Labor & Employment – Page 8

DOJ and FTC Issue Antitrust Guidelines for Business Activities Affecting Workers

Four days before President Trump took office, the Department of Justice (“DOJ”) and Federal Trade Commission (“FTC”) (together, “the Agencies”) under the Biden administration released their “Antitrust Guidelines for Business Activities Affecting Workers” (“The Guidelines”). These Guidelines replace and expand upon antitrust guidance for HR professionals that the Obama administration issued in 2016. The new Guidelines aim to clarify how the DOJ and FTC “identify and assess business practices affecting workers that may violate the antitrust laws.”
In particular, the new Guidelines address the following types of agreements and business practices as violations of antitrust law that may trigger civil penalties or criminal liability:
1. Wage-Fixing and No-Poach Agreements
Wage-Fixing Agreements: These are agreements between businesses (or between individuals of different businesses) to fix wages or other terms of compensation, such as benefits and bonuses. The Agencies say these agreements may be illegal even if they only set a range, ceiling, or benchmark for calculating wages without setting a specific wage.
No-Poach/No-Solicit Agreements: These are agreements between businesses (or between individuals of different businesses) to not recruit, solicit, or hire workers. This can include an agreement to request permission from the other company before trying to hire an employee. The Agencies say an agreement may be illegal even if it does not completely prohibit hiring the other company’s workers. For example, an agreement not to “cold call” workers is considered a no-poach agreement by the Agencies regardless of whether the businesses are allowed to hire the workers who applied for a position without first being solicited.
Notably, the Agencies continue to identify no-poach and non-solicit agreements as potentially per se criminal violations of the antitrust law even after DOJ suffered a series of stinging losses in criminal no-poach trials.[1]
2. No-Poach Agreements Between Franchisor and Franchisee
No-poach agreements in the franchise context occur when franchisors and franchisees agree to not compete for workers. The updated Guidelines expand on the no-poach agreements in the franchise context with the Agencies stating they may be illegal regardless of whether they actually harm workers. The Agencies note that a franchisor can also violate antitrust laws if it organizes or enforces a no-poach agreement among franchisees that compete for workers. Written and/or unwritten agreements between franchisees not to poach, hire, or solicit each other’s workers may also violate state laws, according to the Agencies.
3. Sharing Competitively Sensitive Information
According to the Agencies, sharing competitively sensitive information with your competitors, including terms and conditions of employment or compensation, may also violate the antitrust laws if the information exchange has (or is likely to have) anticompetitive effect. Discussing two hot areas of antitrust focus—information exchanges and algorithmic collusion—the Agencies also state that information exchanges can serve as evidence of a wage-fixing conspiracy, including information exchanges facilitated through an algorithm or some other third party, or can be unlawful. The Agencies go so far as to say that algorithms that generate wage recommendations may be unlawful even if businesses do not strictly adhere to those recommendations.
4. Non-Compete Clauses
The Guidelines say that non-compete clauses that restrict workers from switching jobs or starting a competing business can violate the antitrust laws. As we previously discussed, the FTC issued a rule banning most non-compete agreements, but a federal judge in Texas struck down that rule in July 2024. The Guidelines acknowledge that case, which is now on appeal, but reassert the FTC’s authority to address non-competes on a “case-by-case” basis.
5. Other Employment Conditions
The Agencies say they will also scrutinize any agreements that “impede worker mobility or otherwise undermine competition.” The Guidelines use the following as illustrative examples:

Employee non-disclosure agreements
Training repayment agreements
Non-solicitation agreements with employees
Exit fee and liquidated damages agreements
False earnings claims by employers

Finally, the Guidelines emphasize that antitrust laws that protect employees also apply to independent contractors.
Will the Guidelines Have Staying Power in the new Administration?
Time will tell how the new Guidelines fare under the Trump Administration. On one hand, two Republican FTC Commissioners dissented from issuing the Guidelines—criticizing the timing “mere days before” the transition of power. On the other hand, the Obama administration’s 2016 guidelines survived the first Trump Administration. Previous Trump-appointed leaders of the DOJ Antitrust Division doubled down on the Guidance’s warning and brought the first criminal no-poach cases. The new Guidelines have already lasted a busy three weeks since the inauguration.
Given the continued antitrust focus on labor it remains wise for companies to:

Review hiring and compensation practices that implicate the types of activities the Guidelines cover—especially practices involving no-poach agreements, non-competes, information sharing, or hiring restrictions.
Review form or template agreements for employees and independent contractors to ensure compliance with antitrust laws.
Watch this space to stay up-to-date on the Trump administration’s approach to antitrust guidance and enforcement.

FOOTNOTES
[1] Ruling and Order on Defendants’ Motions for Judgment of Acquittal, United States v. Patel, No. 3:21- cr-220 (D. Conn. Apr. 28, 2023), ECF No. 599.
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Navigating Permanent Establishment Risks in Cross-Border Employment

As businesses continue to expand their operations across borders—by engaging contractors, hiring employees, or initiating other revenue-generating activities overseas—understanding permanent establishment risks becomes critical.
The creation of a permanent establishment (PE)—a tax concept that may trigger a company’s obligation to report, file, and pay corporate taxes in a foreign country—represents an additional administrative and financial obligation.
A foundational understanding of PE considerations can help global employers identify and mitigate potential issues—and better know when to seek appropriate professional guidance.

