Dismissal by Accident – the Serious Point in a Comedy of Errors (UK)
In 2020, Ms Korpysa was told that because of the COVID lockdown, her workplace would be closing. She thought that meant that she was being dismissed, and asked her employer, Impact Recruitment Services Limited, for details of her contract, accrued holiday pay entitlement and (said Impact) her P45. Impact took that as meaning that she was resigning, and based on that belief it processed steps to take her off the payroll and send her the P45 it said she had requested. She in turn took that as confirmation of her assumed dismissal, even though that was not Impact’s intention, and started unfair dismissal proceedings.
In what must have been one of those is-one-coffee-enough mornings, the Employment Tribunal was therefore faced with deciding the rights and wrongs of a termination of Korpysa’s employment caused by neither party giving notice but each believing that the other had.
Having determined that Korpysa had not in fact asked for her P45, the ET concluded relatively quickly that Impact’s sending it to her did constitute a dismissal effective from that date. The next step in assessing the statutory fairness of that dismissal was then to look at the reason for it. Was it one of the permitted reasons in section 98 Employment Rights Act 1996, because if not, Impact was surely sunk. Korpysa argued that her employer could not possibly rely on any of those statutory reasons because logically you could not claim to have had a reason for something you did not think you were doing.
The ET agreed with that reasoning and upheld Korpysa’s unfair dismissal claim. On Impact’s appeal, however, the EAT was less sure. To construe “reason” as requiring a positive thought-process on the part of the employer went too far, it thought. The proper question was what had led to the termination of the employment, i.e. the factual causation of the dismissal, regardless of whether the employer had had any conscious role in it.
What had caused the employer here to act in a way constituting a dismissal of Korpysa was its genuine belief that she had quit. If she had, its conduct would have been entirely understandable and unobjectionable. Given that she had not, however, two further questions arose under ordinary unfair dismissal principles – first, did that belief fall within one of those permitted reasons in section 98 and second, if it did, had Impact acted reasonably in treating those circumstances as justifying that conduct?
The EAT accepted without too much debate that Impact’s genuine belief could in principle fall within the “some other substantial reason” category in section 98, so that was its first hurdle cleared relatively easily. But the next one was less obvious – had it acted reasonably?
Usually that means some sort of prior process, some warnings or at least a moment’s consultation with the employee, but strictly those are not steps required by black and white statute. They are just the moss or barnacles grown on to the statute by decades of case law and guidance. Even the bare bones of the Acas Code of Practice on disciplinary and grievance procedures are not mandatory. It is only an unreasonable failure to follow them which will generally be fatal to an employer’s defence. In the very rare circumstances where it is reasonable not to follow them (perhaps not least because nothing was further from your mind than a dismissal), then the employer may fight on.
What would an employer’s acting reasonably look like in these particular circumstances? The EAT sent that question back to the ET to look at again, so we cannot yet report here on whether Korpysa’s accidental dismissal was fair. At the same time, it offered the ET some thoughts of its own to chew on. Given that it was not alleged by Impact that Korpysa had said expressly that she was leaving, had it failed to take the steps that any reasonable employer would have taken in those circumstances to verify its understanding of Korpysa’s intentions? Might that have led to its being able to correct her own mistaken view that she had been dismissed at the time of the site closure?
These are obviously very unusual facts – an employee who thought she had been dismissed on the site closure when she hadn’t plus an employer which believed that she had resigned when she hadn’t, together leading to an actual dismissal on the date of issue of the P45 which neither party thought had happened at all. Nonetheless, there is a lesson to be taken by employers out of this mess – before rushing to take your employee off the payroll and issuing P45s etc., do just check. This is exactly the same caution as applies in any case where the employee’s intentions are not crystal clear. That is not just because they don’t make express reference to quitting or exactly what you can do with your job, as here, but also if they do use such terms but in circumstances where that might reasonably be suspected as not their true intention – in temper, under provocation or pressure, or just off their wheels through alcohol or significant mental ill-health. Sayings about gift-horses come very readily to mind, but it is best to resist that temptation. If in any doubt, ask.
New Bill Strengthens Protections for Federal Whistleblowers who Make Disclosures to Congress
On March 26, Senator Richard Blumenthal (D-CT) introduced the Congressional Whistleblower Protection Act of 2025. The bill strengthens protections for federal employee whistleblowers who make disclosures to Congress, expanding the types of whistleblowers covered and granting them the right to have their case heard in federal court if there are delays in administrative proceedings.
“This law is a significant step forward for federal employees,” said Stephen M. Kohn, founding partner of Kohn, Kohn & Colapinto and Chairman of the National Whistleblower Center. “Retaliation against whistleblowers who testify before Congress is unacceptable. This law is highly significant and should be passed quickly. It is absolutely necessary if Congress is serious about engaging in meaningful oversight.”
The bill ensures that whistleblowers are able to file an administrative complaint if their right to share information with Congress has been interfered with or denied. It expands the definition of qualified whistleblowers to include former employees, contractors, and job applicants.
Furthermore, the bill allows for whistleblowers to seek relief in federal court if corrective action is not reached within 180 days of filing a complaint.
Senator Blumenthal previously introduced the Congressional Whistleblower Protection Act during the last session of Congress.
