance of the aircraft, crew costs, landing fees and in-flight catering and services, although fixed costs like the depreciation of the aircraft or any base salaries paid to staff generally are not required to be disclosed unless these costs are increased due to the executive’s personal use. In addition, if any single perk exceeds the greater of $25,000 or 10% of total perks, its specific value must be itemized, which may result in increased scrutiny from investors and regulators.
Other Key Considerations
In addition to the tax and SEC disclosure considerations, other key considerations should be analyzed. For example, internal policies and recordkeeping procedures should be established and monitored and, from a corporate governance perspective, appropriate approvals from the board or its committees (e.g., audit or compensation) should be obtained. Once approved, periodic reporting and monitoring may be advisable. Further, other regulatory considerations should be reviewed, particularly, where corporate-owned aircraft is used (e.g., FAA rules).
Proskauer Perspectives
Given these considerations, companies that permit executives to use their private aircraft should carefully track and retain information relating to their use. It is also best practice for companies to establish clear policies and guidelines regarding using aircraft for personal travel, including the process for obtaining pre-approval for any personal use. A company’s finance, tax, legal and human resources functions should also coordinate to ensure an executive’s imputed income is correctly tracked and reported and any personal use by an executive is properly disclosed in accordance with the SEC disclosure rules. Companies may also consider requiring executives to reimburse them for the costs associated with any personal use, which may mitigate some of the issues discussed in this blog post.
Although allowing executives to use a company’s private aircraft can be an attractive benefit for executives, businesses should proactively manage any associated tax, governance and operational issues and, for public companies, SEC disclosure obligations as well. By addressing these issues in a thoughtful and comprehensive manner, companies can support their management team by avoiding unnecessary surprise tax consequences and also reinforce investor confidence through consistent governance practices that contribute to long-term corporate stability and trust.

DOL Rescinds 2022 Guidance Cautioning Against 401(k) Plan Investments in Cryptocurrencies

On May 28, 2025, the Department of Labor (“DOL”) issued Compliance Assistance Release No. 2025-01 which rescinds the DOL’s prior Compliance Assistance Release No. 2022-1 which had warned 401(k) plan fiduciaries against adding cryptocurrencies as direct investment options under their plans.
The 2022 guidance (described in more detail here) cautioned 401(k) plan fiduciaries to exercise “extreme care” when considering offering direct investments in cryptocurrencies, digital assets or other similar products to a defined contribution plan’s investment lineup. In the 2022 guidance, the DOL noted that these types of investments “present significant risks and challenges to participants’ retirement accounts, including significant risks of fraud, theft, and loss” due to (among other things) the evolving regulatory environment surrounding these investments, their speculative nature, valuation concerns, and the likely inability of the average participant to be able to sufficiently understand the investment and make an informed decision.
In rescinding the 2022 guidance, the DOL takes a more neutral stance towards cryptocurrencies by reverting to its historical approach of neither endorsing nor disapproving of offering cryptocurrency investments in 401(k) plans.
Takeaways for Plan Fiduciaries: The 2025 guidance does not change a plan fiduciary’s duties of prudence, loyalty and diversification when considering whether to add an investment option (cryptocurrency-related or otherwise) to their plan’s investment lineup. Notwithstanding the seemingly warmer approach towards allowing cryptocurrency investments in 401(k) plans, without a safe harbor protecting plan fiduciaries who offer such an investment option, it remains to be seen whether this guidance will actually impact the offering of cryptocurrency in defined contribution plans.

Stronger Workplaces for Nova Scotia Act Amendments in Effect in July and September 2025

On September 20, 2024, Nova Scotia’s Stronger Workplaces for Nova Scotia Act, which amended the Workers’ Compensation Act, the Occupational Health and Safety Act, and the Labour Standards Code, received Royal Assent. Portions of the Stronger Workplaces for Nova Scotia Act are already in effect. This article will review the changes coming into effect in July and September 2025.

