OSHA Issues Updated Guidance for Site-Specific Targeting Inspection Program
On April 8, 2025, the Occupational Safety and Health Administration (OSHA) released Directive CPL 02-01-067, updating its Site-Specific Targeting (SST) inspection program. The revised directive outlines procedures for selecting and inspecting general industry establishments with twenty or more employees, based on employer-submitted injury and illness data from calendar years 2021 through 2023. Whereas the prior version of the program essentially targeted all employers and workplaces, this version is more narrowly tailored.
Quick Hits
OSHA’s updated SST program targets general industry establishments (excluding construction) with twenty or more employees, using Form 300A data from 2021–2023.
The program prioritizes inspections at establishments with high or upward-trending injury and illness rates, as well as those that failed to submit required data.
The directive replaces the previous SST guidance (CPL 02-01-064, February 7, 2023) and will remain in effect for two years unless superseded.
Background
The SST program is OSHA’s primary programmed inspection initiative for non-construction workplaces. It leverages objective injury and illness data submitted under 29 C.F.R. § 1904.41 to focus enforcement resources on establishments with elevated rates of occupational injuries and illnesses. The program aims to ensure that employers maintain safe and healthful workplaces by directing inspections where they are most needed. From April 2023 to December 2024, the SST program resulted in 652 inspections, with a higher rate of violations and noncompliance compared to other non-construction programmed inspections, reinforcing the program’s effectiveness.
Key Changes in the 2025 SST Directive
Inspection selection is now based on 2023 Form 300A data for high-rate establishments, and 2021–2023 data for establishments with upward-trending rates. The low-rate and non-responder lists are also generated using 2023 data, updating from the previous use of 2021 data. The directive clarifies procedures for scheduling, prioritizing, and documenting inspections, and provides updated guidance on the use of the SST OSHA Tools Dashboard for managing inspection lists.
Inspection List Selection Criteria
OSHA will generate inspection lists for:
High-rate establishments: Selected based on 2023 DART (Days Away, Restricted, or Transferred) rates, with separate thresholds for manufacturing and non-manufacturing sectors.
Upward-trending establishments: Identified by rates at or above twice the private-sector national average in 2022, with continued annual increases from 2021–2023.
Low-rate establishments: Randomly sampled to verify the accuracy of reported data.
Non-responders: Randomly sampled from establishments that failed to submit required 2023 Form 300A data.
Scheduling and Inspection Procedures
Area offices (AOs) are responsible for maintaining and documenting inspection cycles, using the SST web-based application to generate and update inspection lists. Inspections are comprehensive in scope and may be expanded to include health hazards based on prior inspection history or industry classification. During inspections, compliance officers will review OSHA 300 logs, 300A summaries, and 301 incident reports for 2021–2023, and evaluate the adequacy of the employer’s safety and health management system. Establishments that received a comprehensive inspection within the past thirty-six months, are public-sector employers, or are participants in OSHA’s Voluntary Protection Programs (VPP) or Safety and Health Achievement Recognition Program (SHARP) are generally excluded from the inspection list. Small employers that are not required to submit their OSHA Form 300A electronically will not be subject to the program.
Deferrals and Deletions
SHARP and VPP participants are deferred or deleted from programmed inspection lists for specified periods. Establishments with ongoing OSHA On-Site Consultation visits may receive deferrals of up to ninety days. AOs must document all deletions and deferrals, including rationale and supporting information.
State Plan Impact
States with OSHA-approved state plans must adopt inspection targeting systems at least as effective as the federal SST program. States are required to notify OSHA of their intent to adopt identical or different policies within sixty days and implement any changes within six months.
Conclusion
The updated SST directive reflects OSHA’s ongoing commitment to data-driven enforcement and targeted inspections in general industry. Employers may want to ensure timely and accurate submission of injury and illness data and maintain robust safety and health management systems to mitigate the risk of inspection and potential citations.
The Employment Strategists Ep 13 – Hot Weather, Hot Takes, Dress Code in the Workplace [Podcast]
David T. Harmon and Mariya Gonor explore how employers can keep their policies compliant, respectful, and inclusive—from gender-neutral standards to religious accommodations and ethnicity. They also examine real cases where dress code violations by employees led to legal action.
This podcast is not intended, and should not be taken, as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only and you are urged to consult a lawyer concerning your own situation with any specific legal questions you may have. The content reflects the personal views and opinions of the participants.
Florida’s CHOICE Act Offers Employers Unprecedented Tools for Non-Compete + Garden Leave Agreements
Takeaways
The Florida Legislature’s recently passed CHOICE Act allows covered non-compete and garden leave agreements to extend for up to four years — double the current amount of enforcement time.
The Act makes it significantly easier for employers to obtain an injunction and enforce covered agreements.
