Germany: Bureaucracy Out, Digital In? The New Government’s Plans for Labour and Employment
After long negotiations between the Christian Democrats and the Social Democrats, the parties agreed to establish a coalition to form the new government and Friedrich Merz was eventually elected on 6 May 2025 as new Chancelor of Germany. The coalition agreement published by the parties offers insight into their agenda. While not the primary focus of the agreement, there are several initiatives that aim to address certain labour and employment issues of relevance to the German market.
Streamlining the future of work
The coalition agreement outlines several key initiatives designed to enhance Germany’s competitiveness as a business hub, particularly by furthering digitalisation and streamlining bureaucracy. This commitment is also reflected in their plans for addressing L&E-related issues:
Promoting qualified immigration, particularly by digitalising processes in an effort to accelerate the recognition of professional qualifications from other countries
Further reducing the written form requirements in employment law, e.g. for contracts under the Part-Time and Limited Term Employment Act (Teilzeit- und Befristungsgesetz). For further details on the previous changes that took effect in January 2025, please refer to our recent blog post on the Bureaucracy Relief Act.
Digitalisation of collective labour rights
Collective labour law is particularly impacted by the effort to digitalise employment processes:
Enabling the use of online works council meetings (Betriebsratssitzung) and works meetings (Betriebsversammlung) as an alternative to in-person meetings
Implementing an optional digital voting process for the works council elections in 2026
Right to digital access, i.e. the right to use existing digital communication channels as an alternative to the notice board for advertising among others collective labour events and opportunities
Improving Flexibility
The new government is also seeking to implement a change to the Working Hours Act (Arbeitszeitgesetz) that would allow for maximum weekly instead of daily working hours. The current position is a daily maximum of eight (or in exceptions, ten) working hours.
To comply with the EU Working Time Directive, a maximum of 48 weekly working hours would generally be permitted. Exceptions would have to be made for certain workers, e.g., for those working nightshift. Additionally, a new concept is required to allow for the increase in flexibility while still ensuring the workers’ health, safety and adequate rest time. The coalition agreement does not provide any specifics as to how this will be achieved.
According to coalition parties, the adjustment is intended to enhance the compatibility of family and work. However, while the new regulations would not constitute an increase in weekly working hours, they are likely to benefit employers by allowing for more flexible schedules due to the decreased regulations. Examples could be agreeing on a permanent 4-day week with no reduction in pay or the option to offset short-term spikes in workload by ordering work for more than 10 hours a day. Once these changes are implemented, employee handbooks or works agreements referencing maximum working hours may require changes to comply with the new regulations.
The parties also plan to implement an obligation to digitally record working hours for employers. Following the implementation, a transition period will be established during which small and mid-size companies will be exempt from the new requirements. However, the obligation does not extend to trust-based working hours. Therefore, the decision to pursue this option remains at the discretion of employers.
A further initiative aimed squarely at increasing productivity is exempting overtime income of full-time employees from income tax. The definition of overtime in this context is any working time that exceeds 34 hours in the case of employees with a CBA, or 40 hours in the case of employees without a CBA.
If employers offer bonuses to part-time employees for increasing their working hours, these bonuses remain tax-free according to the parties’ plans. It remains to be seen how the coalition will deal with attempts to exploit such bonuses.
Allowing for a smooth transition after reaching retirement age
Many employers and employees are interested in maintaining their existing employment relationship after the employee reaches the standard retirement age. However, given the restrictions in the Part-Time and Limited Term Employment Act, most flexible solutions are not viable. In most cases, employers are currently only able to establish long-term employment relationships that do not adequately address the challenges associated with such employment.
The coalition agreement now includes a plan to lift the ban on pre-employment after reaching the standard retirement age in the Part-Time and Limited Term Employment Act. This would allow employees to remain in a familiar work environment while transitioning to a reduced or limited role within their organisation. Lifting the ban would be a welcome change for both parties to an employment relationship as it would provide reliable planning and legal certainty.
The effort to encourage individuals to remain in the workforce after reaching the standard retirement age also includes plans to exempt up to EUR 2,000 of such employees’ income from income taxes.
Strengthening unions
The coalition parties plan to make compliance with collective bargaining agreements a prerequisite for the awarding of federal contracts worth EUR 50,000 or more and for start-ups with “innovative services” in the first four years after their establishment for projects worth EUR 100,000 or more.
The parties also aim to enhance the appeal of trade union memberships by offering tax incentives for their members.
Other initiatives
While these initiatives are also part of the coalition agreement, how or even if they will be implemented is less certain for some than others:
Raising the minimum wage to EUR 15 per hour by 2026, which is explicitly labeled as something that may be feasible
Implementing a legal framework for AI at the workplace
Summary
The agreement encompasses a combination of measures that are favourable to employers and those that are principally intended to strengthen employee rights. However, none of them legally binding. Thus, the agreement is, in essence, a mere collection of potential initiatives. It is not feasible for it to be realised in its entirety within the next four years. Immediate action is therefore not required. Nevertheless, it provides the most comprehensive insight into the incoming government’s plans and as a result, what employers may expect in upcoming legislative periods.
UK Business Immigration – The Immigration White Paper is Here
The government’s long awaited White Paper Restoring Control over the Immigration System has been published today. As part of the Home Secretary’s foreword in the Paper, she states that the plan will “restore order, control and fairness to the system, bring down net migration and promote economic growth”. The proposals signal a marked tightening of the UK’s approach to both legal and illegal migration, or so it says, as the Paper lacks much of the detail which would be required to substantiate that.
It is not yet clear how or when these new measures will be introduced (they are described as ‘plans’ throughout the Paper). As ever, the devil will be in the detail but we have summarised the key points likely to affect UK businesses, with our commentary below:
Skilled Worker skill threshold: This will increase from RQF 3 (A level) to RQF 6 (Graduate level) or above. This will mean that the number of eligible occupations will be reduced by around 180. This will not affect existing Skilled Worker visa holders who will continue to be able to renew their visa, change employment and take supplementary employment, in currently eligible occupations below RQF 6. However, applicants from overseas or those applying to switch from other routes will have to meet the higher skills threshold. We are also told that salary thresholds will rise but without any detail on the level of increase. These measures could be introduced relatively quickly so employers intending to sponsor lower skilled workers (including existing employees with Graduate visas) should consider submitting applications sooner rather than later.
Temporary Shortage List: Occupations with a skills requirement of RQF 3-5 (below degree level) will only qualify for sponsorship on a time limited basis where they are included on a new Temporary Shortage List. Occupations will only be included on the list where
there have been long term shortages,
the Migration Advisory Committee has advised it is justified,
there is a workforce strategy in place, and
employers seeking to recruit from abroad are committed to playing their part in increasing recruitment from the domestic workforce.
In this sense, it appears that the requirement to carry out additional training to be able to use the Skilled Worker route will not apply to an employer sponsoring roles skilled at RQF 6 or above.
Immigration Skills Charge: this is currently £1,000 (for medium/large sponsors) or £364 (small sponsors) per year of sponsorship and is paid up front at the time of the application, and will be increased by 32%. Again, this could be introduced at short notice so employers should consider accelerating planned applications to beat the increase deadline.