Quick Hits

The Stronger Workplaces for Nova Scotia Act amends the Workers’ Compensation Act to include Section 89A, which outlines the duties of employers and employees regarding the early and safe return to work of injured workers. This change will come into effect on July 15, 2025.
Starting September 1, 2025, the act will also amend the Occupational Health and Safety Act to include psychological health and safety in the definition of “health and safety” and require employers to establish policies to prevent workplace harassment.
Employers may want to review and update their current policies on harassment, occupational health and safety, and safe return to work to comply with the new regulations and address the Nova Scotian government’s focus on preventing workplace harassment and psychological harm.

Changes Coming in July 2025
The Stronger Workplaces for Nova Scotia Act amends the Workers’ Compensation Act by adding Section 89A and changing Subsection 89(3), which provides the definitions for “alternative employment” and “suitable work,” to apply to Section 89A as well. These changes come into effect on July 15, 2025.
Section 89A essentially codifies an employer’s and employee’s duties and the actions when an employee is injured and returns to work. It states,
(1) The employer of an injured worker shall co-operate in the early and safe return to work of the worker by

(a) contacting the worker as soon as practicable after the injury occurs and maintaining communication throughout the period of the worker’s recovery and impairment;
(b) attempting to provide suitable work that is available and, where possible, restores the worker’s pre-injury earnings;
(c) giving the [Workers’ Compensation] Board such information as the Board may request concerning the worker’s return to work; and
(d) doing such other things as may be prescribed by the regulations.

(2) An injured worker shall co-operate in the worker’s early and safe return to work by

(a) contacting the employer as soon as practicable after the injury occurs and maintaining communication throughout the period of the worker’s recovery and impairment;
(b) assisting the employer, as may be required or requested, to identify suitable work that is available and, where possible, restores the worker’s pre-injury earnings;
(c) giving the Board such information as the Board may request concerning the worker’s return to work; and
(d) doing such other things as may be prescribed by the regulations.

(3) Where, in the opinion of the Board, an employer fails or refuses to comply with subsection (1), the Board may impose a penalty on the employer not exceeding the total of

(a) the full amount or capitalized value, as determined by the Board, of any compensation payable to a worker of the employer in respect of injuries that occurred to the employer’s workers during the period of non-compliance; and
(b) any other expenditures made by the Board in respect of injuries that occurred to the employer’s workers during the period of non-compliance.

(4) Where, in the opinion of the Board, a worker fails or refuses to comply with subsection (2), the Board may suspend, reduce, terminate or withhold the worker’s compensation during the period of non-compliance.

The definitions of “alternative employment” and “suitable work” in Subsection 89(3) are the following:

“Alternative employment” means employment that is comparable to the worker’s pre-injury work in nature, earnings, qualifications, opportunities and other aspects.
“Suitable work” means work which the worker has the necessary skills to perform, is medically able to perform and which does not pose a health or safety hazard to the worker or any coworkers.

However, only “suitable work” is used in Section 89A and not “alternative employment.” So, based on Subclause 89A(1)(b) the employer only needs to attempt to provide work which the worker has the necessary skills to perform, is medically able to perform, and does not pose a health or safety hazard to the worker or others, but does not need to be comparable to the worker’s pre-injury work.
Both employers and employees must follow Section 89A, or else the Workers’ Compensation Board of Nova Scotia can issue penalties against them. If an employer runs into issues where an employee is not communicating while recovering from their injuries or is not assisting in finding suitable work, it could remind the employee of his or her obligations under Subsection 89A(2) and that the Board could suspend, reduce, terminate, or withhold the employee’s compensation.
Changes Coming in September 2025
The act’s amendments to the OHSA focus on physical and psychological health and safety, and preventing harassment in the workplace. These changes come into effect on September 1, 2025.
The first change is that the act adds the definition of “health and safety” to Section 3 of the OHSA, which includes both physical and psychological health and safety. This could have significant impacts throughout the OHSA, as every mention of “health and safety” now includes psychological health and safety. For example, Section 13(1)(a) and Section 17(1)(a) state that employers and employees respectively shall take every precaution that is reasonable in the circumstances to ensure the health and safety of persons or themselves at or near the workplace, which now includes psychological health and safety.
The second change by the act adds Subsection (4) to Section 13 to the OHSA. Section 13 prescribes the employer’s precautions and duties, and Subsection (4) will add the following:
(4) Every employer shall, in accordance with the regulations, establish and implement a policy respecting the prevention of harassment in the workplace.