Quick Hits

Tax connections: Establishing a PE can result in the obligation to file corporate taxes abroad.
Local registration: Although PE is primarily a tax concept, it may coincide with requirements to register with local business authorities as a foreign entity conducting business in the country.

Understanding ‘Permanent Establishment’
A company’s business activities may create a significant economic presence that could trigger tax liability abroad. Usually, tax authorities look for revenue-generating activities in which the foreign company is engaged. Some countries have taken the position that if a key element of a product (including, in some instances, the use of intellectual property) is created on their soil that generates revenue—even outside of the relevant countries—the revenue is taxable. The business activities of a company that will trigger a PE are primarily governed by tax treaties between countries, or, in their absence, by local tax laws.
Key Triggers for Permanent Establishment Obligations

Fixed place of business: Traditionally, having a physical office, branch, factory, or any other fixed place where business activities are conducted, establishes a PE. This may include construction or installation projects that last for a certain period. The modern global economy and the rise of remote work, however, have complicated this definition.
Dependent agents: Engaging a dependent agent—whether an employee or an independent contractor who primarily works for the company and has the authority to enter into contracts on its behalf—may also trigger a PE. The agent’s financial dependence and exclusivity to the company are critical factors.
Rendering services: Providing services such as consulting, engineering, or management in a foreign country for a specified duration (often 183 days within 12 months) may establish a PE. This duration may vary by country, with some having shorter periods.

Remote Work and Permanent Establishment Risk
The COVID-19 pandemic has significantly impacted the concept of PE, particularly with the rise of remote work. Initially, many countries considered remote work arrangements as temporary activities that did not establish a PE. But as remote work has become more permanent, tax authorities have increased their scrutiny of these arrangements. Factors such as whether an employee’s home is at the company’s disposal, whether the company pays for home office expenses, the use of the home address for business purposes, and other indicia of company/employer control over the address are often considered by tax authorities in their PE determinations.
Special Considerations and Examples

Intellectual property: In some countries, such as Germany, creating intellectual property within the country and using it for revenue-generating activities abroad may establish a PE.
Sales activities: While supporting sales activities may not trigger a PE, actively selling within a foreign market likely will.
Country-specific rules: Some countries, such as India, have unique rules where employing individuals within the territory, even for non-revenue–generating activities, may trigger a PE.

Mitigating Risk and Maintaining Compliance
Businesses carefully evaluating their cross-border activities to avoid unintended tax obligations may want to consider the following:

Remote work: Do the benefits of allowing employees to work remotely from another country outweigh the potential tax risks? Employers might also consider pushing back on paying remote work expenses to mitigate PE risks.
Contract structuring: Businesses often attempt to mitigate PE risk by structuring contracts such that significant decisions and signatures occur outside the foreign country. Tax authorities might question this strategy, focusing on the substance over the form of the business activities.
Preparatory and auxiliary activities: Activities considered preparatory or auxiliary, such as administrative tasks, research and development, or marketing support, generally do not establish a PE. However, sales activities that directly generate revenue in the foreign country may fall within a gray area.
Tax professionals: Engaging tax advisors to navigate the complex and evolving landscape of international tax laws and treaties often makes good sense.

Conclusion
Understanding, strategically planning for, and managing permanent establishment risks are crucial steps for businesses operating abroad. While labor and employment attorneys and HR professionals may not specialize in tax law, they play a vital role in issue-spotting and ensuring that potential tax implications are addressed with the help of seasoned tax professionals. By staying informed and proactive, businesses can navigate PE complexities and considerations, avoid unintended tax consequences, and maintain compliance in the global marketplace.

Missing Participants – New State Unclaimed Property Fund Option for Small Balances

Takeaways

On January 14, 2025, the DOL issued Field Assistance Bulletin (FAB) 2025-01, providing sponsors and administrators of ongoing defined contribution plans with a new option for missing participant balances of $1,000 or less: transfer to the state unclaimed property fund associated with the participant’s last known address.

Illinois Takes Aim at Artificial Intelligence in Employment

In a significant move to regulate artificial intelligence (AI) in the workplace, the Illinois Legislature amended the Illinois Human Rights Act (IHRA or “the Act”) to address the growing use of AI at various points throughout the employment process.
Under House Bill 3773, effective January 1, 2026, Illinois will protect prospective and current employees from discriminatory AI practices during recruitment, hiring, promotion, renewal of employment, selection for training or apprenticeship, discharge, discipline, and tenure as well as the terms, privileges, and conditions of employment. The amendment also prohibits the use of zip codes as a proxy for protected classes.
As amended, employers are required to notify employees of the use of AI at any of these touchpoints throughout the employment process. However, the amendment does not provide specific notice requirements or prescribe affirmative steps employers must take to prevent discriminatory outcomes as a result of using AI. Rather, the amendment simply states that the Illinois Department of Human Rights (IDHR) will adopt rules to implement and enforce these new standards at an undefined future date.
Illinois has remained at the forefront of workplace AI regulation since passing the Illinois Artificial Intelligence Video Interview Act in 2019, which requires employers to disclose and obtain consent for the use of AI in analyzing video interviews. Since this time, a growing number of cities and states have joined Illinois in expanding regulatory frameworks governing the use of AI in the employment process. Alongside Illinois, Colorado passed a similar law requiring employers to use “reasonable care” to protect Colorado residents from known or foreseeable risks of “algorithmic discrimination.” New York City has also passed legislation requiring employers to conduct “bias audit[s]” within one year of the use of AI tools and provide certain notices to employees or prospective candidates.
Employers should comprehensively evaluate their employment process and algorithms to determine whether and how AI is used to evaluate prospective and current employee information at any point throughout the employment process.