“Whistleblowers must be protected against retaliation when they bravely reveal waste, fraud, and abuse,” Blumenthal stated when introducing the previous version. “This measure will strengthen safeguards for anyone reporting government misconduct and empower them to seek relief if they face retaliation. Congressional whistleblowers are essential to our democracy, and they deserve vigorous protection.”
The Congressional Whistleblower Protection Act is cosponsored by Senators Mazi Hirono (D-HI), Amy Klobuchar (D-MN), Edward Markey (D-MA), Bernie Sanders (I-VT), Adam Schiff (D-CA), Chris Van Hollen (D-MD), Sheldon Whitehouse (D-RI), and Ron Wyden (D-OR).
Pennsylvania Teacher’s Union Faces Class Action over Data Breach
The Pennsylvania State Education Association (PSEA) faces a class action resulting from a July 2024 data breach. The proposed class consists of current and former members of the union as well as PSEA employees and their family members. The lawsuit alleges that the union was negligent and breached its fiduciary duty when it suffered a data breach that affected Social Security numbers and medical information. The complaint further alleges that the PSEA failed to implement and maintain appropriate safeguards to protect and secure the plaintiffs’ data.
The union sent notification letters in February 2025 informing members that the data acquired by the unauthorized actor contained some personal information within the network files. The letter also stated, “We took steps, to the best of our ability and knowledge, to ensure that the data taken by the unauthorized actor was deleted [. . .] We want to make the impacted individuals aware of the incident and provide them with steps they can take to further protect their information.” The union also informed affected individuals that they did not have any indication that the information was used fraudulently.
The complaint alleges “actual damages” suffered by the plaintiff related to monitoring financial accounts and an increased risk of fraud and identity theft. Further, the complaint states that “the breach of security was reasonably foreseeable given the known high frequency of cyberattacks and data breaches involving health information.”
In addition to a claim of negligence, the class alleges that the breach violates the Federal Trade Commission Act and the Health Insurance Portability and Accountability Act. The class is demanding 10 years of credit monitoring services, punitive, actual, compensatory, and statutory damages, as well as attorneys’ fees.
Parole Programs for Cuban, Haitian, Nicaraguan, and Venezuelan Nationals Terminated by DHS
On March 25, 2025, the U.S. Department of Homeland Security (DHS) published a notice in the Federal Register announcing the immediate termination of the Cuba, Haiti, Nicaragua, and Venezuela (CHNV) parole programs. As a result, approximately 532,000 individuals in the United States who were paroled under these programs will lose their parole authorizations and any associated benefits, including work authorizations, within thirty days of the date of publication of the notice, or by April 24, 2025.
Quick Hits
On March 25, 2025, the U.S. Department of Homeland Security (DHS) announced the immediate termination of the Cuba, Haiti, Nicaragua, and Venezuela (CHNV) parole programs, affecting approximately 532,000 individuals who will lose their parole and associated benefits by April 24, 2025.
The Trump administration has decided to end these programs, citing a lack of significant public benefit and inconsistency with foreign policy goals.
Because CHNV beneficiaries will lose ancillary benefits such as employment authorization, employers will need to reverify the work authorization of affected employees by the April 24, 2025, deadline.
Background
Parole allows noncitizens who may otherwise be inadmissible to enter the United States for a temporary period and for a specific purpose. Section 212(d)(5)(A) of the Immigration and Nationality Act authorizes the secretary of homeland security, at the secretary’s discretion, to “parole into the United States temporarily under such conditions as [the secretary] may prescribe only on a case-by-case basis for urgent humanitarian reasons or significant public benefit any alien applying for admission to the United States.”
The Biden administration implemented a temporary parole program for Venezuelan nationals in October 2022 to discourage irregular border crossings and later expanded the parole programs to include Cuban, Haitian, and Nicaraguan nationals in January 2023. The CHNV parole programs permitted up to 30,000 individuals per month from Cuba, Haiti, Nicaragua, and Venezuela to enter the United States for a period of up to two years. Until January 22, 2025, approximately 532,000 individuals arrived in the United States by air under the CHNV parole programs.
The Biden administration announced in October 2024 that it would not extend legal status for individuals permitted to enter the United States under the CHNV parole programs but encouraged CHNV beneficiaries to seek alternative immigration options. On January 20, 2025, President Donald Trump announced his intention to terminate the parole programs in Executive Order 14165, “Securing Our Borders.” Consistent with that executive order and the secretary of homeland security’s discretionary authority, Secretary Kristi Noem is now terminating the CHNV parole programs, having found the programs no longer “serve a significant public benefit, are not necessary to reduce levels of illegal immigration, … and are inconsistent with the Administration’s foreign policy goals.”
What This Means for Employers
According to the notice, any employment authorization derived through the CHNV parole programs will terminate on April 24, 2025. This will impact persons with Employment Authorization Documents (EADs) in the (c)(11) category. Individuals without a valid alternative basis to remain in the United States are expected to depart the country upon the termination of their paroles on April 24, 2025.
CHNV beneficiaries may have already updated their Form I-9s with EAD cards with a validity date beyond April 24, 2025. Employers are expected to reverify affected employees’ work authorizations by April 24, 2025, to ensure continued compliance with Form I-9 employment eligibility verification rules. However, identifying which employees are impacted by this change prior to the April 24, 2025, expiration date may be challenging, since the public interest parolee EAD category code (c)(11) is typically not entered in the I-9 form or other personnel records.