While it is not yet clear what employers need to include in this policy, we anticipate the Nova Scotia Occupational Health and Safety Division releasing the regulations and a companion guide by mid-summer 2025, to be in force by September 1, 2025.
We further anticipate the definition of harassment in the regulation to be similar to the language in the Workers’ Compensation General Regulations, which states,
“workplace harassment or bullying” means a single significant occurrence or a course of repeated occurrences of objectionable or unwelcome conduct, comment or action in the workplace that, whether intended or not, degrades, intimidates or threatens, and includes all of the following, but does not include any action taken by an employer or supervisor relating to the management and direction of a worker or the workplace:

(i) workplace harassment or bullying that is based on any personal characteristic, including, but not limited to, a characteristic referred to in clauses 5(1)(h) to (v) of the Human Rights Act,
(ii) inappropriate sexual conduct, including, but not limited to, sexual solicitation or advances, sexually suggestive remarks or gestures, circulating or sharing inappropriate images or unwanted physical contact.

Employers with comprehensive harassment policies may not need to make any changes until the regulations are out; however, if they do not have such policies yet, they may want to begin drafting them.
Impact of These Changes
Employers may want to consider what impact the Stronger Workplaces for Nova Scotia Act will have on their workplaces and review their current harassment, occupational health and safety, and safe return to work policies, especially because the Nova Scotian government is taking harassment and psychological harm in the workplace seriously.

Big Law Redefined: Immigration Insights Episode 14 | Transferring Employees to Canada – What Corporate Employers Need to Know [Podcast]

In this episode of the Immigration Insights series on Greenberg Traurig’s Big Law Redefined podcast, host Kate Kalmykov, co-chair of GT’s Global Immigration & Compliance Practice, is joined by Canadian immigration attorney Sergio Karas to discuss the basics and complexities of corporate immigration to Canada.
They address the do’s and don’ts of cross-border work, key visa categories, business visitor vs. work permit rules, and common mistakes companies make.
Kate and Sergio emphasize the need for careful planning, accurate documentation, and understanding the differences between US and Canadian immigration systems.
If your business is involved with Canadian immigration, you won’t want to miss this discussion!

Reconciliation Bill Provisions Targeting Tax-Exempt Organizations Affect Hospitals

The budget reconciliation bill passed by the House of Representatives on May 22, 2025 (the “Reconciliation Bill”), contains a number of provisions targeting tax-exempt entities. While these provisions do not specifically target or call out hospitals, they may apply to tax-exempt and government hospitals.
Excise Tax on Compensation Expanded
Under current law, tax-exempt organizations and certain government entities are subject to a 21 percent excise tax on employee compensation that exceeds $1 million or that constitutes an excess parachute payment. The excise tax applies to amounts paid to the five highest compensated employees of the organization in the tax year and those who had been in that category since 2017 (“Covered Employees”).
Hospitals exempt from taxation under section 501(a) of the Internal Revenue Code of 1986 (the “Code”) and, in some cases, those owned by state or local governments are subject to this excise tax. However, compensation paid to licensed medical professionals for the performance of medical services does not count towards the $1 million trigger of the excise tax. Only the portion of a medical professional’s compensation for other services, such as research, teaching, or administrative or governance duties, are considered compensation for this purpose. Compensation paid by entities related to the tax-exempt or government entity, such as a for-profit or tax-exempt subsidiary or other affiliate, is included for this purpose.
Section 112020 of the Reconciliation Bill expands the scope of the excise tax by broadening the definition of Covered Employee to include all employees and former employees – not only those who are or have been one of the five most highly compensated. Tax-exempt and government hospitals entities and medical facilities affiliated with large hospital systems may be affected if they have large numbers of highly paid executives.
Tiered Increase on Private Foundation Investment Earnings
Hospitals, particularly those reliant on financial support from private foundations, also should be aware of the proposed increase in the tax on private foundation net investment income – as the increase will, potentially, leave private foundations with fewer assets to distribute to tax-exempt hospitals and other charities. Tax-exempt private foundations are currently subject to an excise tax of 1.39 percent on net investment income. Section 112022 of the Reconciliation Bill would increase the tax rate for private foundations with assets of $50 million or more. The increased rates will be tiered as follows:

2.78% if assets exceed $50 million but are less than $250 million;
5% if assets exceed $250 million but are less than $5 billion; and
10% if assets reach $5 billion.

Assets of related entities generally are included for this purposes — though assets will not be taken into account with respect to more than one private foundation. (The Reconciliation Bill does not address how assets will be divided when the aggregated group of related entities includes more than one private foundation.) Further, assets of related organizations that are not intended or available for the use or benefit of the private foundation are not taken into account unless the related organization is controlled by the private foundation. Notably, asset valuation would take on greater significance under a tiered system where a single dollar could double a private foundation’s tax rate. While the Reconciliation Bill states that asset value will be based on fair market value as of the close of the taxable year, numerous questions related to this calculation not addressed which may be problematic given that, if passed, this provisions will apply to taxable years beginning after the date of the enactment.
Parking and Transportation Benefits Included in UBTI
The Tax Cuts and Jobs Act, adopted in 2018, imposed the unrelated business income tax on parking and qualified transportation benefits provided to employees by tax-exempt employers. The provision was repealed retroactively the following year due to the complexity of calculating the amount to be included as unrelated business taxable income (“UBTI”) and uncertainty and confusion surrounding the application of the tax generally.
Section 112024 of the Reconciliation Bill would restore the requirement that tax-exempt organizations treat amounts paid and costs incurred to provide parking and qualified transportation benefits (defined in Code sections 132(f) and 132(f)(5)(C) respectively) as UBTI. Reinstating this requirement would increase the taxable income of tax-exempt hospitals and require them to update their accounting systems and administrative procedures to ensure compliance. As currently drafted, the provision does not address or resolve the complexities that led to its repeal in 2019.

50% of Professional Services Users Have Used AI Tools Not Authorized by Company

A new survey from Intapp, titled “2025 Tech Perceptions Survey Report,” summarizes findings from a survey of fee-earners that there has been a “surge in AI usage.” The professions surveyed included accounting, consulting, finance, and legal sectors. Findings include that “AI usage among professionals has grown substantially, with 72% using AI at work versus 48% in 2024.” AI adoption among firms increased to 56%, with firms utilizing it for data summarization, document generation, research, error-checking, quality control, voice queries, data entry, consultation (decision-making support), and recommendations. That said, the vast majority of AI adoption in the four sectors is in finance, with 89% of professionals using AI at work. Specifically, 73% of accounting professionals, 68% of consulting professionals, and 55% of legal professionals use AI.
A significant conclusion is that when firms do not provide AI tools for professionals to use, they often develop their own. Over 50% of professionals have used unauthorized AI tools in the workplace, which increases risk for companies. They are reallocating the time saved with AI tools by improving work-life balance, focusing on higher-level client work, focusing on strategic initiatives and planning, cultivating relationships with clients, and increasing billable hours.
The survey found that professionals want and need technology to assist with tasks. Only 32% of professionals believe they have the optimal technology to complete their job effectively. The conclusion is that professionals who are given optimal technology to perform their jobs are more satisfied and likely to stay at the firm, optimal tech “powers professional-and firm-success, and AI is becoming non-negotiable for future firm leaders.”
AI tools are rapidly developing and adopted by all industries, including professional sectors. As noted in the Intapp survey, if firms are not providing AI tools for workers to use to enhance their jobs, they will use them anyway. The survey reiterates how important it is to have an AI Governance Program in place to provide sanctioned tools for workers to reduce the risks associated with using unauthorized AI tools. Developing and implementing an AI Governance Program and acceptable use policies should be high on the priority list for all industries, including professional services.