New California Law Allowing for Workplace Restraining Orders Against Harassment Now In Effect

A new law addressing workplace violence restraining orders, which expands employers ability to obtain temporary restraining orders in non-violent situations of harassment, was signed into law on September 30, 2023, became effective on January 1, 2025.
California Code of Civil Procedure Section 527.8 enables employers to file a petition for a temporary restraining order (TRO) to protect employees from violence or threats of violence. However, as of the beginning of 2025, California Senate Bill No. 428 expanded the law to allow employers to seek TROs to protect against “harassment,” in situations where conduct may not rise to the level of a threat of violence.
Specifically, SB 428 added “harassment” as a reason for seeking a restraining order, which is defined as: “a knowing and willful course of conduct directed at a specific person that seriously alarms, annoys, or harasses the person, and that serves no legitimate purpose. The course of conduct must be that which would cause a reasonable person to suffer substantial emotional distress, and must actually cause substantial emotional distress.”
The legislative history for SB 428 provides the following example of this limitation:
[A] sixty-five-year-old man became obsessed with a twenty-four year-old employee. He repeatedly came to her place [of] business and at times called her up to 100 times for [sic] day for months. He was not threatening her with violence initially. He wanted her attention and told her that he was in love. Until there was a threat of violence which eventually occurred, both the victim and the business felt helpless to protect the victim. Ultimately, this defendant’s repeated rejections lead [sic] him to threaten violence.
Supporters of SB 428 pointed out that employers should not have to wait for conduct to escalate to violence before seeking court intervention. Under the new law, the employer may seek a court order to keep the threatening individual away from the workplace, the employee’s home, and other locations, and prohibit the individual from communicating with the employee in any way. If the individual violates the order, the police are authorized to arrest the individual.
Employers may want to update workplace policies and ensure that all employees are aware of the new protections against harassment. In the event of a complaint of harassment, employers may wish to explore whether a workplace violence restraining order is an appropriate remedy to address the complaint.

District Court Rules Employer’s Withdrawal Liability Cannot Be Based on Post-Rehabilitation Plan Contribution Increases

In Central States, S.E. & S.W. Pension Fund v. McKesson Corp., No. 23-cv-16770, 2025 WL 81358 (N.D. Ill. Jan. 13, 2025), the district court affirmed that a multiemployer pension plan’s calculation of withdrawal liability should not have included contribution rate increases imposed after the plan had implemented a rehabilitation plan.
An employer that withdraws from a multiemployer pension plan is generally liable for its proportionate share of the plan’s unfunded vested benefits. The statutory methods used to calculate the employer’s share are all based in part on the amount of contributions the employer was required to remit to the plan in the years preceding its withdrawal. The employer’s withdrawal liability is payable immediately in a lump sum or pursuant to a statutory payment schedule. The payment schedule is calculated by: (i) determining the employer’s maximum annual payment, (ii) determining how many payments the employer must make to pay off the withdrawal liability with interest, and (iii) capping the number of payments at no more than twenty years (even if the withdrawal liability would not be paid off in twenty years). One of the most important variables used to calculate the employer’s withdrawal liability and its payment schedule is the contribution rate at which the employer was required to contribute to the plan. All else equal, a higher rate will result in greater withdrawal liability and larger annual payments.
For plans that have adopted a funding improvement or rehabilitation plan, the Multiemployer Pension Reform Act of 2014 (MPRA) amended the statute to generally exclude from these calculations any contribution rate increases imposed after 2014 unless the increases: (i) were due to increased levels of work or employment, or (ii) were used to provide an increase in benefits or benefit accruals that an actuary certifies is paid using contributions not contemplated by the funding improvement or rehabilitation plan and that will not imperil the plan from satisfying the requirements of its funding improvement or rehabilitation plan.
The District Court’s Decision
McKesson Corporation was a contributing employer to the Central States Pension Fund. The Fund adopted a rehabilitation plan in 2008 that called for annual increases in McKesson’s contribution rate. The rehabilitation plan did not alter the Fund’s formula for benefit accruals, which called for participants to accrue 1% of all contributions made to the Fund on their behalf during the year. When McKesson withdrew from the Fund, the Fund demanded that it pay $1,437,004.08 per year for 20 years to pay off its withdrawal liability. McKesson commenced arbitration to challenge the assessment, arguing that the Fund should have excluded the contribution rate increases pursuant to MPRA, which would have lowered its required payments to $1,091,819.04 per year for 20 years.
The arbitrator agreed and the District Court affirmed. The Court concluded that the statute was unambiguous and that once a multiemployer pension plan adopts a funding improvement or rehabilitation plan, there is a presumption that any subsequent contribution rate increases are to be excluded from the withdrawal liability calculation unless the plan satisfies one of the two statutory exceptions. The Court rejected the Fund’s argument that it qualified for the second exception because, pursuant to its 1% accrual formula, any increase in contributions resulted in increased benefits to participants. The Court noted that the resulting increase in benefits predated the Fund’s rehabilitation plan, and thus could not satisfy the statute’s requirement that increased contributions be used to pay for additional benefits or benefit accruals, and that in any event, the Fund had not obtained the actuarial certification needed to satisfy the statutory exception. The Court also rejected the Fund’s alternative argument that only the portion of the increased contribution rates used to reduce the Fund’s underfunding should be excluded from the withdrawal liability calculation and that the portion used to pay for increased benefit accruals should not. The Court held that the statute does not make any such distinction, and rejected the Fund’s reliance on a proposed rule by the PBGC that would have interpreted the statute to allow for such a distinction because the PBGC did not end up adopting the rule.
Proskauer’s Perspective
Several other employers have challenged the Fund’s efforts to include post-2014 contribution rate increases in its withdrawal liability calculations, and the Seventh Circuit is expected to resolve the issue later this year. Plans that have taken a similar approach to the Fund will want to monitor these cases, as they may have a significant impact on their approach to calculating employers’ withdrawal liability. In the meantime, for employers that contribute to or have withdrawn from plans that have adopted funding improvement or rehabilitation plans, the decision is a reminder to review closely withdrawal liability calculations to assess whether rate increases are being included in the calculation of withdrawal liability or the corresponding payment schedule.