English Language requirement for visa applications:
Increased language requirements for Skilled Workers and workers where a language requirement already applies from B1 to B2 (Independent User) levels, in accordance with the Common European Framework for Reference for Languages (CEFR).
A new English language requirement for all adult dependants of workers and students at level A1 (Basic User) to align to spousal and partner routes, likely increasing this requirement over time.
Requirements to demonstrate progression to level A2 (Basic User) for any visa extension, and B2 (Independent User) for settlement.
Increase existing requirements for settlement across the majority of immigration routes from B1 to B2 (Independent User).
For employers hiring applicants whose first language is not English, this may mean longer lead-in times before submitting applications and/or dependants applying to join the main applicant in the UK at a later date once their English language ability meets the required threshold.
Graduate visas: these currently allow international students who have completed an eligible higher education qualification in the UK to work for any employer in any role, and will be reduced from 2 years to 18 months.
Compliance: the Paper talks in general terms about innovative financial measures, penalties or sanctions, measures which will support compliance with visa conditions, the establishment of the Fair Work Agency to co-ordinate stronger action against exploitative employers, tougher rules on sponsors flouting employment law, strengthening the civil penalty regime, increasing resources into preventing illegal working as well as using visas and modern biometric technology to support raids. However, there is no detail about what any of this will mean in practice.
Earned Settlement: the qualifying period for settlement for Skilled Worker visa holders will increase from five to ten years, although individuals will also have the opportunity to reduce that period through contributions to the UK economy and society. The government will consult on these changes later this year so it unlikely that anything will change in the short term.
Social Care visa route: This will be closed to new applications from abroad. For a transition period until 2028, permit visa extensions and in-country switching for those already in the country with working rights will be permitted but this will be kept under review.
Labour Market Evidence Group: We are told that the group “will focus on sectors / occupations which are central to industrial strategy, which currently have high levels of reliance on migration for their workforce, or which are anticipated to in future and will make recommendations about sectors or occupations where workforce strategies are needed, or where the labour market is currently failing” and “drawing upon the evidence base gathered by the LME Group, key sectors where there are high levels of recruitment from abroad will need to produce, or update, a workforce strategy which relevant employers will be expected to comply with. This will detail steps to be taken on skills, training, and broader conditions, as well as engagement of the economically inactive domestic labour force”.
Global talent: the Paper talks in general terms about: “ensuring that the very highly skilled have opportunities to come to the UK and access our targeted routes for the brightest and best global talent” and “Increasing the number of people arriving on our very high talent routes, alongside faster routes for bringing people to the UK who have the right skills and experience to supercharge UK growth in strategic industries” and “a targeted and capped expansion of the HPI route, looking to double the number of qualifying institutions, whilst maintaining the focus of the route on individuals that will have the most benefit to the UK workforce and ensuring that any necessary safeguards are in place” but provides no detail beyond that to be of any material assistance to UK employers at this stage.
What action should employers take?
Although some of the planned changes will be subject to consultation via the Migration Advisory Committee and/or require new legislation, others could be introduced within a matter of weeks or months through changes to the Immigration Rules. UK businesses reliant on employing overseas workers should therefore:
Review the skill level of their sponsored workforce (both existing and prospective) and consider whether any applications should be submitted earlier than originally planned.
Review recruitment budgets and forecasts to take into account the increase in the Immigration Skills Charge and the ongoing cost of maintaining a Skilled Worker visa for 10 years rather than 5.
Do You Really Want to Be an ERISA Fiduciary?
Two recent class action lawsuits charging a breach of fiduciary duty under the Employee Retirement Income Security Act (ERISA) have increased the stakes and raised important considerations regarding a plan fiduciary’s duty of loyalty/prudence and engagement in prohibited transactions. This follows a string of cases over the years that have expanded the responsibilities of ERISA fiduciaries in the context of the use and investment of retirement plan assets.
Quick Hits
The U.S. District Court for the Northern District of Texas recently ruled that an employer breached a duty of loyalty to plan participants by permitting an investment manager to invest retirement assets in holdings based on nonpecuniary environmental, social, and governance (ESG) factors. A major factor in the case was that the CFO of the employer also acted as the fiduciary overseeing the plan asset investment managers.
The Supreme Court of the United States recently ruled in another case that involved allegations of prohibited transactions under ERISA, 29 U.S.C. § 1106(a)(1)(C). The main issue was whether a plaintiff is required to plead facts addressing the elements of a prohibited transaction exemption under 29 U.S.C. § 1108(b)(2)(A) in order to state a viable prohibited transaction claim under 29 U.S.C. § 1106(a)(1)(C).
First Case
In a recent class action filed in the Northern District of Texas against an employer and its fiduciary committee responsible for several 401(k) plans, the plaintiffs alleged the fiduciaries had breached their duties to the plans when investing plan assets in ESG investments. The court ruled that there was no breach of the duty of prudence but found that there had been a breach of the duty of loyalty.
Duty of Prudence
The court concluded that there was no breach of the duty of prudence concerning the selection and retention of investment managers. According to the ruling and ERISA’s relevant provisions, fiduciaries are required to perform their duties with “the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.” 29 U.S.C. § 1104(a)(1)(B).
Most prudence claims are process-focused. A key factor in the court’s decision was the robust process the employer maintained for monitoring, selecting, and retaining managers in the plans’ core investment lineup. The court found the employer and fiduciary committee’s method to be thorough and well-documented. Additionally, the court viewed favorably the defendants’ efforts to mitigate risks by hiring an external, industry-leading consultant to continuously monitor all aspects of the plans.
The court emphasized that the duty-of-prudence analysis is “inherently comparative” and objective, relying on how fiduciaries should act “consistent with prevailing industry standards.” This comparative approach underscores the importance of adhering to industry norms and best practices in fiduciary decision-making.
Duty of Loyalty
In contrast to the first ruling, the court determined that there had been a breach of the duty of loyalty because the employer’s interests were intertwined with the investment manager’s. ERISA’s duty of loyalty is the “highest known to law,” requiring fiduciaries to act solely and exclusively in the best interests of the plan’s participants and beneficiaries. The court ruled that this standard had not been met.
A significant concern for the court was the undue influence the investment manager had over the employer, evidenced by its ownership of approximately $400 million of the employer’s fixed income debt and 5 percent of the employer’s stock.
Another critical issue identified by the court was the dual role of the employer’s chief financial officer (CFO), who managed the day-to-day operations of the investment manager while also holding a fiduciary duty to the employer as an officer of the company. These conflicting interests were exacerbated by the CFO’s admission that the relationship between the employer and the investment manager regarding ESG investments was circular. The court found that these overlapping interests and roles regarding plan and employer compromised the fiduciary duty of loyalty, highlighting the need for clear and uncompromised dedication to the best interests of plan participants and beneficiaries.