Don’t Get Dog Tired: How to Respond to Employee Requests to Bring Service or Emotional Support Animals to Work as an Accommodation

A Maryland employer recently found itself in the Equal Employment Opportunity Commission’s (EEOC) doghouse when it allegedly summarily rejected an employee’s accommodation request to have his service animal come to work with him.
According to the EEOC’s press release concerning its recent lawsuit against the employer, the EEOC alleged that the employer, a car dealership, violated the Americans with Disabilities Act (ADA) by denying a disabled veteran’s request to bring a service dog to work to help manage his post-traumatic stress disorder (PTSD). The EEOC claimed the service animal was a medically necessary support to prevent debilitating panic attacks — a condition resulting from the employee’s combat service in Iraq.
Instead of engaging in the required interactive process to evaluate whether the request could be reasonably accommodated, the dealership summarily denied the request and offered no alternatives, according to the EEOC. The EEOC claims that lack of accommodation ultimately forced the employee to resign. Now, the company is facing a federal lawsuit seeking back pay, damages, and injunctive relief.
The case against the car dealership is a stark reminder that an employer’s obligations under the ADA may include permitting employees to bring their service animals – or even emotional support animals – to work with them as an accommodation for their disability(ies).
What the ADA Requires
The ADA prohibits discrimination based on disability in several areas, including employment. Title I of the ADA specifically requires covered employers (i.e., those with 15 or more employees) to provide reasonable accommodations to qualified individuals with disabilities. This applies both to applicants and current employees and includes the possibility of allowing service animals or emotional support animals as accommodations.
A service animal under the ADA is defined as an animal that is individually trained to do work or perform tasks for a person with a disability. These tasks must be directly related to the person’s disability, such as alerting them to a medical issue, retrieving items, or assisting with mobility. In contrast, emotional support animals (ESAs) — while they may offer therapeutic benefits — are not trained to perform specific tasks related to a disability.
Unlike in the public accommodation context under Title II (applicable to state and local governments) or Title III of the ADA (applicable to places of public accommodation), an employee’s request for an accommodation related to their emotional support animal is not unreasonable as a matter of law simply because it does not technically meet the definition of a “service animal.”
The Employer’s Role: The Interactive Process
When an employee requests an accommodation involving an animal, employers are required to engage in an interactive process — a collaborative dialogue to determine whether the request is reasonable and how it may be implemented. This process should be conducted in good faith and documented. If an employee requests that he be permitted to bring his service animal or emotional support animal to work with him as an accommodation for a medical issue, the employer’s obligation to engage in the interactive process under the ADA is triggered.
We see all too often employers get in trouble under the ADA because they summarily denied an accommodation request that they believed was not reasonable and/or would cause an undue hardship without any discussion with the employee who requested the accommodation.
When Can You Say No or Ask for More Information?
While the ADA encourages flexibility, employers are not required to allow animals in the workplace under every circumstance. If an employee requests to bring a service animal to work as an accommodation, and the employee is suffering from a non-obvious impairment, the employer is then permitted to request medical information from the employee to support the request for an accommodation.
The employer should also explore what accommodations may be effective to permit the employee to perform the essential functions of the employee’s position. A disabled employee is not entitled to their requested or preferred accommodation, only a reasonable one. That may involve working with the employee to find another accommodation that would be effective in accommodating the employee, rather than permitting the employee to bring their service or emotional support animal to work. If the EEOC’s allegations against the car dealership are accurate, then the car dealership should not have summarily rejected the employee’s service animal accommodation request but rather should have sought to work with the employee in the interactive process to find an accommodation that worked for both parties.
Lastly, employers are not legally required to provide an accommodation if it would pose an undue hardship on the employer, which is a difficult standard to meet, or if the accommodation would pose a direct threat to the health and safety of the employee or others. For example, although the case was not brought under the employment portion of the ADA, in November 2023, the Sixth Circuit Court of Appeals affirmed the grant of summary judgment to an employer who denied an employee’s request to bring her service animal to work because it caused a coworker and a patient to have allergic reactions and was therefore a direct threat to hospital safety.
What About My Place of Public Accommodation?
Employers operating places of public accommodation should also be familiar with their legal requirements under Title III of the ADA. Title III of the ADA, applicable to places of public accommodation, requires service animals (i.e., not emotional support animals) to be allowed in all areas of public access, unless (1) granting access would fundamentally alter the nature of the program; (2) the animal poses a direct threat to the health and safety of others; (3) the animal is out of control; or (4) the animal is not housebroken.
When it is not obvious what service an animal provides, only limited inquiries are permitted. Staff at places of public accommodation may ask only two questions: (1) Is the service animal required because of a disability, and (2) what work or task has the service animal been trained to perform?
On the other hand, staff at places of public accommodation cannot (1) ask a visitor what his or her disability is; (2) ask whether the person can demonstrate whether the service animal can perform the work or task; (3) require medical documentation; or (4) require a special identification card or training documentation for the service animal.
Although employees’ or visitors’ requests to bring a service or emotional support animal to your place of employment can be challenging, engaging in the required interactive process and knowing your legal requirements can help keep your workplace from going to the dogs, at least from a legal perspective.