A Changing Enforcement Landscape Under the New Administration

As the Trump Administration embarks on its second term, significant shifts in government enforcement priorities are quickly taking shape. Not surprisingly, this administration appears to be focusing on immigration, drug and violent crime offenses, and traditional fraud rather than more novel white-collar enforcement. Additionally, it appears as though the Department of Justice will face potential resource issues due to the efforts of the Department of Government Efficiency (DOGE). Whether that is through hiring freezes, resignations resulting from ending remote work, layoffs, and potential buyouts of federal employees, the reduction of resources could have a substantial impact on staffing for white-collar enforcement cases, which tend to be resource intensive. Nonetheless, businesses and industry professionals should be aware of these evolving trends to ensure compliance and readiness for potential government investigations. Below we highlight what we expect to see throughout this administration’s term.

Immigration: The Trump Administration has reaffirmed its commitment to stringent immigration enforcement. Prior to this administration taking office, agencies like the Department of Labor had been focused on underage labor violations and holding businesses accountable for third party staffing companies. Now, however, the focus will shift to the removal of anyone not legally in the United States, likely leading to an increase in ICE raids and I-9 audits, including in places like hospitals, schools and places of worship, all of which used to be safe havens for this type of enforcement activity.
DEI and False Claims Act Liability: President: President Trump’s executive order aimed at eliminating diversity, equity, and inclusion (DEI) policies introduces new compliance challenges for federal contractors and grant recipients. The order reverses federal contracting requirements dating back nearly 60 years, which obligated federal contractors and subcontractors to implement affirmative action programs. The January 21, 2025, executive order requires federal contractors and grant recipients to agree that their “compliance in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decisions” under the False Claims Act (FCA). Second, it requires federal contractors and grant recipients to certify that they do “not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.” The new certification and materiality requirements create heightened FCA risk for clients who participate in government programs and may incentivize whistleblowers to initiate qui tam actions.
Health Care: Health care enforcement, particularly those involving the FCA, is anticipated to continue at a steady pace. During President Trump’s first term, health care enforcement actions increased in his second year and remained steady thereafter, so we can likely expect a similar trend this term. Additionally, the newly established Department of Government Efficiency (DOGE) is taking steps to actively mine data for fraud, particularly in Medicare and Medicaid, which could lead to an increase in enforcement activities in the healthcare sector.
Foreign Corrupt Practices Act: While the Department of Justice (DOJ) achieved record enforcement levels for Foreign Corrupt Practices Act (FCPA) cases during the previous term, President Trump has signed an executive order directing the DOJ to pause criminal prosecutions related to the bribing of foreign government officials under the FCPA and instructing Attorney General Pam Bondi to prepare new guidelines for enforcement. The executive order comes a week after Attorney General Pam Bondi had already announced via a memo that the DOJ would be scaling back laws governing foreign lobbying transparency and bribes of foreign officials. In the memo, Attorney General Bondi also disbanded the National Security Division’s corporate enforcement unit and directed the Department of Justice’s money laundering office to prioritize cartels and transnational crime.
SEC Enforcement: We expect a major scaling back on the SEC’s focus on cryptocurrency, internal accounting and disclosure control violations. President Trump’s nominee as SEC chairman, Paul Atkins, is a known supporter of the crypto industry. Instead, we anticipate a renewed focus on traditional securities fraud cases, including like retail investor protection, Ponzi schemes, and insider trading. Under Chair Gensler, corporate penalties and disgorgement reached record highs, but with a Republican-controlled SEC we are likely to see smaller penalties and an adherence to disgorgement limitations set by the Supreme Court.
Antitrust: Antitrust enforcement is expected to pivot away from merger scrutiny towards addressing concerns related to “Big Tech” and alleged censorship. Additionally, there may be enforcement actions targeting alleged collusion on DEI issues, reflecting the administration’s executive orders and stated policy goals. Industries under high public scrutiny and foreign corporations should be particularly vigilant in preparing for potential agency scrutiny.