While the court found that there had been a breach of the duty of loyalty, it did not outright prohibit plan fiduciaries from looking at ESG factors for investment plans. In State of Utah v. Micone (February 14, 2025), the U.S. District Court for the Northern District of Texas upheld a 2022 U.S. Department of Labor regulation allowing fiduciaries to consider ESG factors if the factors served as a tiebreaker between equally beneficial financial options. The court emphasized that financial benefits must be the sole and primary consideration, with ESG factors considered only after confirming the financial benefits of an investment for the plan beneficiaries.
Second Case
The Supreme Court of the United States reviewed a case brought by employees who participated in a university’s 403(b) plans from 2010 to 2016. Among other claims, the employees alleged that payments made to the plan’s service providers were prohibited transactions under ERISA, 29 U.S.C. §1106, due to excessively high recordkeeping fees. The district court dismissed the employees’ prohibited transactions claim, and the U.S. Court of Appeals for the Second Circuit affirmed, primarily based on the courts’ conclusion that the employees were also required to plead facts supporting the nonapplication of relevant prohibited transaction exemptions in §1108.
Before the Supreme Court, the employees argued that §1106(a)(1)(C) of ERISA prohibits all transactions between plan fiduciaries and service providers and that the exemptions in §1108 are affirmative defenses that a defendant must plead and prove. The fiduciaries argued that plaintiffs must also plead and prove that the exemption facts negate application of the §1108 exemptions.
On April 17, 2025, the Supreme Court reversed the Second Circuit’s decision. The Court held that §1108 exemptions are affirmative defenses and that “defendant fiduciaries bear the burden of pleading and proving that a §1108 exemption applies to an otherwise prohibited transaction under §1106.” This holding drastically reduces the requirements for plaintiffs to plausibly allege that a prohibited transaction occurred, and it will likely expose fiduciaries to greater potential liability and expense because it will lead to more prohibited transaction claims getting past the pleading stage, forcing defendants to engage in expensive discovery.
Next Steps
Plan sponsors may want to review the makeup of their fiduciary committees to ensure they do not include high-ranking members who have a conflict of interest to the employer stemming from their duty of loyalty to the company as an officer or director. Instead, plan sponsors may want to consider appointing individuals who, while perhaps holding a lower rank such as a manager, are still knowledgeable about investments to make prudent choices for the plan.
Plan sponsors may also want to ensure that their committee delegation is properly documented, and that the fiduciary committee is actively fulfilling its responsibilities. It is crucial that the committee members possess a thorough understanding of their responsibilities, including investments and fees associated with the plan.
When selecting a plan vendor, a plan sponsor may want to verify whether the vendor holds a significant ownership stake (e.g., at least 5 percent) in the employer and make note of other external influences that may sway investment decisions.
Finally, ERISA requires plan fiduciaries to conduct proper due diligence of the investments, their returns over time, and the fees being paid by the plan as compared to other similarly situated plans.
The State of Employment Law: Ohio’s Unusual Constitutional Minimum Wage Protections
In this series, we will explore some of the ways states vary from one another in their employment laws.
State minimum wage laws are common. Every state except Louisiana, Mississippi, and South Carolina has a law setting a minimum wage. Colorado, Florida, and Ohio take this a step further by including minimum wage provisions in their state constitutions. Of those three states, Ohio stands apart with some relatively extensive requirements for minimum wage record keeping.
Pursuant to Article II, Section 34a of Ohio’s Constitution, employers must maintain records of each employee’s name, address, occupation, pay rate, hours worked for each day worked, and total amount paid to the employee. Employers are responsible for maintaining such records for at least three years following the last date on which each employee was employed. Any employee has the right to request these records from their employer (and, in my experience, Ohio plaintiff’s lawyers frequently request this information when they send demand letters). If an employer has failed to maintain the required information, an employee has a private right of action and can recover equitable and monetary relief.
Ohio is generally regarded as a fairly pro-employer state, and it does relatively little to regulate employment relationships compared to other states. Consequently, it is surprising that Ohio, of all states, has such a constitutional protection related to its minimum wage. Employers that do business in Ohio should be aware of this constitutional requirement and take care to preserve the required records for current and recently-separated employees.
Minnesota Employment Legislative Update 2025, Part II: It’s Déjà Vu—Lengthy Omnibus Bills, Buried Employment Law Changes
Last year’s Minnesota legislative session resulted in a 1,000-page omnibus bill that included significant changes to the state’s labor and employment laws. As this year’s legislative session comes to a close, we predict a range of developments in employment and labor-related laws to emerge in omnibus bills or to be passed last minute due to the existing legislative divide. This means a repeat of lengthy omnibus bills with uncertainty about what will make it to the governor’s desk after the close of session on May 19, 2025.
Quick Hits
Minnesota’s legislative session will conclude with an omnibus bill introducing significant proposed changes to labor and employment laws, with more developments expected by the end of the session on May 19, 2025.
A provision in the omnibus bill would mandate that Minnesota employers provide a thirty-minute meal break for employees working six or more consecutive hours and a fifteen-minute rest break every four hours, with penalties for noncompliance.
SF 3045 / HF 2783 would prohibit employers from retaliating against employees for their political contributions or activities, with violations classified as gross misdemeanors and provisions for civil action.
Omnibus Budget and Policy Bills
Several omnibus bills have emerged that may impact employers. An omnibus bill is a large bill generally made up of numerous smaller bills on the same broad topic. Often, the smaller bills are heard in committee and then laid over for possible inclusion in the omnibus bill rather than passing each bill separately.
Senate File (SF) 1832 / House File (HF) 2440
SF 1832 passed in the Senate and currently sits with the House of Representatives for comparison with HF 2440.
Meal and Rest Breaks
The legislature snuck in a provision to this omnibus bill that would impact Minnesota’s meal and rest break laws. Minnesota meal and rest break statutes are currently vague, stating that employers must provide employees working eight or more hours with “sufficient time” to eat a meal and with “adequate time” to use a restroom every four hours. The omnibus bill would:
allow each employee working six or more consecutive hours a meal break of at least thirty minutes; and
allow each employee a rest break of at least fifteen minutes or enough time to utilize the nearest convenient restroom, whichever is longer, within each four consecutive hours.
If an employer fails to provide said meal and rest breaks, the employer would be liable to the employee for the meal or rest break time that should have been provided at the employee’s regular rate of pay, plus an additional equal amount as liquidated damages. Additionally, the commissioner could assess a penalty of up to $1,000 per employee per day during which meal or rest breaks are not provided as required.
Should this bill pass, employers may want to review their meal and rest break policies and make appropriate changes.
Employer Unemployment Penalties
This provision of the omnibus bill would increase penalties for employers that misrepresent or make false statements to the state’s unemployment insurance program, which is administered by the Minnesota Department of Employment and Economic Development, to 100 percent instead of the current 50 percent of the amount of overpaid benefits to the applicant, the amount of benefits that the applicant would have been entitled to, or the amount of the special assessment.
Commissioner’s Injunctive Relief
This provision of the omnibus bill would grant the commissioner of the Minnesota Department of Labor and Industry the power to not only bring civil actions but also seek an “order enjoining and restraining violations” against employers that violate various labor and employment statutes.