In the Federal Register notice, DHS indicated it may use the expedited removal (deportation) process for any CHNV beneficiaries who do not depart the United States or obtain another lawful status by April 24, 2025. Under sections 235(b)(1) and 212(a)(9)(A)(i) of the Immigration and Nationality Act, expedited removal orders may not be appealed, and those removed through such means are subject to a five-year bar on reentry to the United States.
A lawsuit challenging the termination of CHNV parole has been filed.
Navigating Whistleblower Protections and Compliance with DEI Executive Orders
As Polsinelli has discussed, President Donald Trump issued Executive Order No. 14151 titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” and Executive Order No. 14173 titled “Ending Radical and Wasteful Government DEI Programs and Preferencing” (collectively, the “Orders”) shortly after taking office, and that a District Court of Maryland enjoined certain aspects of those Orders. The Trump administration appealed the District Court’s decision, and on March 14, 2025, the U.S. Court of Appeals for the Fourth Circuit granted the Trump administration’s request for a stay (i.e., pause) of the injunction pending the outcome of the appeal. This means that during the appeal, the Orders are in full force and effect.
There are many articles discussing the importance of employers taking steps to determine whether their actions, policies and procedures may violate the Orders.
Given the back-and-forth nature of the decisions related to the Orders, a question that some employers may have is whether an employee is protected from retaliation if they report that they believe their employer is violating one of the Orders, but that Order is eventually struck down. Employers may be surprised to learn that if an employee reasonably believes the employer’s activity violates a legal provision (here, for example, the Orders), then they may be protected even if the Orders are later revoked or struck down.
Whistleblower Protections and Potential Activity Related to the DEI Executive Orders
What might protected activity look like with regard to these Orders? Examples of potential whistleblowing activity could include:
An employee may report the employer is continuing DEI programs, trainings or initiatives that they believe violate the Orders prohibiting race- or gender-based preferences.
An employee may report that an employer or an employee of the employer is prioritizing hiring, promotions or contracting decisions based on race, gender or other DEI-related criteria.
An employee may report that their employer is requiring them to participate in DEI training and claim such training promotes race- or gender-based biases, in violation of the Orders.
Employees working for federal contractors may report that their employer is not following the Orders’ requirements regarding DEI restrictions in government-funded projects or is inaccurately certifying compliance with DEI-related contract terms.
How Should Employers Respond to Whistleblowing?
When an employee reports a concern or engages in whistleblowing activities, employers should carefully evaluate and respond to the allegations. Steps an employer should consider taking include:
Assessing the complexity and seriousness of the employee’s complaint and, if appropriate, consider an investigation conducted under the attorney-client privilege or by an external investigator in conjunction with human resources.
Documenting findings and actions taken.
Maintaining a communication channel with the employee throughout the process.
Communicating with the employee that the investigation has concluded, sharing appropriate information considering the privacy of other employees and privilege considerations.
A well-handled response not only helps address and potentially resolve immediate concerns but also demonstrates the company’s commitment to compliance and transparency, reducing potential legal exposure.
Given the current fast-changing circumstances, now may be a good time for employers to review their complaint reporting procedures. An effective internal reporting system typically will be accessible, confidential and supported by a clear policy that outlines the process for handling reports and the protections available to employees.
How Should Employers Treat Whistleblowers?
Employers should not try to identify who made a report of an alleged violation of law to a governmental agency, particularly if the agency is then investigating the employer. That information is usually not necessary to respond to the report and could create additional risk for the employer.
If an employer knows who has made a complaint, then the employer should treat that employee with the same level of care it would afford its other employees. In particular, the complaining employee should not be held to a higher performance or behavior standard.
That said, making a complaint does not mean that an employee cannot be held to performance and behavior standards. Nor does making a complaint mean that an employee cannot be separated from employment for lawful reasons. However, as in many areas, employers would be wise to consult counsel before taking adverse action against an employee if the employee has recently complained that the employer has violated the law. This is so because many courts have held that close timing is enough to infer a retaliatory motive. Thus, employers should be very careful to show that it has a legitimate, non-retaliatory reason for separating an employee who it knows has complained (rightly or wrongly) of a violation of law, particularly if that complaint occurred close in time to when the separation will occur.
Next Steps for Employers
Employers should also consider regularly reviewing their policies and procedures to ensure ongoing compliance with applicable law. Reviewing policies and procedures with legal counsel can help identify areas of risk and ways to implement changes. By taking a proactive approach to compliance and employee relations, employers can create a positive work environment that supports both legal obligations and business objectives.
Finally, employers particularly impacted by the recent changes may want to consider offering training to managers by knowledgeable trainers who can explain these new laws and how they may change the way an employer operates.
Still in the Dark After Loper Bright: SCOTUS Declines to Shine a Light on NLRB Deference Post-Chevron
Last year, the United States Supreme Court’s Loper Bright decision put an end to “Chevron deference,” a judicial practice of deferring to federal agency interpretations of ambiguous statutory language. While the legal blogosphere has spent considerable ink weighing the impact of Loper Bright, the Supreme Court recently rejected a pair of petitions on the amount of deference owed to the National Labor Relations Board (NLRB), casting an even longer shadow over Loper Bright. So, what can we learn from the Supreme Court’s inaction?