As the enforcement landscape continues to evolve, it will be crucial to stay informed and proactive.

Bankruptcy Dollar Amounts Set to Rise Significantly on April 1, 2025

Every three years on April 1, the dollar amounts in the Bankruptcy Code are adjusted to account for inflation. The April 1, 2025, increase will be approximately 13.2%, even larger than the nearly 11% increase three years ago.
Bankruptcy Code section 104 requires the Judicial Conference of the United States to publish the changes at least a month before they take effect. On February 4, 2025, the Judicial Conference published this year’s increase in the Federal Register.[1] The planned 13.2% increase in statutory dollar limits will affect nearly everything in bankruptcy that has a dollar limit, including

the amount of property that a debtor may exempt from the estate,
the maximum amount of certain “priority” claims, such as for employee wages and for deposits for certain undelivered products and services,
the minimum aggregate claims needed to file an involuntary bankruptcy petition, and
the aggregate debt limits used to determine which debtors qualify to file cases under chapter 13 or subchapter V of chapter 11.

Anyone who relies on specific dollar limits in the Bankruptcy Code should note these changes.
Note, subchapter V of chapter 11 previously had a debt limit of $7,500,000, but as we reported earlier, this debt limit reverted on Friday, June 21, 2024, to $3,024,725. The subchapter V debt limit will rise to $3,424,000 on April 1, 2025, as part of this triennial adjustment.
Michigan has dollar limits for its own set of state-specific bankruptcy exemptions, and its dollar limits increase every three years as well. They increase on a different three-year cycle, though. They were last increased March 1, 2023, and are not set to increase again until 2026.
[1] Adjustment of Certain Dollar Amounts Applicable to Bankruptcy Cases, 90 FR 8941-01.

DEI at Stake: Federal Groups Challenge Trump’s Efforts to Curb Inclusivity

The Trump administration is facing a new legal challenge to President Donald Trump’s executive orders (EOs) to eliminate diversity, equity, and inclusion (DEI) programs and initiatives after a group of diversity officers, professors, and restaurant worker advocates filed a lawsuit in a federal court in Maryland on February 3, 2025, alleging the orders are vague and unconstitutional.
Meanwhile, the U.S. Attorney General and the U.S. Office of Personnel Management (OPM) issued memoranda on February 5, 2025, to implement the orders and guide federal agencies on their scope.
Quick Hits

A coalition of DEI advocates has initiated a legal challenge against President Trump’s executive orders to eliminate diversity, equity, and inclusion programs, claiming they are unconstitutional and infringe on free speech rights.
The lawsuit argues that the vague language of the executive orders creates uncertainty that could lead to discriminatory enforcement against those promoting lawful DEI efforts.
The U.S. Office of Personnel Management has provided guidance to federal agencies on interpreting and implementing the recently signed executive orders regarding DEI and DEIA initiatives.
The developments raise questions for employers wishing to implement or continue implementing DEI programs to foster more inclusive workplaces.