2025 Review of AI and Employment Law in California

California started 2025 with significant activity around artificial intelligence (AI) in the workplace. Legislators and state agencies introduced new bills and regulations to regulate AI-driven hiring and management tools, and a high-profile lawsuit is testing the boundaries of liability for AI vendors.
Legislative Developments in 2025
State lawmakers unveiled proposals to address the use of AI in employment decisions. Notable bills introduced in early 2025 include:
SB 7 – “No Robo Bosses Act”
Senate Bill (SB) 7 aims to strictly regulate employers’ use of “automated decision systems” (ADS) in hiring, promotions, discipline, or termination. Key provisions of SB 7 would:

Require employers to give at least 30 days’ prior written notice to employees, applicants, and contractors before using an ADS and disclose all such tools in use.
Mandate human oversight by prohibiting reliance primarily on AI for employment decisions such as hiring or firing. Employers would need to involve a human in final decisions.
Ban certain AI practices, including tools that infer protected characteristics, perform predictive behavioral analysis on employees, retaliate against workers for exercising legal rights, or set pay based on individualized data in a discriminatory way.
Give workers rights to access and correct data used by an ADS and to appeal AI-driven decisions to a human reviewer. SB 7 also includes anti-retaliation clauses and enforcement provisions.

AB 1018 – Automated Decisions Safety Act
Assembly Bill (AB) 1018 would broadly regulate development and deployment of AI/ADS in “consequential” decisions, including employment, and possibly allow employees to opt out of the use of a covered ADS. This bill places comprehensive compliance obligations on both employers and AI vendors—requiring bias audits, data retention policies, and detailed impact assessments before using AI-driven hiring tools. It aims to prevent algorithmic bias across all business sectors.
AB 1221 and AB 1331 – Workplace Surveillance Limits
Both AB 1221 and AB 1331 target electronic monitoring and surveillance technologies in the workplace. AB 1221 would obligate employers to provide 30 days’ notice to employees who will be monitored by workplace surveillance tools. These tools include facial, gait, or emotion recognition technology, all of which typically rely on AI algorithms. AB 1221 also describes procedures and requirements for any analyzing vendor’s storage and usage of data collected by such a tool. AB 1331 more broadly restricts employers’ use of tracking tools—from video/audio recording and keystroke monitoring to GPS and biometric trackers—particularly during off-duty hours or in private areas.
Agency and Regulatory Guidance
CRD – Final Regulations on Automated Decision Systems
On 21 March 2025, California’s Civil Rights Council (part of the Civil Rights Department (CRD)) adopted final regulations titled “Employment Regulations Regarding Automated-Decision Systems.” These rules, which could take effect as early as 1 July 2025, once approved by the Office of Administrative Law, explicitly apply existing anti-discrimination law (the Fair Employment and Housing Act (FEHA)) to AI tools.
Key requirements in the new CRD regulations include:
Bias Testing and Record-Keeping
Employers using automated tools may bear a higher burden to demonstrate they have tested for and mitigated bias. A lack of evidence of such efforts can be held against the employer. Employers must also retain records of their AI-driven decisions and data (e.g., job applications, ADS data) for at least four years.
Third-Party Liability
The definition of “employer’s agent” under FEHA now explicitly encompasses third-party AI vendors or software providers if they perform functions on behalf of the employer. This means an AI vendor’s actions (screening or ranking applicants, for example) can legally be attributed to the employer—a critical point aligning with recent caselaw (see Mobley lawsuit below).
Job-Related Criteria
If an employer uses AI to screen candidates, the criteria must be job-related and consistent with business necessity, and no less-discriminatory alternative can exist. This mirrors disparate-impact legal tests, applied now to algorithms.