Differing Sources of Deference
Issued in 1984, Chevron created a “bedrock principle of administrative law that a reviewing court must defer to a federal agency’s reasonable interpretation of an ambiguous statute it administers.” According to Kent Barnett and Christopher J. Walker in Chevron in the Circuit Courts, Chevron was “one of the most cited Supreme Court decisions of all time.” Under Chevron, a court would first determine whether a statute clearly answered a particular question. If it did, the court would simply apply the statute’s answer. If the statute was “silent or ambiguous,” however, the court would defer to the interpretation of the federal agency charged with enforcing the statute if the agency’s interpretation was “based on a permissible construction of the statute.”
Loper Bright put an end to Chevron’s reign, however, holding that deference to an administrative agency violated the Administrative Procedures Act (APA) because courts and judges were supposed to interpret statutes unless a statute specifically reflected Congressional delegations of discretionary power to the federal agency. In other words, if Congress specifically delegated authority to agencies to promulgate regulations and relevant definitions, Loper Bright appeared to leave that deference intact. After all, in those situations, Congress, not Chevron, required courts to defer to agencies. If Congress did not make that delegation, however, a court, not the agency, was responsible for interpreting an ambiguous statute.
The NLRB is supposedly one of those agencies Congress tapped to promulgate regulations and relevant definitions for the NLRA. Indeed, the Supreme Court noted in Ford Motor Co. v. NLRB, years before Chevron, that Congress had made a “conscious decision” to delegate to the NLRB “the primary responsibility of marking out the scope of the statutory language.” Similar delegations to federal agencies exist in the Age Discrimination in Employment Act (ADEA), the Americans with Disabilities Act (ADA), the Genetic Information Nondiscrimination Act (GINA), and the recently passed Pregnant Workers Fairness Act and the PUMP Act.
So, Loper Bright should have little impact on the NLRB’s interpretation of the NLRA and other labor statutes, right? Not so fast. Reasonable minds, like the Sixth and Ninth circuits, might disagree.
Circuital Thinking
The Ninth Circuit’s Approach
The dispute started in the Ninth Circuit between a group of hospitals and their employees’ union. Per the collective bargaining agreement, the hospitals deducted union fees from participating employees if the employees executed a written assignment authorizing the deduction. After the collective bargaining agreement expired, the hospitals continued to deduct dues for several months but then stopped. They notified the union that they believed the written assignments violated the Taft-Hartley Act because the union’s assignments did not have specific language regarding revocability upon the expiration of the collective bargaining agreement.
The union filed an unfair labor practice charge, the NLRB filed a complaint, and an administrative law judge determined that the hospitals committed an unfair labor practice by unilaterally ending the practice of collecting union dues. After a series of decisions, the NLRB determined that the Taft-Hartley Act did not require specific language and found that the hospitals engaged in unfair labor practices. On appeal, the Ninth Circuit agreed with the NLRB’s decision.
After the Supreme Court issued Loper Bright, the hospitals petitioned the Supreme Court for a writ of certiorari, arguing that the Ninth Circuit improperly deferred to the NLRB’s interpretation of the NLRA instead of performing its own statutory analysis.
The Sixth Circuit’s Approach
The Sixth Circuit took a slightly different approach. There, a union and a road paving company began negotiating a collective bargaining agreement. When negotiations broke down, the union began picketing. As negotiations continued, the union requested information from the company regarding bargaining unit employees. However, the company did not provide that information, and the union filed unfair labor practices charge against the company based on picketing violations and the failure to provide that information. The NLRB brought a complaint, and an administrative law judge issued a decision finding that the company violated the NLRA by refusing to provide the employee bargaining unit information. The NRLB affirmed the administrative law judge’s decision.
On appeal, the Sixth Circuit, citing Loper Bright, declined to defer to the NLRB’s interpretation of the NLRA and decided to exercise independent judgment in deciding whether an agency acted within its statutory authority. Performing its own analysis, the Sixth Circuit affirmed the NLRB’s decision.
The company petitioned the Supreme Court for a writ of certiorari, arguing, in part, that the Sixth Circuit was required to defer to the NLRB’s interpretation of the NLRA pursuant to Loper Bright. The company also was seeking to challenge the president’s removal authority, and may have made its Loper Bright argument to sweeten the deal for Supreme Court review (since both the NLRB and Sixth Circuit reached the same result on statutory interpretation).
Supreme Inaction
Given these two apparently conflicting interpretations of Loper Bright, it seemed the Supreme Court was primed to clarify the appropriate approach. Was the Ninth Circuit correct in deferring to the NLRB’s analysis of the NLRA or was the Sixth Circuit correct in adhering to Loper Bright’s direction that it decide the meaning of ambiguous statute? At any rate, certainly a circuit split requires Supreme Court review?