DEI Executive Orders
In the first days of President Trump’s second term, he signed two key executive orders to eliminate all “illegal” DEI and diversity, equity, inclusion, and accessibility (DEIA) programs from the federal government and discourage the use of such programs in the private sector: EO 14151, “Ending Radical and Wasteful Government DEI Programs and Preferencing,” and EO 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” and President Trump’s rescission of many of Biden’s executive actions.
EO 14151 directs federal government agencies to end all illegal DEI and DEIA mandates, policies, programs, preferences, and activities in the federal government, including “equity action plans,” “equity action initiatives,” or other programs, grants, or contracts. The EO further eliminates DEI or DEIA performance requirements for employees, contractors, or grantees. The EO further seeks to eliminate “environmental justice” offices, positions, programs, policies, and services across the federal government.
EO 14173 terminates several prior executive actions to promote DEI in the federal government and orders the development of “appropriate measures to encourage the private sector to end illegal discrimination and preferences, including DEI.” The order argued that employers “have adopted and actively use dangerous, demeaning, and immoral race- and sex-based preferences under the guise of so-called” DEI or DEIA programs that violate civil rights laws.
Specifically, the EO directs the attorney general to develop recommendations for using federal civil rights laws and other measures to deter DEI in the private sphere and directs federal agencies to “identify up to nine potential civil compliance investigations of publicly traded corporations, large non-profit corporations or associations, and institutions of higher education with endowments over 1 billion dollars.”
DEI Legal Challenge
On February 3, 2025, a coalition of DEI advocates—the National Association of Diversity Officers in Higher Education, American Association of University Professors, Restaurant Opportunities Centers United, and the Mayor and City Council of Baltimore—filed a lawsuit in the U.S. District Court for the District of Maryland alleging the Trump EOs on DEI and DEIA are vague and unconstitutional.
The lawsuit alleged President Trump’s EOs are unconstitutional, threaten to put their members in the “crosshairs” of federal investigators, and will unlawfully strip federal funding from private entities that wish to continue with DEI efforts.
According to the lawsuit, President Trump’s policies leave their members “with an untenable choice: continue to promote their lawful diversity, equity, inclusion, and accessibility programs, or suppress their speech by ending the programs or policies that the President may consider ‘illegal DEI.’”
Specifically, the suit challenges EO 14173, alleging that it “is designed to, and does, chill free speech on matters of substantial political import,” which is “amplified by its vagueness.” The lawsuit alleges that “[t]he undefined terms leave potential targets with no anchor as to what speech or actions the order encompasses,” the suit alleges. “They also give executive branch officials like the Attorney General carte blanche authority to implement the order discriminatorily.”
The groups raise several constitutional claims, including those based on the First Amendment, the Due Process clause of the Fifth Amendment, and separation of powers, alleging that the orders are vague and suppress their free speech.
The suit names President Trump and several agency heads and acting heads as defendants and is seeking preliminary and permanent injunctions to block the implementation of EO 14151 and EO 14173.
Agency Guidance
On February 5, 2025, OPM Acting Director Charles Ezell issued a memorandum to the heads and acting heads of federal departments and agencies on eliminating DEI and DEIA programs and initiatives, including DEI or DEIA offices, employee resource groups (ERGs), and “special emphasis programs” within the agencies The memo shows how OPM interprets the DEIA orders, providing valuable insights into what the EOs may be interpreted to prohibit for federal contractors, federal money recipients, and even private employers.
The memo directs federal agencies to “eliminate DEIA offices, policies, programs, and practices (including policies, programs, and practices outside of any DEIA offices) that unlawfully discriminate in any employment action” based on “protected characteristics.”
The memo explained that “[u]nlawful discrimination related to DEI includes taking action motivated, in whole or in part, by protected characteristics” and that “a protected characteristic does not need to be the sole or exclusive reason for an agency’s action.” Specifically, the memo stated that unlawful DEI includes practices such as “diverse slate” policies that mandate the composition of hiring panels or candidate pools.
However, the restrictions are not meant to include offices or personnel required by law “to counsel employees allegedly subjected to discrimination, receive discrimination complaints, collect demographic data, and process accommodation,” but “[s]uch functions should be transferred” to other personnel and offices at the agency, the memo stated.
Similarly, the memo says that agencies should “eliminate Special Emphasis Programs that promote DEIA based on protected characteristics in any employment action,” including hiring, promotions, training, and internships or fellowships.
The memo further stated that the orders revoke the authority for ERGs and that agencies should eliminate them to the extent that they promote unlawful discrimination. However, agency heads “retain discretion” to allow programs such as affinity group lunches, mentorship programs, and gatherings “for social and cultural events” so long as such events are not restricted to members or attendance to those of a protected characteristic.
The memo also highlighted the administration’s position that the Biden administration had “conflated” DEI with “longstanding, legally-required” disability accessibility obligations. The memo told agencies to “rescind policies and practices contrary to the Civil Rights Act of 1964 and the Rehabilitation Act of 1973,” except to retain a minimum number of employees to carry out legally required disability and accessibility laws.
DOJ Memo
Also on February 5, 2025, newly confirmed U.S. Attorney General Pamela Bondi issued two memoranda implementing EO 14173. One memo directs the U.S. Department of Justice (DOJ) to review all “consent decrees, settlement agreements, litigation positions (including those set forth in amicus briefs), grants or similar funding mechanisms, procurements, internal policies and guidance, and contracting arrangements” that include “race- or sex-based preferences, diversity hiring targets, or preferential treatment based on DEI- or DEIA-related criteria.”
The memo further directs the DOJ to update its guidance to affirm “equal treatment under the law means avoiding identity-based considerations in employment, procurement, contracting, or other Department decisions” and to “narrow the use of ‘disparate impact’ theories that effectively require use of race- or sex-based preferences.”
The other memo states the DOJ’s Civil Rights Division “will investigate, eliminate, and penalize illegal DEI and DEIA preferences, mandates, policies, programs, and activities in the private sector and in educational institutions that receive federal funds.” The memo further carries out the EO by directing the Civil Rights Division and the Office of Legal Policy to submit a report with recommendations to enforce federal civil rights laws to “encourage the private sector to end illegal discrimination and preferences, including policies relating to DEI and DEIA.”
However, both memos indicated in footnotes that they only apply to programs that “discriminate, exclude, or divide individuals based on race or sex” and “does not prohibit educational, cultural, or historical observances—such as Black History Month, International Holocaust Remembrance Day, or similar events—that celebrate diversity, recognize historical contributions, and promote awareness without engaging in exclusion or discrimination.”
Next Steps
The Trump administration has taken a hardline stance against DEI and DEIA generally, characterizing specific DEI/DEIA practices like race and gender preferences, including such DEI initiatives as diverse slates, as “illegal” or “unlawful discrimination.” These efforts come as the administration is further seeking to define sex as binary and immutable and limit the Supreme Court of the United States’ holding in Bostock v. Clayton County, Georgia, that firing an employee because of the employee’s sexual orientation or transgender status constitutes unlawful sex discrimination under Title VII of the Civil Rights Act of 1964. Further, federal lawmakers have reintroduced the “Dismantle DEI Act,” which seeks to codify President Trump’s DEI orders and prevent future administrations from reinstating similar policies.
The OPM memo confirms that federal agencies must eliminate DEI and DEIA programs and offices, which the administration is already dismantling. Further, those prohibitions extend beyond hiring and promotion practices that take DEIA into account to include softer implementation of DEI, such as through ERGs and Special Emphasis Programs. However, the memo acknowledges that agencies still need personnel to maintain compliance with antidiscrimination and harassment laws, as well as to fulfill accommodation obligations for employees with disabilities covered by applicable law.
At the same time, the DEI executive orders are facing a legal challenge and are likely to face more challenges that raise constitutional and other legal questions about the president’s authority to effectuate such changes, particularly the power to discourage and chill DEI with private employers without explicit statutory authorization and in contravention to existing federal law, such as Title VII. A ruling in favor of the plaintiffs could reinforce the importance of the lawfulness of DEI programs and protect them from future executive actions. Conversely, a ruling favoring the executive order could set a precedent for further restrictions on DEI efforts.
Employers may want to monitor these quickly evolving developments and consider reviewing their own DEI and DEIA practices regarding risk tolerances.