Employers looking to take advantage of the Act will need to comply with its technical requirements.
Article
The Florida Legislature passed the Florida Contracts Honoring Opportunity, Investment, Confidentiality, and Economic Growth (CHOICE) Act on April 24, introducing the most sweeping changes to Florida’s restrictive covenant framework in years and offering employers unprecedented tools to protect their valuable business interests. If enacted, the Act will take effect on July 1, 2025.
Who Does the CHOICE Act Cover?
The CHOICE Act applies to covered employees or independent contractors earning more than twice the annual mean wage in the Florida county where either (i) the covered employer’s principal place of business is located or (ii) where the covered individual resides if the covered employer’s business is located outside of Florida. Therefore, depending upon the Florida county, the compensation threshold could range anywhere from $80,000 to nearly $150,000. Notably, the Act expressly excludes licensed healthcare practitioners as defined in Section 456.001, Florida Statutes, from its scope. But the Act does not prohibit enforcement of — or otherwise render unenforceable — restrictive covenants with healthcare practitioners under existing Florida restrictive covenant law, subject to the exclusions of Section 542.336, Florida Statutes, which prohibits restrictions between physicians who practice a medical specialty and an entity that employs or contracts with all physicians who practice that same specialty within the same Florida county.
Covered Non-Compete Agreements
Under the CHOICE Act, non-compete agreements with covered employees or contractors can extend up to four years post-employment. In contrast, under Florida’s current non-compete statute, employee-based non-competes lasting longer than two years are presumed to be unreasonable and unenforceable. To be enforceable under the CHOICE Act, covered non-compete agreements must:
Be in writing and advise the worker of their right to consult legal counsel, providing at least seven days for review before execution.
Include a written acknowledgment from the worker confirming receipt of confidential information or substantial client relationships during employment.
Specify the non-compete period will be reduced day-for-day by any nonworking portion of a concurrent garden leave period, if applicable.
Covered Garden Leave Agreements
The CHOICE Act also codifies enforcement of certain garden leave arrangements, allowing employers to require covered employees or contractors to provide advance notice — up to four years—before employment or contract termination. During this notice period, employees remain on the employer’s payroll at their base salary and benefits but are not entitled to any discretionary compensation. During the first 90 days of the garden leave period, an employer may require the worker to continue working. But a worker may engage in nonwork activities at any time thereafter.
To be enforceable under the Act, a covered garden leave agreement must:
Be in writing and advise the worker of their right to consult legal counsel, providing at least seven days for review before execution.
Include a written acknowledgment from the worker confirming receipt of confidential information or substantial client relationships during employment.
Not obligate the worker, after the first 90 days of the notice period, to provide any further services to the employer and allow the worker to engage in nonwork activities. (The worker may also work during the remainder of the notice period for another employer so long as the covered employer has provided permission to the worker.)
How Are Covered Agreements Enforced?
The CHOICE Act provides robust remedies for employers seeking to enforce covered agreements. For covered entities, the Act requires strict enforcement and makes it significantly easier for employers to obtain injunctions. Upon application, courts are required to issue preliminary injunctions to enforce a covered agreement unless the employee or contractor can demonstrate, by clear and convincing evidence, the agreement is unenforceable or unnecessary to prevent unfair competition. Further, if an employee or contractor engages in “gross misconduct,” an enforcing employer may reduce the salary or benefits provided to the employee or “take other appropriate action” without such activity constituting a breach of the covered agreement. An employer who prevails in its enforcement action is entitled to recover its monetary damages and attorney’s fees.
What Should Employers Do Now?
The CHOICE Act represents a significant development in Florida’s restrictive covenant law, offering employers enhanced mechanisms to safeguard their business interests through enforceable non-compete and garden leave agreements. Employers seeking to avail themselves of the new Act should take immediate steps to review and modify existing agreements or, if appropriate, draft new agreements.
Filing EEO-1 Reports in 2025: Key Points Employers Need to Know
Every year, private sector employers with 100 or more employees, and federal contractors with 50 or more employees who met certain criteria, are required to submit workforce demographic data to the federal Equal Employment Opportunity Commission (EEOC). Such employers may also be required to file similar reports under applicable state laws. The federal filing is known as the EEO-1 Report. While the authority for the report comes primarily from a federal statute, recent Executive Orders and changing EEOC Guidance surrounding race, gender, DEI and affirmative action have caused some employers, including manufacturers, to question what their current reporting responsibilities are for this year. To that end, below are several key points that employers filing EEO-1 reports need to know:
Private employers that meet the threshold criteria noted above are still required to file EEO-1 reports. The EEOC announced that the 2024 EEO-1 Component 1 data collection opened on May 20, 2025. The deadline for submitting and certifying 2024 EEO-1 Component 1 Reports is June 24, 2025.