Apparently not. The Supreme Court denied certiorari in both cases without any clarifying statement, leaving it unclear whether Loper Bright will impact NLRB or other agency decisions in the future. So, what does this mean? On one hand, in both cases the federal circuit courts ultimately affirmed the NLRB’s decisions, albeit after performing different analyses. Maybe the Supreme Court was unwilling to wade into these waters if both courts ultimately reached the correct decision. On the other hand, were these simply cases where the statutory text was unambiguous, such that agency interpretations were not even truly implicated?
Unfortunately, we’re left to wait until the next dispute. Perhaps time will tell, even if the Supreme Court won’t. In the interim, Bradley is available to answer any questions you might have regarding new administrative rules or decisions.
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Ensuring Employee Selection Procedures Comply with California Law
California’s Fair Employment and Housing Act (FEHA) prohibits discrimination both in the selection of employees and during employment based on certain protected characteristics. Federal law provides similar protections under Title VII of the Civil Rights Act of 1964. Consequently, California employers must ensure their employee selection process is free from discrimination.
Any selection policy or practice that disproportionately impacts individuals based on the protected characteristics enumerated below is unlawful unless it is job-related and consistent with business necessity.
Employers must design and implement their selection procedures, including tests and interviews, to make certain they are fair and equitable. FEHA prohibits any non-job-related inquiries of applicants or employees, either verbally or through the use of an application form, that express, directly or indirectly, a limitation, specification, or discrimination as to race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, marital status, sex, age, or sexual orientation, or any intent to make such a limitation, specification, or discrimination.
Employers should also be cognizant of the following requirements under FEHA:
Requests for Transfer or Promotion: Employers must consider such requests and must not restrict information on promotion and transfer opportunities in a way that discriminates based protected categories.
Training: Employers must provide training opportunities equitably.
No-Transfer Policies: Policies maintaining segregation based on protected categories are prohibited.
CA employers must also comply with laws such as the Fair Chance Act, which requires specific procedures when conducting background checks of applicants and prohibits employers with five or more employers from asking candidates about their conviction history before making a job offer.
How to Protect Your ESOP from Lawsuits Over Cash Holdings
At least five lawsuits have recently been filed against employee stock ownership plan (ESOP) fiduciaries alleging a failure to prudently invest cash held in the ESOP trust. While scrutiny of investments in company stock has long been common, the focus on cash holdings represents a significant and novel shift. These cases signal a potential trend, and ESOP fiduciaries should take steps to mitigate risk, as outlined below.
Why Are ESOP Cash Holdings Becoming Litigation Targets?
One recent case, Schultz v. Aerotech, sheds light on this issue. In this lawsuit, the plaintiffs argue that Aerotech’s ESOP held nearly 20% of its total assets in cash equivalents, yielding a return of less than 1.5% over five years. Aerotech counters that the cash-heavy approach was necessary to meet future repurchase obligations. The plaintiffs, however, claim the company could have pursued higher-yield investments while maintaining adequate liquidity.
The court reviewing Aerotech’s motion to dismiss pointed to the “vast disparity” between Aerotech’s cash-heavy approach and the practices of similar plans as raising plausible inference that the company, as a plan fiduciary, failed to meet its fiduciary obligations. While Aerotech may later demonstrate that its investment strategy was justified under the specific circumstances, the allegations of imprudence were sufficient for the case to survive a motion to dismiss and proceed to costly discovery.
What Actions Can ESOP Fiduciaries Take?
Although the courts have not yet fully addressed these claims, ESOP fiduciaries can take the following measures to reduce risk and align their actions with their fiduciary obligations:
1. Assess Cash Holdings and Prepare for Increased Scrutiny
Evaluate the rationale behind the ESOP’s cash holdings. For instance:
Are large cash reserves an intentional strategy to buffer repurchase obligations?
Or are they the unintended result of segregating accounts of terminated participants over extended periods (which raises other compliance issues)?
Prepare for increased scrutiny from employees, plaintiff’s lawyers, and regulators by documenting the reasoning behind your investment strategies.
2. Reevaluate Investment Strategies
Ensure the ESOP’s investment approach aligns with fiduciary duties under ERISA. Unlike investments in company stock, cash holdings and other non-stock assets do not enjoy the same protective standards. Consider whether reallocating cash into low-risk, higher-yield assets could achieve better returns without compromising liquidity. Ultimately, an ESOP is a retirement plan, and the fiduciaries responsible for investment of the plan assets need to evaluate the prudence of those investments. This is separate in certain respects to the company’s need to satisfy the repurchase obligation.
3. Engage an Investment Advisor or Investment Manager
Appointing an investment advisor or investment manager can help reduce fiduciary liability. An investment advisor could make recommendations to the plan administrator or ESOP committee on appropriate investments of cash for the ESOP. However, the ultimate fiduciary responsibility for the investment of plan assets would rest with the plan administrator or ESOP committee. The plan administrator or ESOP committee could also appoint an investment manager who would take on the primary fiduciary obligation for the management of the assets. However, the plan administrator or ESOP committee would still have to act prudently with respect to the selection and monitoring of the investment manager.
4. Invest in Fiduciary Training
Formal training on fiduciary duties, particularly on selecting and managing investments, is increasingly common for 401(k) plans and can be equally beneficial for ESOP fiduciaries. This is especially important if an investment manager is not engaged.