What You Need to Know to Prepare for an ICE Raid or Audit

On January 20, 2025, President Trump signed an executive order declaring a national emergency at the southern border of the United States and allowing for the use of federal funding for border security and the deployment of armed resources to the region. The following day, the Department of Homeland Security issued a directive rescinding policies that limited enforcement in sensitive locations such as churches, schools and hospitals.
Since this directive was implemented, employers should be prepared to handle ICE immigration enforcement actions or inspections at these locations as ICE raids, which target undocumented employees are not announced in advance. Businesses, schools, employees, and students must be ready and well prepared to address immigration actions by ICE during the foreseeable future.
Preparing requires designating a key representative, such as HR, legal counsel or a senior administrator, to interact with ICE officers and training front-line staff to direct officers to the representative. Employers should be prepared with written response plans and should be aware of their rights—and the rights of their employees.

Attorney General Bondi’s Day One Orders for DOJ

Shortly after her confirmation, and just after her swearing-in by Associate Justice Clarence Thomas, U.S. Attorney General Pamela Bondi issued fourteen memoranda that seek to reform the Department of Justice by rescinding prior guidance, issuing new guidance, and establishing new priorities for the nation’s chief law enforcement and prosecuting agency. We examine below the actions taken by Attorney General Bondi.

“Elimination of Diversity, Equity, and Inclusion” (DEI): Two of the memos focus on the elimination of prior Diversity Equity and Inclusion (DEI) efforts at the Department and in the private sector. These directives stem from President Trump’s executive order on January 21, 2025 concerning “Ending Illegal Discrimination and Restoring Merit-Based Opportunity”. The first memo requires “[a]ll Department materials that encouraged or permitted race- or sex-based preferences as a method of compliance with federal civil rights laws” to be rescinded and replaced with new guidance. The second memo directs theDOJ’s Civil Rights Division to “investigate, eliminate, and penalize illegal DEI and DEIA preferences, mandates, policies, programs, and activities in the private sector and in educational institutions that receive federal funds.” For a full summary of the DOJ’s focus on DEI, go to the blog post by our colleagues in Labor and Employment.
Immigration. This memo directs the DOJ to withhold federal funding from, and pursue enforcement actions against, sanctuary cities. The memo cites 8 U.S.C. § 1373which provides that state or location jurisdictions “may not prohibit, or in any way restrict, any government entity or official from sending to, or receiving from, the Immigration and Naturalization Service information regarding the citizenship or immigration status, lawful or unlawful, of any individual.” The memo warns that any sanctuary cities that violate this statute will receive a cut in federal funding cuts.
Elimination of Cartels. This memo directs DOJ personnel to focus its efforts to eliminate cartels and transnational criminal organizations (TCOs). The memo identifies various enforcement mechanisms and resources that may be used in carrying out the directive. Notably, the memo calls for the Department to shift the focus of its prosecutions under the Foreign Corrupt Practices Act (FCPA) to “the criminal operations of Cartels and TCO”. Additionally, the memo removes the requirement that the Fraud Section of the Criminal Division handle all investigations and prosecutions under the FCPA, now permitting any U.S. Attorney’s Office to initiate charges with only 24 hours of advance notice to Main Justice required. It is unclear whether, and to what degree, DOJ will continue its pending corporate investigations and prosecutions and/ or initiate new ones.
Joint Task Force October 7. This memo focuses on the creation of the Joint Tasks Force October 7 to “seek[] justice for victims of the October 7, 2023 terrorist attack in Israel” and address ongoing antisemitic threats in the United States.
Charging, Pleas Negotiations, Etc. This memo outlines general policy regarding charging, plea negotiations, and sentencing for prosecutors. It lays out the Department’s criminal enforcement including immigration enforcement; human trafficking and smuggling; transnational organized crime, cartels, and gangs; and protection of law enforcement personnel. The memo also disbands the Foreign Influence Task Force and the National Security Division’s Corporate Enforcement Unit. [I think we should also note that the guidance is now to charge the most serious, readily provable crime, with the highest “recommended” sentence under the guidelines. Quote the language.]
“Zealous” Advocacy on Behalf of the U.S. This memo directs DOJ to “zealously defend the interest of the United States.” The memo emphasizes the responsibilities DOJ attorneys have to enforce the laws of the United States, but also highlights their responsibility to “vigorously defend[] presidential policies and actions against legal challenges on behalf of the United States.” This memo suggests discipline for DOJ attorneys that decline to sign briefs or appear in court on personal grounds or “otherwise delay or impede the Department’s mission.”
Recession of Biden Administration Guidance. Three of the memos roll back specific directives made by former Attorney General Merrick Garland who served in the Biden Administration, including those that pertained to the interpretation of guidance documents, third-party settlements to non-governmental, third-party organizations, and the prioritization of environmental prosecutions.
Death Penalty. Two memos focus on the death penalty—one memo directs U.S. Attorney’s Offices “to assist local prosecutors in pursuing death sentences under state law against the 37 commuted inmates” who’s sentence former President Joe Biden previously commuted, while the other memo revives the federal death penalty by lifting the moratorium on federal executions and provides for the re-review of pending cases potentially eligible for death.
DOJ Employees Back to the Office. This memo directs DOJ employees to return to work in-person by February 24, 2025 and reinforces President Trump’s January 20, 2025 Presidential Memorandum on the same matter.
Weaponization Work Group. This memo targets “abuses of the criminal justice process, coercive behavior, and other forms of misconduct.” The directive addresses Trump’s January 20 Executive Order concerning “Ending the Weaponization of The Federal Government” by establishing a “Weaponization Work Group,” tasked with reviewing criminal and civil enforcement over the last 4 years, and reporting to the White House “instances where a department’s or agency’s conduct appears to have been designed to achieve political objectives or other improper aims rather than pursuing justice or legitimate governmental objectives.”