Broad Coverage of Tools
The regulations define “Automated-Decision System” expansively to include any computational process that assists or replaces human decision-making about employment benefits, which covers resume-scanning software, video interview analytics, predictive performance tools, etc.
Once in effect, California will be among the first jurisdictions with detailed rules governing AI in hiring and employment. The CRD’s move signals that using AI is not a legal shield and that employers remain responsible for outcomes and must ensure their AI tools are fair and compliant.
AI Litigation
Mobley v. Workday, Inc., currently pending in the US District Court for the Northern District of California, illustrates the litigation risks of using AI in hiring. In Mobley, a job applicant alleged that Workday’s AI-driven recruitment screening tools disproportionately rejected older, Black, and disabled applicants, including himself, in violation of anti-discrimination laws. In late 2024, Judge Rita Lin allowed the lawsuit to proceed, finding the plaintiff stated a plausible disparate impact claim and that Workday could potentially be held liable as an “agent” of its client employers. This ruling suggests that an AI vendor might be directly liable for discrimination if its algorithm, acting as a delegated hiring function, unlawfully screens out protected groups.
On 6 February 2025, the plaintiff moved to expand the lawsuit into a nationwide class action on behalf of millions of job seekers over age 40 who applied through Workday’s systems since 2020 and were never hired. The amended complaint added several additional named plaintiffs (all over 40) who claim that after collectively submitting thousands of applications via Workday-powered hiring portals, they were rejected—sometimes within minutes and at odd hours, suggestive of automated processing. They argue that a class of older applicants were uniformly impacted by the same algorithmic practices. On 16 May 2025, Judge Lin preliminarily certified a nationwide class of over-40 applicants under the Age Discrimination in Employment Act, a ruling that highlights the expansive exposure these tools could create if applied unlawfully. Mobley marks one of the first major legal tests of algorithmic bias in employment and remains the nation’s most high-profile challenge of AI-driven employment decisions.
Conclusion
California is moving toward a comprehensive framework where automated hiring and management tools are held to the same standards as human decision-makers. Employers in California should closely track these developments: pending bills could soon impose new duties (notice, audits, bias mitigation) if enacted, and the CRD’s regulations will make algorithmic bias expressly unlawful under FEHA. Meanwhile, real-world litigation is already underway, warning that both employers and AI vendors can be held accountable when technology produces discriminatory outcomes.
The tone of regulatory guidance is clear that embracing innovation must not sacrifice fairness and compliance. Legal professionals, human resources leaders, and in-house counsel should proactively assess any AI tools used in recruitment or workforce management. This includes consulting the new CRD rules, conducting bias audits, and ensuring there is a “human in the loop” for important decisions. California’s 2025 developments signal that the intersection of AI and employment law will only grow in importance, with the state continuing to refine how centuries-old workplace protections apply to cutting-edge technology.

Federal Court Vacated Gender Identity Portions of EEOC Harassment Guidance: Employer Uncertainty Remains

Takeaways

A federal court in Texas vacated the gender identity portions of the EEOC’s harassment guidance.
Uncertainty remains about issues like sex-designated restrooms and personal pronouns, but employers should continue to require employees to treat everyone with respect.
Employers also should consider carefully all accommodation requests and always engage in the interactive process.