5. Evaluate Transferring Cash to a 401(k) Plan
One way to mitigate liability for investing cash allocated to the account of a terminated participant who no longer holds any stock is to transfer the cash out of the ESOP and into the employer’s 401(k) plan. This option is most useful when the accounts of terminated participants are segregated (i.e., the stock is exchanged for cash to maximize the investments in stock for active participants) and immediate distributions are not permitted. While there are complex pros and cons to this approach, reducing the fiduciary obligations on the ESOP fiduciaries is a clear benefit.
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Trump Administration Terminates Humanitarian Parole for Citizens of Cuba, Haiti, Nicaragua, Venezuela
Department of Homeland Security (DHS) Secretary Kristi Noem announced the termination of humanitarian parole for citizens of Cuba, Haiti, Nicaragua, and Venezuela, also known as the CHNV program, in the Federal Register on March 25, 2025. Humanitarian parole for citizens of these countries will expire no later than 30 days from March 25, 2025, or April 24, 2025.
CHNV beneficiaries who did not file some other immigration benefit application prior to publication of the termination notice must depart the United States on or before April 24, 2025, or the expiration of their humanitarian parole, whichever date is sooner. DHS will prioritize removal of CHNV beneficiaries without pending immigration applications who remain in the United States beyond the expiration of their humanitarian parole.
DHS has determined that, after termination of the parole, the condition upon which employment authorizations were granted no longer exists, and DHS intends to revoke parole-based employment authorizations.
The CHNV program was instituted by DHS under former President Joe Biden. It allowed citizens of Cuba, Haiti, Nicaragua, and Venezuela who obtained U.S. financial sponsors to enter the United States by humanitarian parole for up to two years. Once in the United States, parolees could apply for work authorization. Humanitarian parole was renewable, however, on Oct. 4, 2024, the Biden Administration announced it would not renew the program. About 530,000 individuals benefited from the CHNV program.
Seeking to enjoin termination of the program, on Feb. 28, 2025, Haitian Bridge Alliance and several individuals affected by the termination of the CHNV program filed a lawsuit in U.S. District Court for the District of Massachusetts, alleging violations of the Administrative Procedure Act and the Due Process Clause of the Fifth Amendment. The lawsuit is pending.
Operation Allies Welcome, the humanitarian parole program for Afghanis who assisted U.S. forces during the war in Afghanistan, and Uniting for Ukraine, the humanitarian parole program for individuals fleeing the war in Ukraine, are unaffected by the latest announcement.
The Perils of Interpreting Your Own Rules Too Strictly, Especially When They Don’t Exist (UK)
So here it is, 2025’s first serious contender for the What On Earth Were They Thinking? Awards, an unfair dismissal case with a common-sense answer so clear you could see it from Mars, but which it nonetheless took five years and the Court of Appeal to arrive at.
Mr Hewston was employed by Ofsted as a Social Care Regulatory Inspector. In 2019, in the course of a school inspection, he brushed water off the head and touched the shoulder of a boy of 12 or 13 who had been caught in a rainstorm.
That contact was reported to Ofsted by the school as a case of “inappropriate touching”. The terms of the school’s reports were, said the Court of Appeal, “redolent with hostility against the inspectors and the inspection”. They described the incident in fairly hyperbolic terms – that contact had created a “very precarious situation” and had “put the safety of a student at risk”, both allegations which Ofsted itself quickly dismissed as arrant nonsense. It knew that the same school had made complaints about a number of previous inspectors, allegations not necessarily unconnected with its having serially failed to receive the Ofsted gradings it wanted.
Ofsted itself never made any suggestion that there had been any improper motivation on Hewston’s part. It accepted from the outset that the conduct was “a friendly act of sympathy and assistance”. Nonetheless, it dismissed Hewston for gross misconduct a month later. Why?
The disciplinary charges referred to his having without consent or invitation touched a child on the head and shoulder “contrary to Ofsted core values, professional standards and the Civil Service Code”. It was not Ofsted’s case that any of those values or standards or the Code contained any explicit reference to the circumstances in which school inspectors should make physical contact with a child, still less any blanket no-touch rule. Nonetheless, Hewston found himself in an impossible position at the disciplinary Hearing – even though promising that he had learnt his lesson, the more he denied that he had acted improperly (not least in the absence of any such rule), the more fuel he added to Ofsted’s claimed view that he could not be trusted not to do it again.
By the time the question reached the Court of Appeal, the issues had for practical purposes been boiled down to whether it was reasonable for Ofsted to treat that conduct as justifying Hewston’s dismissal, and as part of that, whether even without that no-touch rule, Hewston should have appreciated that his conduct could lead to his dismissal.
The ruling was clear that Hewston’s actions had been a misjudgement, however well-intentioned, but also that Ofsted could not reasonably have determined that they were sufficient to justify his dismissal. There had never been any safeguarding issue nor any risk to the child. Hewston had made it clear that he would undertake whatever training was required and would not repeat his conduct. Even if Ofsted thought that he harboured some continuing doubt about whether he had in fact acted inappropriately, it had no real reason to fear a recurrence. In any case, it was not allowed to turn sub-dismissable conduct into gross misconduct merely because Hewston didn’t seem in its perception to show the appropriate remorse or understanding.