Trump Administration Provides Some Guidance on DEI Programs

Following up on the Trump Administration’s series of executive orders and statements regarding diversity, equity, inclusion, and accessibility (DEI or DEIA) programs, on February 5, 2025, both the Office of Personnel Management (OPM) and the United States Attorney General Office issued memoranda reflecting additional guidance as to what may constitute an “illegal” DEI or DEIA program and directing enforcement action.
Specifically, the OPM memo instructs federal agencies to terminate “all illegal DEIA initiatives” and requires the elimination of DEIA offices, policies, and practices. It explains the administration’s view that any DEI program that encourages action based on a protected characteristic is illegal, even if it is not the sole reason for the action. The memo clarifies that it is not targeting agency departments that exist to counsel employees allegedly subject to discrimination or receive and respond to such discrimination complaints (such as the Equal Employment Opportunity Commission (EEOC)).
The memo further addresses Employee Resource Groups (ERG) and states that federal agencies must eliminate any ERG that promotes unlawful DEIA initiatives or otherwise involves programs designed to retain/train/develop their employees based on protected characteristics. It states that affinity and mentor programs are potentially permissible if attendance at and participation in such programs are not restricted by protected characteristics and participants are not segregated by such protected characteristics during events.
While the OPM memo only applies to federal employees, its contents offer insight as to how the administration views and seeks to define “illegal” DEIA initiatives. At its base, it is taking any action, promoting any action, or permitting any action (including participation or the denial of participation) that is premised upon (even partially) a protected characteristic.
The Attorney General memo announces that the Department of Justice will investigate, eliminate and penalize “illegal” DEI and DEIA programs, preferences, mandates, policies, and activities in the private sector and in educational institutions that receive federal funds.
The memo instructs the Civil Rights Division and the Office of Legal Policy to jointly submit a report to the Associate Attorney General by March 1, 2025, containing recommendations for enforcing federal civil rights laws and taking other appropriate measures to encourage the private sector to end illegal discrimination, including DEI and DEIA programs. The report is to include a list of the companies that are the most “egregious” offenders as well as a plan to enforce the requirement to eliminate such programs.
In a clarifying footnote, the memo states that the aim is to end illegal discrimination stemming from diversity initiatives and not to eliminate observances based on history (using Black History Month and Holocaust Remembrance Day as examples of such observances).
Since January 20, 2025, according to various news reports, private sector companies’ reactions have encompassed a wide spectrum, ranging from withdrawal of DEIA programs, doubling down and re-committing to such initiatives, and a more middle-of-the-road approach aimed at reviewing and modifying existing programs and initiatives.
We will continue to monitor what consequences such decisions may have. We again recommend that employers consult DEI experts and labor and employment counsel to assess whether their DEI/DEIA policies and practices may be construed to be out of compliance with existing federal antidiscrimination laws under a Trump-era lens and what changes (if any) in their policies and practices are necessary to ensure compliance or mitigate risk.