SF 2370 / HF 1615
The Senate passed a version of this omnibus bill, but the House amended it. The revised omnibus bill will be headed back to the Senate.
Namely, a provision of this omnibus bill seeks to strengthen tribal medical cannabis programs, including by expanding the nondiscrimination provisions to include “the person’s status as an individual enrolled in the registry program” or “the person’s status as a Tribal medical cannabis program patient.”
Amongst other provisions, the omnibus bill prohibits retaliation “against a patient” who asserted rights or sought remedies under the law and provides for injunctive relief. If the omnibus bill passes, Minnesota employers would be required to provide “written notice to a patient at least 14 days before […] tak[ing] an [adverse] action.” The written notice would need to cite the specific federal law or regulation the employer believes would be violated if they fail to take action.
SF 3045 / HF 2783
SF 3045 had its third reading and was passed to the House for reading and comparison to HF 2783. Once received by the House, the omnibus bill was amended and passed. However, the Senate did not concur with the House bill amendment and requested a conference committee be convened. On May 5, 2025, both House and Senate conference committees were convened to compromise on the language of the bill. If they reach a compromise, their agreement must be passed by both bodies before it can be sent to the governor.
Notably, SF 3045 / HF 2783, with limited exceptions, would explicitly prohibit employers (defined as a person or entity employing one or more employees) from economic reprisal against individuals due to their political contributions or political activity, “including for becoming a candidate or local candidate for elected public office,” or due to “refusal to communicate with public or local officials to influence a decision about a legislative or administrative action or the official action of a political subdivision.” Violation of this section would be considered a gross misdemeanor, and the statute would provide for a right to bring a civil action for damages, injunctive relief, costs, and attorney fees, and any other just and equitable relief, including reinstatement.
New Bill Signed Into Law
Yesterday, Governor Tim Walz signed HF 688 / SF 1317 into law. This law affords full and equal access to all housing accommodations to individuals actively training service dogs. Previously, these accommodations were available only to individuals with disabilities who had service dogs. The new law would allow individuals training service dogs not to pay extra fees for the dogs in training. These individuals would still be liable for any damage done to the premises by the service dog in training. Notably, this protection would only be limited to service dogs in training under the supervision of an organization accredited by Assistance Dogs International or the International Guide Dog Federation. The law specifies that landlords or boards of homeowners’ associations may require written certification from the supervising organization.
Beltway Buzz, May 9, 2025
The Beltway Buzz™ is a weekly update summarizing labor and employment news from inside the Beltway and clarifying how what’s happening in Washington, D.C., could impact your business.
DOL to Rescind 2024 Independent Contractor Regulation? The U.S. Department of Labor (DOL) is backing away from the Biden-era independent contractor regulation finalized in January 2024. More specifically, the DOL’s Wage and Hour Division (WHD) has issued guidance (Field Assistance Bulletin No. 2025-1, “FLSA Independent Contractor Misclassification Enforcement Guidance”) instructing its field staff to “no longer apply the 2024 Rule’s analysis when determining employee versus independent contractor status in FLSA investigations.” The DOL will be taking this position while it reconsiders the 2024 Rule, “including whether to rescind the regulation.” In the meantime, DOL investigators are instructed to rely on Fact Sheet #13: Employment Relationship Under the Fair Labor Standards Act (FLSA). Finally, the guidance notes that “the 2024 Rule remains in effect for purposes of private litigation.” The first Regulatory Agenda of the second Trump administration—expected sometime in June or July of this year—should provide stakeholders with a clearer picture of the DOL’s intentions regarding a potential rescission of the 2024 independent contractor rule.
Bipartisan Paid Family Leave Bill Introduced in House. In January 2024, the Buzz discussed the U.S. House of Representatives’ bipartisan Paid Family Leave Working Group’s four-pillar paid leave framework. This week, Representatives Chrissy Houlahan (D-PA) and Stephanie Bice (R-OK), who co-chair the working group, introduced the More Paid Leave for More Americans Act. The legislation combines two pillars of their framework, the Paid Family Leave Public Partnerships Act and the Interstate Paid Leave Action Network Act. Here is how it would work:
Paid Family Leave Public Partnerships Act. This portion of the bill would offer DOL grants to states that establish paid family leave programs. To be eligible for such grants, states would be required to:
provide eligible employees with at least six weeks of paid leave for the birth or adoption of a child;
provide wage replacement between 50 percent and 67 percent based on employees’ income, with a cap equal to 150 percent of the state’s average weekly wage;
enter into a partnership with a private entity—such as an insurance carrier—to administer the benefits; and
participate in the to-be-created Interstate Paid Leave Action Network (I-PLAN).
Interstate Paid Leave Action Network Act (I-PLAN Act). This aspect of the More Paid Leave for More Americans Act would help states reduce the variances between the programs that have led to the current “patchwork” of paid leave compliance requirements. The I-PLAN would be tasked with establishing an agreement that will “[c]reate a single policy standard with respect to all participating States to facilitate easier compliance with and understanding of paid leave programs across States[.]” In other words, the I-PLAN aspect of the bill will strive to seek uniformity between states on key paid family leave terms such as employee eligibility, family member, intermittent leave, etc.
The More Paid Leave for More Americans Act still has a long way to go before becoming law. But the bipartisan nature of the bill is an optimistic sign for its supporters.
EEOC Personnel News. Recent nominations and hiring decisions shed some light on where the U.S. Equal Employment Opportunity Commission (EEOC) is heading from a policy perspective:
Commissioner Appointment. President Donald Trump nominated Brittany Bull Panuccio to serve on the Commission. Panuccio is currently an assistant U.S. attorney in Florida and previously served as an attorney at the U.S. Department of Education. If confirmed, Panuccio would join Acting Chair Andrea Lucas to form a Republican majority on the Commission. Current Commissioner Kalpana Kotagal is the only Democrat on the Commission. Further, Panuccio’s confirmation would return a functioning quorum to the Commission and would likely allow Acting Chair Lucas to move forward with her regulatory—and subregulatory—agendas. D’Ontae D. Sylvertooth and Sean J. Oliveira have the details.
Chief of Staff. Acting Chair Lucas has selected Shannon Royce as her chief of staff. Royce is an attorney and former president of the Christian Employers Alliance. Lucas has announced that one of her top priorities is “protecting workers from religious bias and harassment.”
Bill Would Provide Tax Break on Overtime Pay. The Buzz has discussed President Trump’s desire to limit the taxes that workers pay on tips and overtime earnings. Bills have already been introduced in the U.S. Congress to address the “no tax on tips” issue. This week, Republican legislators turned to the overtime issue by introducing the Overtime Wages Tax Relief Act. The bill would allow workers to deduct up to $10,000 ($20,000 for those filing jointly) of income derived from working overtime for each taxable year. The deduction begins to phase out when income reaches $100,000 for individuals or $200,000 for married couples. Republicans may try to include this bill in their larger reconciliation tax reform package.