Note that this is a shorter collection period for employers and according to the EEOC, this period will not extend past the June 24, 2025 deadline.
Unlike past years, the EEOC will only be sending electronic notices to filers. No notifications about this collection period will be sent via postal mail. This includes letters of non-compliance after the collection period has closed.
Previously, employers were allowed to submit employee information under a non-binary designation. That has since been removed. Employers must report employees’ biological sex meaning they must select male or female when reporting this information.
Note that no organization may use the information collected in its EEO-1 report to justify treating employees differently based on their race, sex, or any other protected characteristic.
Employers subject to the filing requirement should take the steps necessary to meet next month’s reporting deadline. Employers that require assistance with EEO-1 reporting and related compliance with such laws, should consult competent legal counsel.
This post was co-authored by Labor + Employment Group lawyer Bryce Simmons.
Preliminary Injunction of Recent DoD + GSA Memo Means Federal Contractors Must Continue to Comply with Biden-Era Project Labor Agreement EO + FAR
Takeaways
The injunction vacates federal agencies’ memoranda exempting certain construction projects from mandatory PLA requirements.
Executive Order 14063 (EO) and related Federal Acquisition Regulations requiring PLAs on large-scale federal construction projects remain in effect.
Despite the injunction, the Trump Administration is likely to continue scaling back the use of PLAs on federally funded projects.
A D.C. federal judge granted the North America’s Building Trades Union and Construction Trades Council’s request to enjoin the recent memoranda exempting certain construction projects from Executive Order (EO) 14063. North America’s Building Trades Unions (NABTU) v. Department of Defense et al, No. 1:25-cv-01070 (DDC May 16, 2025).
Executive Order 14063 is a Biden-era rule requiring every federal contractor to enter into a Project Labor Agreement on federal construction projects over $35 million. The Federal Acquisition Regulatory Council implemented this rule in 2023 as a Federal Acquisition Regulation. In February 2025, the Department of Defense (DOD) and Federal General Services Administration (GSA) issued memoranda purportedly eliminating this requirement. The North America’s Building Trade Union’s filed suit seeking to enjoin the DOD and GSA memoranda.
The court held the two unions demonstrated a substantial likelihood of establishing that the memoranda are contrary to law and violate the Administrative Procedure Act in deviating from the EO requirements without “providing adequate justification or following the proper exception process.” The court further noted that agencies are bound by EOs until they are “rescinded or overridden through lawful procedures.” Accordingly, the DoD and GSA memoranda were vacated.
PLA Basics
A PLA is a pre-hire, collective bargaining agreement that contractors enter with one or more labor organizations establishing terms and conditions of employment for a specific construction project. The PLA can include dispute resolution procedures, wages, hours, working conditions and bans on work stoppages.
Under the EO, non-union contractors may bid for and work on covered federal PLA projects, but they must abide by the terms of the PLA (and the applicable terms of collective bargaining agreements referenced therein) for the duration of that project. For contractors already signatory to a union contract, the PLA is an additional layer to the existing union agreement. The non-union contractor need not sign on to union agreements for other work not covered by the PLA.
Executive Order 14063
Former President Joe Biden signed Executive Order 14063, Use of Project Labor Agreements for Federal Construction Projects, on Feb. 4, 2022. That order provided that, with certain exceptions, government contractors and subcontractors working on federal construction projects that meet the threshold of $35 million must “become a party to a project labor agreement [PLA] with one or more appropriate labor organizations.”
The order explained that PLAs “avoid labor-related disruptions on projects by using dispute-resolution processes to resolve worksite disputes and by prohibiting work stoppages, including strikes and lockouts.”
On Dec. 22, 2023, the FAR Council, after issuing a proposed rule and receiving public comment, issued its final rule implementing the EO, with minimal changes to its proposed regulations.
Trump Administration Impact
The lawsuit highlights ongoing legal challenges over the Biden Administration’s mandatory PLA requirements. Recently, in MVL USA Inc. v. United States, several construction companies filed a lawsuit in the U.S. Court of Federal Claims challenging the legal authority of federal agencies to mandate PLAs under the EO. 174 Fed. Cl. 437 (Fed. Cl. 2025). The court found in favor of the construction companies, holding the PLA mandate, as applied in those cases, violated full and open competition under the Competition in Contracting Act because it excludes responsible offerors declining to enter PLAs, even when the data indicates an exception should be made. While the D.C. Circuit noted in NABTU v. DoD that the holding was limited to the specific procurements in that case, the case will likely serve as precedent when future bidding challenges arise.
Nonetheless, President Trump is expected to make efforts to revoke or scale back the mandate during his administration. On March 14, 2025, for example, he issued EO 14236 (Additional Rescissions of Harmful Executive Orders and Actions) which revoked Biden-era EO 14126 (Investing in America and Investing in American Workers) that encouraged federal agencies to prioritize projects involving PLAs, among other pro-labor agreements. EO 14236 does not impact the PLA mandate, but it does indicate the Trump Administration will, at the very least, minimize the use of PLAs going forward.