Most of all, Hewston’s trip to the Court of Appeal was successful for the reasons in one short paragraph in a judgement of nearly 30 pages – the “fundamental point was that in the absence of a no-touch rule or other explicit guidance covering a situation of the relevant kind, Hewston had no reason to believe that he was doing anything so seriously wrong as to justify dismissal”. As a result, said the Court, it seemed “deeply regrettable that [Hewston], who was an experienced inspector with an unblemished disciplinary record on safeguarding issues, should have been summarily dismissed for conduct which, on any reasonable appraisal, amounted to no more than a momentary and well-meaning lapse of professional judgement of a kind which he was most unlikely ever to repeat”.
So for employers, the immediate moral of this story is that if you have a principle of conduct in your business which is as important to you as Ofsted said its non-existent no-touch rule was to it, make it express. And the more stringent that rule is, the more it might lead to dismissal for conduct which isn’t on its face that big a deal, the louder you have to shout about it.
But even then, that is not necessarily the end of the matter. As employer, you cannot safely go straight from breach of that rule to dismissal without consideration of the specific circumstances of the case. That is particularly the position where the wider the rule, the easier it is to breach it for wholly innocuous reasons. Even writing as a committed adherent to the instructions on packs of dishwasher tablets to “keep well away from children”, there are limits. Could a school inspector touch a child to help it up after a playground accident? To pull it out of the way of a car or a collision with another child, something corrosive spilt in the Chemistry Lab, an errant javelin on Sports Day? Could you sit it down and dry its tears if it were clearly distressed about something, or help it to the Sick-room? Exactly where is the line between protecting a child’s physical health and safety on the one hand and its comfort, happiness or wellbeing on the other? With the possible exception of that one about not taking the boron rods out of nuclear reactors, every hard rule has its fuzzy edges.
As soon as Ofsted accepted that no harm to the child had been intended or done, that should have been the end of the matter. A warning at its absolute highest. However, to pursue the principle of a rule which did not exist as far as the Court of Appeal at vast cost to both Hewston and the taxpayer shows, with respect, a serious loss of self-awareness from the point of dismissal and ever since. Don’t let this happen to you – remember that fairness trumps rules every time.
Timing and Planning Fundamentals for Transitioning Founder-Owned Law Firms
Ensuring the longevity and success of a founder-owned law firm requires meticulous planning, especially when transitioning senior partners toward retirement. This article outlines strategic policies and actionable steps that can significantly enhance the likelihood of a smooth transition, thereby maintaining client trust and firm continuity.
Importance of Mandatory Retirement Planning
Mandatory retirements facilitate leadership changes and create opportunities for junior partners, yet an unprepared firm may face challenges if such retirements occur prematurely. Conversely, not making room for the advancement of younger partners will also negatively impact a firm.
Addressing Retirement Controversy
Mandatory retirement ages often generate controversy. Many clients appreciate the experience of senior lawyers who possess extensive institutional knowledge or trial expertise. Setting a retirement age arbitrarily, without a transition plan, is frequently unproductive and impractical. Nonetheless, failing to establish a retirement age presents its own set of serious issues.
Challenges of Senior Partner Transitions
Consider a scenario involving a senior partner who is unwilling to implement a transition plan and chooses to retain maximum control over client accounts. Such partners typically do not adequately introduce their partners or senior associates to their clients or discuss continuity plans with the firm or the clients. In these cases, a practice may decline when clients become aware that there is no succession plan, exposing them to potential risks.
Strategic Transition Period Approach
To address continuity issues, we recommend a transition period approach that can ease partners into retirement, benefit clients, and ensure the firm’s continued success.
10 Action Steps for Effective Transition Planning
Establish a Mandatory Retirement Planning Age:
Define a mandatory age for submitting a transition plan.
Communicate Policy Clearly:
Ensure all partners are informed about the retirement age policy through official meetings, internal memos, and written guidelines.
Provide Flexibility:
Incorporate exceptions or extensions based on individual contributions, client relationships, and firm needs.
Plan for Transition:
Encourage partners to discuss their retirement plans when they reach the age of 60 as part of a long-range planning process.
Create Incentives:
Develop incentives for partners to engage in transition planning, including post-retirement compensation and reduced billable requirements during the transition phase.
Define Criteria:
Establish clear criteria for passing on practices, including client introductions, marketing activities, case and role assignments, and client notices.
Support Successor Partners:
Support successor partners through enhanced marketing efforts, client visits, and billing adjustments for transition-related casework.
Implement Policy on Transition Costs:
Develop a policy addressing the costs and investments associated with transitions to ensure fair distribution among partners.
Monitor Progress:
Review and monitor transition plan progress regularly to ensure they are on track and address any challenges promptly.
Provide Training and Coaching:
Offer training and mentorship programs for senior partners to help them adjust to their new role and effectively pass on their knowledge and client relationships to successor partners.
Conclusion
By following these steps, a founder-owned law firm can ensure a smooth and orderly transition of practices, retain client trust, and maintain its long-term success.
How to Remain Compliant: Navigating the Post-Affirmative Action Landscape for Federal Contractors
On January 21, 2025, President Trump issued an Executive Order targeting diversity, equity, and inclusion (DEI) and diversity, equity, inclusion, and accessibility (DEIA) programs.1 Among other things, Executive Order 14173 (EO 14173), titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” revoked Executive Order 11246. We unpacked the key provisions of E.O. 14173 in a previous alert. How will this development impact federal contractors, subcontractors and other companies?