OFCCP Layoffs Arrive. President Trump’s rescission of Executive Order 11246 eliminated the affirmative action requirements for federal contractors, and, in turn, most of the operations of the Office of Federal Contract Compliance Programs (OFCCP). Many OFCCP employees were subsequently offered a deferred resignation option or placed on administrative leave. This week, most of OFCCP’s remaining employees received notice that they would be laid off, effective June 6, 2025. According to reports, this is more than 300 employees (according to its fiscal year 2025 budget justification, OFCCP has about 490 employees). OFCCP will reportedly maintain one regional office in Dallas, Texas.
A Pope-ular Guest. At the Buzz, no news is more significant than labor and employment policy developments. But for the rest of the world—particularly for Catholics—the selection of Chicago-born Cardinal Robert Prevost as Pope Leo XIV was the news of the week. Some American politicians, such as Senators Mark Kelly (D-AZ) and John Hoeven (R-ND), expressed excitement and optimism about the selection of an American-born Pope. But at this early hour, there aren’t any plans to invite the new pontiff to address Congress. Indeed, it is a rare event. On September 24, 2015, Pope Francis delivered an address to a joint session of Congress, the only Pope to ever do so. It was probably no coincidence that three of the most powerful politicians at the time—Vice President Joe Biden, Speaker of the House John Boehner, and House Democratic Leader Nancy Pelosi—were all Catholic.
NYC Employers Reminded to Post Lactation Accommodation Policy
New York City employers are reminded that they are now required to physically and electronically post a copy of their written lactation accommodation policy.
As we previously reported, Local Law 109 – which became effective on May 8, 2025 – amends the New York City Human Rights Law’s existing obligations on employers to implement and distribute a written lactation accommodation policy. The amendment requires that employers both distribute the written policy to employees “at the commencement of employment,” as well as make the policy “readily available to employees by, at a minimum, conspicuously posting such policy at an employer’s place of business in an area accessible to employees and electronically on such employer’s intranet, if one exists.”
In addition, the amendment incorporates the recent change to New York State law requiring the first 30 minutes of each lactation break be paid. The amendment requires that a compliant lactation accommodation policy now include a statement that the employer will provide 30 minutes of paid break time for lactation purposes and permit an employee to use existing paid break or meal time for lactation time needed in excess of 30 minutes.
NYC employers should take immediate steps to ensure compliance with these new requirements.
McDermott+ Check-Up: May 9, 2025
THIS WEEK’S DOSE
Republicans Advance Reconciliation Debate. Work continued behind the scenes among Republicans to reach consensus on Medicaid policies, with a House Energy and Commerce Committee markup announced for May 13, 2025.
Senate Committees Hold HHS Nomination Hearings, President Trump Withdraws Surgeon General Nomination. Committees considered the nominations of James O’Neill for US Department of Health and Human Services (HHS) deputy secretary and Gary Andres for HHS assistant secretary for legislation. President Trump withdrew Janette Nesheiwat’s nomination for surgeon general and nominated Casey Means in her place.
President Trump Signs Additional Healthcare EOs. The executive orders (EOs) seek to increase domestic drug manufacturing, as President Trump continues to hint at forthcoming pharmaceutical tariffs, and halt federal funding of certain infectious agents research. The president also previewed a forthcoming EO to tie Medicare drug pricing to lower prices abroad, often called the “most favored nation” policy.
Administration Defends FDA in Mifepristone Case. The decision may reflect efforts to protect the executive branch from state intervention.
CONGRESS
Republicans Advance Reconciliation Debate. After key House reconciliation markups expected to occur this week were postponed, Republicans held internal meetings to hash out Medicaid, nutrition, and tax policies to be included in reconciliation. Moderate Republicans continued to urge the House Energy and Commerce Committee not to enact Medicaid policies that could cut coverage or reduce funding for the expansion population. Policies rumored for potential inclusion include work requirements for able-bodied adults, repeal of Biden-era regulations, restrictions on state coverage of undocumented immigrants, and increased eligibility checks. Conservative Republicans led by House Budget Committee Vice Chair Smucker (R-PA) sent a letter to Speaker Johnson stating that if net savings targets aren’t met, tax cuts must be reduced. Senate Majority Leader Thune (R-SD) and Senate Finance Committee Chair Crapo (R-ID) also joined the debate, stating that the House is not pursuing enough spending cuts, including in Medicaid.
The Energy and Commerce Committee announced its markup for May 13, 2025, at 2:00 pm EDT. It is important to remember that just because a markup is announced, it doesn’t mean it has to happen. If it goes forward as planned, the markup will likely last all evening and into May 14, 2025. Language will need to be released by 2:00 am EDT on Monday. While nothing is officially off the table, Republicans do not appear to have support for policies that target states, such as provider taxes, state directed payments, or a cap on the expansion population. Once bill text and a Congressional Budget Office (CBO) analysis are released, we will see if the Energy and Commerce Committee has been able to meet its $880 billion savings target. Democrats will focus on offering amendments to try to undermine the legislation.
As Democrats work to prevent significant Medicaid cuts from moving forward, the CBO, in response to a request from Senate Finance Committee and House Energy and Commerce Committee Ranking Members Wyden (D-OR) and Pallone (D-NJ), released savings estimates for five Medicaid policies that have been under consideration in reconciliation, along with estimates of Medicaid coverage losses attached to those policies. The policies scored include reducing the expansion population federal match, limiting state provider taxes, capping federal spending for all enrollees, capping federal spending for the expansion population, and repealing the Biden-era eligibility and enrollment final rule. CBO previously scored most of these policies, but the figures are now updated. Estimates of Medicaid coverage losses for each proposed policy range from 2.3 million to 8.6 million people.
Senate Committees Hold HHS Nomination Hearings, President Trump Withdraws Surgeon General Nomination. Both the Senate Finance Committee and the Health, Education, Labor, and Pensions (HELP) Committee held hearings for key HHS personnel. The Finance Committee considered the nominations of James O’Neill to be HHS deputy secretary and Gary Andres to be HHS assistant secretary for legislation. Republicans on the committee focused mostly on nominees’ views on rural health and pharmacy benefit managers (PBMs) and their previous experiences at HHS and on Capitol Hill. Democrats questioned nominees on the measles outbreak, HHS staffing cuts, and recent statements made by Secretary Kennedy regarding autism. Sen. Cassidy (R-LA) similarly expressed concerns about HHS’s restructuring and the agency’s stance on vaccines.
The evening before the HELP Committee hearing to consider O’Neill for deputy secretary and Janette Nesheiwat, MD, for surgeon general, President Trump abruptly withdrew Nesheiwat’s nomination and instead named Casey Means, MD, for surgeon general. Means is the sister of Calley Means, special government employee for HHS. Both Casey and Calley Means have worked closely with HHS Secretary Kennedy for years and were actively involved in his presidential campaign. The committee will consider Means’ nomination at a later date. During the HELP Committee nomination hearing, Republicans focused on the importance of regulatory oversight and safety of drug approvals and expressed interest in preventing the misuse of artificial intelligence (AI). Chair Cassidy continued his focus on the measles outbreak from earlier in the week and asked questions about vaccine mandates for immigrants. Democrats focused on the impact HHS staffing and funding reductions will have on programs, including Medicaid and Head Start.
ADMINISTRATION
President Trump Signs Additional Healthcare EOs. The EO “Regulatory Relief to Promote Domestic Production of Critical Medicines” aims to make the United States more competitive in producing safe and effective medicines. It directs the US Food and Drug Administration (FDA) and the US Environmental Protection Agency, within 180 days, to accelerate domestic pharmaceutical manufacturing inspections and approvals of new and expanded manufacturing capacities. It also directs the FDA to advance improvements within 90 days to the inspection regime of foreign manufacturing facilities involved in the supply of US medicines, funded by increased fees on foreign manufacturing facilities. Read the fact sheet here. The day after the EO was issued, the FDA announced it would increase unannounced inspections at foreign food and drug manufacturing facilities.
The gain-of-function research EO “Improving the Safety and Security of Biological Research” directs federal agencies to halt funding of dangerous gain-of-function research, as defined in the EO, conducted in foreign countries. It directs HHS to include new enforcement terms in research contracts or grants, including a requirement that recipients do not operate or fund dangerous gain-of-function research in foreign countries, with revocation of funding and a ban on HHS funding for up to five years for violations. The Office of Science and Technology Policy will track domestic gain-of-function research under the EO. Read the fact sheet here.
The administration announced that another healthcare-related EO is expected as soon as next week that will pursue “most favored nation” pricing for prescription drugs in the Medicare program. This is a policy the president pursued in his first term and recently promoted to Congress for inclusion in reconciliation for Medicaid.
COURTS
Administration Defends FDA in Mifepristone Case. Idaho, Kansas, and Missouri brought the lawsuit in Texas and challenged the FDA’s review and approval of mifepristone, an abortion medication. In 2024, the US Supreme Court ruled that the original plaintiffs in the case – doctors and medical associations – lacked standing to bring the case. The Biden administration previously defended the FDA in this new iteration of the case, a posture the Trump administration is continuing. In a filing to the Texas court, the Trump administration alleged that the plaintiff states lack standing and requested that the case be dismissed. In other words, the administration is avoiding the merits of the case and pursuing dismissal on procedural grounds. Some commenters suggest that this action is intended to more broadly protect federal authority, although during his presidential campaign, President Trump said that he wouldn’t restrict access to abortion medications.
QUICK HITS
HHS OCR Sends Letter on Race-Based Discrimination to Medical Schools. The HHS Office for Civil Rights (OCR) issued a letter stating that medical schools cannot use race-based criteria or racial stereotypes in admissions, campus life, or hospital operations. OCR notes such actions violate Section 1557 of the Affordable Care Act, Title VI of the Civil Rights Act, and the Equal Protection Clause of the US Constitution. Read the press release here.
ACL Announces $1 Billion in OAA Funding. The Administration for Community Living (ACL) released $1.1 billion in state funding through Older Americans Act (OAA) programs to complete fiscal year (FY) 2025 funding.
NIH, CMS Announce Autism Research Partnership. The National Institutes of Health (NIH) and Centers for Medicare & Medicaid Services (CMS) partnership continues HHS’s focus on researching the root causes of autism. CMS will provide data on Medicare and Medicaid enrollees with autism, in compliance with privacy laws, to the NIH to examine trends, health outcomes, access to care, and the economic burden of autism.
FTC, DOJ Continue Anticompetitive Regulation Emphasis. The Federal Trade Commission (FTC) and US Department of Justice (DOJ) sent a letter to federal agencies instructing them to develop a list of regulations that reduce competition. The action follows an FTC request for information on anticompetitive regulations, with comments due May 27, 2025.
FDA Will Adopt AI in Review Process by June 2025. FDA completed its first AI-assisted scientific review pilot and aims to accelerate review processes by having all centers integrate AI by the end of June 2025.
Trump Administration Fires Acting FEMA Administrator After Congressional Hearing. Acting Federal Emergency Management Agency (FEMA) administrator Cameron Hamilton testified before the House Appropriations Committee that FEMA should not be eliminated, after which he was fired. The Trump Administration aims to eliminate or reduce FEMA and shift disaster response to states.
BIPARTISAN LEGISLATION SPOTLIGHT
Sens. Hawley (R-MO) and Welch (D-VT) reintroduced the Fair Prescription Drug Prices for Americans Act, which was also introduced in the 118th Congress. The legislation would prohibit pharmaceutical companies from setting drug prices above the international average, and violating companies would be subject to civil monetary penalties. Read the press release here. This topic is receiving increased attention from the Trump administration, as noted above.
NEXT WEEK’S DIAGNOSIS
HHS Secretary Kennedy will be on Capitol Hill on May 14, 2025, testifying in front of the House Appropriations Committee and the Senate HELP Committee on the FY 2026 skinny budget proposal released last week. It will be his first appearance in Congress as HHS secretary. Democrats will likely question Kennedy on his response to the measles outbreak and HHS restructuring and reductions in force. HELP Committee Chair Cassidy may echo some of those concerns, as he did in the HHS nomination hearings this week, and may continue his focus on vaccines. On May 13, 2025, the Senate Judiciary Committee will examine pharmacy benefit managers, and the House Energy and Commerce Committee plans to hold its reconciliation markup.
Reyes v. Hi-Grade Materials Co. – Continuing the Trend to Limit PAGA Gamesmanship
The California Fourth District Court of Appeal’s decision in Reyes v. Hi-Grade Materials Co. continues the trend toward limiting plaintiffs’ abuse and improper weaponization of the California Private Attorneys General Act (PAGA).
Chavez, the plaintiff in Reyes v. Hi-Grade Materials Co., filed a putative class action complaint asserting violations of the Labor Code. He then amended his complaint to add a claim for penalties under PAGA[1] on behalf of the state of California and all allegedly aggrieved employees based on the same Labor Code violations. Chavez v. Hi-Grade Materials Co., (2025) WL 1231999, at *2. The trial court denied class certification on a number of grounds, including lack of manageability, leaving Chavez’s individual claims and the representative PAGA claim. Id.
Chavez appealed the denial of class certification, asserting the denial was appealable before final judgment under the death knell doctrinebecause the order terminating the putative class claims was the practical equivalent of a final judgment for the absent class members. Id. at *3. “The death knell doctrine is ‘a tightly defined and narrow’ exception to the one final judgment rule that allows for appellate review of an order denying class certification. Id. at *3 (citing In re Baycol Cases I & II, 51 Cal. 4th 751, 760 (2011).) “Under the doctrine, a denial of class certification is appealable before final judgement if it effectively terminates the entire action as to the class…without the possibility of a group recovery.” Chavez at *3 (Internal citation omitted.)
The defendants argued that the denial of class certification was not the equivalent to a final judgment because the PAGA claim remained intact at the time the trial court issued the order. Id. at *3. The defendants further argued the remaining PAGA action provided the plaintiff some proposed class members an avenue of recovery. Thus, the death knell had not been sounded. Id. After receiving the defendant’s response to the appeal, Chavez voluntarily dismissed his individual and representative PAGA claims. Id. at *4.