Overview of E.O. 11246
E.O. 11246, now revoked, provided much of the basis for regulations implementing the requirement that federal contractors and subcontractors engage in affirmative action efforts to ensure that contractors and subcontractors refrained from discrimination against any employee or applicant for employment because of race, creed, color, or national origin. EO 11246 also required federal contractors and subcontractors that met specified jurisdictional thresholds to develop written affirmative action plans. These federal contractors and subcontractors, and private employers with at least 100 employees, must also submit workforce data annual report (“EEO-1”) to the Equal Employment Opportunity Commission (the “EEOC”). Thereafter, the government added two additional equal opportunity mandates: Section 503 of the Rehabilitation Act of 1973 (“Section 503”), which covers individuals with disabilities and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (“VEVRAA”), which covers protected veterans. Note that VEVRAA requires covered contractors and subcontractors to submit to the EEOC an annual VETS-4212 report, which is a workforce data report specific to protected veterans.
On February 21, 2025 the United States District Court for the District of Maryland enjoined the Trump administration from implementing E.O. 14173 and another Executive Order ending DEI programs within the federal government. (E.O. 14151). As we summarized in a previous alert, the Court found that certain provisions of these two executive orders violate the First and Fifth Amendments to the United States Constitution in that they are unconstitutional content-based and viewpoint-discriminatory restrictions on protected speech (First Amendment) and deny Plaintiffs protection under the Fifth Amendment right to Due Process.
A panel of the United States Court of Appeals for the Fourth Circuit lifted the injunction on March 14. As we wrote in a previous alert, in lifting the injunction the panel noted that the challenged executive orders directed government agencies to take certain actions, and there was not yet a basis to conclude that the agencies would do so in an unconstitutional manner.
What Happened?
On January 24, acting U.S. Department of Labor (DOL) Secretary Vincent Micone released an agency Order directing DOL employees to stop “all investigative and enforcement activity” related to E.O. 11246. Secretary Micone stated that the DOL “no longer has any authority” under the rescinded order. The Order also ordered Section 503 and VEVRAA components of any ongoing review or investigation be held in abeyance pending further guidance.
Additionally, news outlets reported that on February 25, 2025, in response to Trump’s mandate to reduce all agency workforces, acting director of OFCCP, Michael Schloss sent a memo to Secretary Micone detailing Schloss’ plans for a reduction in force at OFCCP.
Undoubtedly, the revocation of E.O. 11246, the planned reduction in force at OFCCP, and a host of other executive orders and agency activities are causing confusion among employers and federal contractors and subcontractors who are perplexed about whether to collect, report, or store demographic data about their employees and prospective employees as required in Section 709(c) of Title VII of the Civil Rights Act of 1964 and implementing regulations (including FAR 22.8). On the one hand, the status of the executive orders issued by President Donald Trump is in flux as courts across the country are addressing challenges raised to the legality of the orders; on the other hand federal contracting and subcontracting entities are confronted with managing the legal and business risks associated with “illegal DEI and DEIA policies.” Federal contracting agencies have also begun to announce Federal Acquisition Regulation (FAR) Class Deviations to FAR 22.8 in order to implement the recent executive orders related to DEI. These FAR Class Deviations will result in modifications to existing and future federal contracts, affecting both federal contractors and subcontractors.
What Should Federal Contractors and Subcontractors Do?
Continue Compliance with Other Federal and State Law
Federal contractors and subcontractors must still fulfill obligations under federal and state laws, like those requiring submission of workforce and/or pay data under applicable federal and state law.
Permissive and Mandatory Steps
Federal contractors may continue to comply with the regulatory scheme implementing E.O. 11246 for 90 days from the date EO 14173 was published. How to determine whether to continue developing and maintaining affirmative action plans through April 21, 2025, is a business decision that should be made on a case-by-case basis.
Additionally, OFCCP still has authority to investigate and enforce claims under Section 503 of the Rehabilitation Act or VEVRAA brought by a federal contractor or subcontractor employee.
Ongoing Affirmative Action Obligations
Federal contractors and subcontractors who were in the process of drafting or implementing affirmative action policies should be mindful that E.O. 14173 did not revoke the federal contractor and subcontractor mandates under Section 503 or VEVRAA to take affirmative action for individuals with disabilities and protected veterans. Accordingly, business with at least 50 employees (or those expecting to grow to that size) and with contracts valued at least $50,000 (for coverage under Section 503, or $150,000 under VEVRAA) should continue with instituting affirmative action plans for individuals with disabilities and protected veterans. As referenced above, however, OFCCP has been directed to hold review and enforcement proceedings in abeyance.
Next Steps
Overall, federal contractors and subcontractors should thoughtfully review their employment policies and practices to ensure that decisions, and records about employment decisions, accurately reflect merit-based employee selection and advancement processes. We also recommend waiting for additional details from the agency and seeking legal counseling before making any changes to your existing policies.
Before making any changes to current candidate or employee data collection practices, federal contractors and subcontractors should review their policies and procedures to determine compliance with both federal and state anti-discrimination laws, as well as for data reporting requirements.