The Court of Appeal agreed with the defendants, holding there was no appellate jurisdiction under the death knell doctrine, or otherwise, even though not all putative class members had an avenue of recovery through the remaining PAGA action. Id. at *3. The court found Chavez’s voluntary dismissal of the PAGA claims did not retroactively make the denial of class certification appealable, noting that a contrary finding would “encourage procedural gamesmanship” and “would also encourage plaintiffs to abandon PAGA claims brought on behalf of the state and other aggrieved employees solely for the purpose of manufacturing appellate jurisdiction to obtain review of an otherwise nonappealable class certification order.” Id. at *5. The court held that even if the representative PAGA claim had been voluntarily dismissed before the appeal, the dismissal did not retroactively “transform a nonappealable order denying class certification into an appealable order.” Id. at *5.
As stated above, the Chavez decision follows a trend of courts seeking to limit the gamesmanship and abuse of PAGA by preventing plaintiffs’ attorneys from using PAGA claims as a bargaining chip, only to dismiss them where dismissal is not for the benefit of the state or the allegedly aggrieved employees, but rather as a litigation or settlement tactic designed to further plaintiffs’ counsel’s benefit. While there is a possibility Chavez could lead to increased resistance by plaintiffs to consolidate putative class actions and PAGA claims, the ruling is overall favorable for employers.
Moreover, while the California Supreme Court has held that manageability is not a basis for striking PAGA claims and affirmed that lack of manageability of the claims is a factor that could lead to the assessment of minimal penalties under PAGA penalties. Estrada v. Royalty Carpet Mills, Inc. (2024) 15 Cal. 5th 582, 619. Thus, denial of class certification for lack of manageability continues to be an important lever to substantially reduce or perhaps even eliminate PAGA exposure.
[1] Cal. Lab. Code § 2698, et. seq.
Labor Law Amendments Limit Damages for Violation of New York’s Weekly Pay Law
As we’ve blogged on previously, there’s a split in the New York intermediate-level appellate courts as to whether a private right of action exists for a violation of Labor Law § 191(1)(a), which—absent a waiver by the Commissioner of Labor—requires New York employers to pay “manual workers” no less frequently than weekly.
In 2019, the Appellate Division, First Department held in Vega v CM & Assoc. Constr. Mgt., LLC that such a private right of action exists and permits a plaintiff to seek liquidated damages equal to the amount of the late-paid wages. In 2024, the Appellate Division, Second Department held in Grant v. Global Aircraft Dispatch, Inc. that no such private right of action exists. The split has yet to be resolved by New York’s highest court, the Court of Appeals.
As part of the FY26 budget process, the New York Legislature passed and Governor Kathy Hochul signed into law on May 9, 2025 amendments limiting damages for a violation of Labor Law § 191(1)(a) to the following, provided the employer has paid wages on a regular payday no less frequently than semi-monthly:
For an employer’s first violation, no more than 100% of the lost interest found to be due for the delayed payment of wages; and
For conduct occurring after May 9, 2025, liquidated damages equal to 100% of the late-paid wages for any employer who, after May 9, 2025, has been subject to one or more previous findings and orders for violations of Labor Law § 191(1)(a) for which no proceeding for administrative or judicial review is pending and the time for initiation of such proceeding shall have expired and relating to employees performing the same work.
For purposes of the amendments, an “order” shall mean a single final order or determination made by the Commissioner of Labor or a court, regardless of the number of employees or the time period that was subject to such order.
The amendments—which will be reflected in Labor Law § 198—confirm that, other than set as set forth above for certain repeat violations after May 9, 2025 and provided the employer has regularly paid wages at least semi-monthly, liquidated damages shall not be available for violations of Labor Law § 191(1)(a).
The amendments take immediate effect as of May 9, 2025 and apply to causes of action pending or commenced on or after that date.
An AI Whistleblower Bill is Urgently Needed
Last year, thirteen brave AI whistleblowers issued a letter titled “A Right to Warn about Advanced Artificial Intelligence,” risking retaliation for highlighting rampant concerns around internal safety and security protocols on products that are built shielded from proper oversight being released to and unleashed upon the public. Legislation is needed to help workers responsibly report the development of high-risk systems that is currently occurring without appropriate transparency and oversight.
The concerns of these AI whistleblowers, in combination with the documented attempts of AI companies to stifle whistleblowing, underscore the urgent need for Congressional action to pass a best-practices whistleblower bill that specifically addresses AI employees.
Like the powerful developing sectors preceding it, insiders in the Artificial Intelligence industry do not have explicit access to safeguards for reporting until legislation is passed. There is historical precedent for sector-based protections: Congress has enacted whistleblower protection laws in past decades that covered employees across relevant industries, including nuclear energy in the 1978 Energy Reorganization Act, airlines under AIR21 in 2000, the federal government in the 1989 Whistleblower Protection Act, and Wall Street under Dodd-Frank in 2010. This legislation helps ensure that workers in such specified fields are able to speak out on issues endangering the public. As its emergence in popular consciousness is recent — ChatGPT was initially released November of 2022 — legislation is behind technological advancement, with executives urging legislators to employ “light touch” regulation. Employees working for AI companies are left without any specialized whistleblower protections.
Why We Need an AI Whistleblower Bill
The whistleblowers’ letter cited public claims from leading scholars, advocates, experts and AI companies themselves pointing to the significant potential harms of AI technology when released into the market without the proper safety protocols. These concerns included further entrenchment of existing inequalities, media manipulation and misinformation, and loss of control of autonomous AI systems. These companies themselves have even published reports on their models’ concerning and risky behavior, but continue to deploy their products for public, business, government, and military use. Specific points the group noted last year that companies, governments, and advocacy groups have made on the matter include:
Serious risk of misuse, drastic accidents, and societal disruption … we are going to operate as if these risks are existential (OpenAI)
Toxicity, bias, unreliability, dishonesty (Anthropic)
Offensive cyber operations, deceive people through dialogue, manipulate people into carrying out harmful actions, develop weapons (e.g. biological, chemical) (Google DeepMind)
Exacerbate societal harms such as fraud, discrimination, bias, and disinformation; displace and disempower workers; stifle competition; and pose risks to national security (US Government – White House)
Further concentrate unaccountable power into the hands of a few, or be maliciously used to undermine societal trust, erode public safety, or threaten international security … [AI could be misused] to generate disinformation, conduct sophisticated cyberattacks or help develop chemical weapons (UK Government – Department for Science, Innovation & Technology)
Inaccurate or biased algorithms that deny life-saving healthcare to language models exacerbating manipulation and misinformation (Statement on AI Harms and Policy (FAccT))
Algorithmic bias, disinformation, democratic erosion, and labor displacement. We simultaneously stand on the brink of even larger-scale risks from increasingly powerful systems (Encode Justice and the Future of Life Institute)
Risk of extinction from AI…societal-scale risks such as pandemics and nuclear war (Statement on AI Risk (CAIS))
With guidance from the scientific community, policymakers, and the public, these risks can be adequately mitigated. However, AI companies have financial incentives to avoid effective oversight.
Also in 2024, whistleblowers brought to light broad confidentiality and non-disparagement agreements which were used to muzzle current and former employees from voicing their concerns. OpenAI whistleblowers filed a complaint with the SEC detailing that OpenAI utilized employment agreements which included:
Non-disparagement clauses that failed to exempt disclosures of securities violations to the SEC;
Requiring prior consent from the company to disclose confidential information to federal authorities;
Confidentiality requirements with respect to agreements, that themselves contain securities violations;
Requiring employees to waive compensation that was intended by Congress to incentivize reporting and provide financial relief to whistleblowers.
While OpenAI claims to have addressed its non-disclosure agreements, the chilling effect of these threats remains in company culture. It is highly concerning that OpenAI whistleblowers with inside knowledge on what oversight is needed have no explicit legal federal protections whatsoever. As it stands, a whistleblower working for major AI companies could be fired for raising concerns around issues such as venues for misuse, internal and external security concerns.
Without information from whistleblowers, the ability of the U.S. government to police and regulate this newly developing technology is curtailed, risking heightening the technology’s risks to public health, safety, national security, and more. Insiders must be able to disclose potential violations safely, freely, and appropriately to law enforcement and regulatory authorities.
What an AI Whistleblower Bill Needs to Include
Legislation must send the message to the AI industry, and to the tech industry at large, that violations on the right of employees to report wrongdoing will not be tolerated. Potential whistleblowers at AI companies must have comprehensive avenues to report even potential violations, instances of misconduct, and safety issues occurring throughout the field. Effective whistleblower laws require that such complaints be welcomed and rewarded as a matter of law and policy, not discouraged by companies sending direct or indirect messages to employees that chill their speech that has resulted in so many catastrophes in the past.
It is critical that an AI whistleblower law pass through the 119th Congress. Any such law must follow the solid precedents used in recent whistleblower legislation that has been passed, either unanimously or without any controversy, by Congress. The most recent example of a private sector whistleblower law that incorporated the basic due process requirements necessary to protect whistleblowers was the Taxpayer First Act, 26 U.S. Code § 7623(d). This law includes the following basic procedures, all of which need to be incorporated into any AI whistleblower law:
Due Process Protections: This includes the right to file a retaliation case in federal court and a jury trial, if requested.
Protection Against Retaliation: Anti-retaliation language that establishes that no employer, individual, or agent of an employer may fire, demote, blacklist, threaten, discriminate or harass an employee/former employee/applicant for employment and/or contractor who has engaged in protected activities covered under the law, which would include providing truthful information to state or federal law enforcement or regulatory authorities.
Appropriate Damages: A whistleblower who prevails in a retaliation case must be afforded a full “make whole” remedy, including (but not limited to) reinstatement and restoration of all of the privileges of his or her prior employment, back pay, front pay, compensation for lost benefits, compensatory damages, special damages, and all attorney fees, costs, and expert witness fees reasonably incurred. Some laws also provide double back pay or punitive damages, which should also be considered. Moreover, a court must have explicit jurisdiction to afford all equitable relief, including preliminary relief.
An Adequate Definition of a Protected Disclosure: Protected whistleblower disclosures should cover reports made, both internally to corporations and to other appropriate authorities, including Congress, and/or state law enforcement or regulatory authorities. Disclosures covered should include reporting threats AI may pose to national security, public health and safety, and financial frauds.
Anonymous and confidential reporting to a company’s internal compliance program.
Prohibition against contractual restrictions on the right to blow the whistle, including barring of mandatory arbitration agreements that would restrict an employee from filing a complaint under the whistleblower law.
No federal preemption or interference with the right to file claims under other state or federal law.
Modern anti-fraud and public safety laws uniformly include whistleblower protections similar to those outlined above. These include the laws such as the aforementioned Taxpayer First Act, as well as the Food Safety Modernization Act, Sarbanes-Oxley Act, the Anti-Money Laundering Act, and the National Transportation Security Act. Given the potential threats posed by AI, how companies have mishandled deployment, and the importance that emerging AI technology is safely developed, there is an urgent need for insiders working in the AI sector to be properly protected when they lawfully report threats to the public interest.
Massachusetts Employers: Do Your Job Applications Contain the Mandatory Notice About Lie Detector Use in Employment?
Takeaways
Under Massachusetts law, all job applications must contain a specific notice regarding the use of lie detector tests.
It is unlawful for employers to require or administer lie detector tests as a condition of employment or continued employment.
Employers should consider the suggested steps below to ensure compliance with the law.
Massachusetts law, G.L. c. 149, § 19B, makes it unlawful for an employer to require or administer a lie detector test as a condition of employment or continued employment.
In addition, the statute requires that all job applications “for employment within the Commonwealth” contain the following notice:
It is unlawful in Massachusetts to require or administer a lie detector test as a condition of employment or continued employment. An employer who violates this law shall be subject to criminal penalties and civil liability.
An employer that violates this law may be subject to fines and/or a private right of action for $500 in statutory damages “for each such violation,” among other things.
Although the law is decades old, a number of questions remains:
The statute’s wording leaves ambiguity regarding the scope of the private right of action. Does it apply only to individuals who are subjected to a “lie detector test,” or does it extend to anyone who completes an application without the required notice? In a 2016 case defended by Jackson Lewis attorneys, Judge Mitchell H. Kaplan of the Massachusetts Superior Court held that the statute’s private right of action did not apply to individuals who merely completed an application lacking the notice but were not subjected to a lie detector test. Auguste v. G4S Secure Solutions (USA), Inc., No. SUCV14-3311-BLS1. Another court more recently reached the opposite conclusion, although it is unclear whether that court considered the arguments raised in Auguste.
The extent of the statute’s reach is unclear. The law purports to apply to any application “for employment within the Commonwealth.” Given the recent rise in remote work, how this provision is interpreted could result in extending the law’s reach to positions beyond those that are clearly based in Massachusetts. Similarly, the statute could possibly apply to Massachusetts residents who apply for remote positions outside the Commonwealth.
The statute’s definition of “lie detector test” extends beyond a polygraph and includes:
any test utilizing a polygraph or any other device, mechanism, instrument or written examination, which is operated, or the results of which are used or interpreted by an examiner for the purpose of purporting to assist in or enable the detection of deception, the verification of truthfulness, or the rendering of a diagnostic opinion regarding the honesty of an individual.
Employers should exercise caution and carefully evaluate the methods they use to determine the truthfulness of job applicants or current employees. Whether using hiring software, artificial intelligence (AI), or other means, it is possible that these tools could be considered lie detector tests under the statute.
Steps for Employers
In order to ensure compliance with the law, employers should take the following steps:
Confirm that the mandatory notice appears in all Massachusetts job applications, including for remote jobs.
Evaluate your interview, hiring, performance management, and discipline tools, including any AI tools, to determine whether they may be construed as a lie detector test under the statute.
Review and, if necessary, revise your Massachusetts separation agreements to ensure they release claims under G.L. c. 149, § 19B.