Although the district court decision is subject to appeal, the federal PLA mandate is still in effect. Construction employers should therefore anticipate that large-scale federal projects may require PLAs that comply with EO 14063’s requirements.
Federal Court Strikes Down Key Portions of EEOC Harassment Guidance
On May 15, a Texas federal court vacated portions of the Equal Employment Opportunity Commission’s (EEOC) Enforcement Guidance on Harassment in the Workplace, concluding that the agency’s expanded interpretation of “sex” under Title VII exceeded its statutory authority (Texas, et al. v. EEOC, 2:24-CV-173).
This decision has immediate, nationwide implications for employers, particularly with respect to workplace policies addressing harassment based on gender identity and sexual orientation.
Background and Scope of the Ruling
The EEOC’s guidance, adopted in 2024 by a narrow 3-2 vote, faced internal opposition, notably from the Acting Chair Andrea Lucas, who objected to provisions treating denial of access to facilities consistent with an individual’s gender identity and intentional misuse of names or pronouns as harassment under Title VII. President Trump’s Executive Order titled “Defending Women from Gender Ideology Extremism and Restoring Biological Truth to the Federal Government,” excluded gender identity from the definition of sex and directed federal agencies to align policies with “biological truth.” As a result, the EEOC was instructed to amend any conflicting guidance. However, due to a lack of quorum, the agency has been unable to formally rescind or revise the guidance. In response to the Executive Order, Lucas declared a change in the agency’s priorities, emphasizing the protection of women from sex-based discrimination by rolling back policies associated with gender identity. These changes involve deactivating the agency’s “pronoun app,” removing non-binary gender markers from discrimination charge forms, and purging EEOC resources of materials that promote gender ideology.
In its ruling, the Texas court determined that certain provisions — specifically all language defining “sex” in Title VII to include “sexual orientation” and “gender identify,” harassment based on sexual orientation and gender identity, and all language defining “sexual orientation” and “gender identity” as a protected class — exceeded the EEOC’s statutory authority and conflicted with existing law. As a result, the court vacated these sections on a nationwide basis.
Vacated Guidance
The vacated guidance of these provisions likely means the EEOC will not be filing litigation alleging discrimination on the basis of sex or gender identity. The EEOC has already withdrawn a number of cases alleging discrimination on the basis of gender identity and has marked these sections on its website to help identify which provisions are no longer operative. This includes guidance and examples related to harassment based on sexual orientation or gender identity, such as intentional misgendering and denial of access to sex-segregated facilities aligned with an individual’s gender identity.
Implications for Employers
Employers should still proceed with caution where these issues arise. The US Supreme Court has interpreted Title VII of the Civil Rights Act of 1964 to prohibit discrimination rooted in sex-based stereotypes, beginning with its decision in Price Waterhouse v. Hopkins in 1989. This interpretation was further expanded in 2020 with Bostock v. Clayton County when the Supreme Court held that adverse employment actions against individuals because of their sexual orientation or transgender status are forms of sex discrimination. However, given the Texas decision, future clarification is likely. Moreover, there are a number of state and local laws that expressly prohibit discrimination on the basis of sexual orientation and gender identity.
Employers should closely monitor further developments from the EEOC and the courts. In the interim, it is advisable to review workplace policies and training materials to ensure they are consistent with applicable federal and state law and to seek legal guidance on handling complaints related to gender identity and sexual orientation.
Workplace Strategies Watercooler 2025: Mental Health Matters—Managing Issues at Work [Podcast]
In this installment of our Workplace Strategies Watercooler 2025 podcast series, John Stretton (shareholder, Stamford) and Maria Greco Danaher (shareholder, Pittsburgh) discuss mental well-being and mental health issues in the workplace. Maria and John highlight the challenges employers face when dealing with employees who have mental health conditions, and explore common issues, such as anxiety, depression, addictive behaviors, introversion, and discrimination concerns. The speakers provide tips on how to recognize, discuss, and manage anxiety among employees. They also share effective practices for promoting a professional and emotionally supportive work environment while properly handling accommodation requests under the Americans with Disabilities Act and addressing potential legal concerns.
How Will Federal Bills Eliminating Tax on Tips and Overtime Impact Employers?
Takeaways
The House and Senate bills differ in key ways, including that while the House bill would provide a deduction on tips and overtime earnings, the Senate bill provides a deduction for tips only.
It remains to be seen which measures will pass in Congress. President Trump is expected to sign a bill that provides some sort of tax relief on tips or overtime pay.
Employers could consider restructuring compensation policies.
Tax breaks on overtime pay and tipped earnings passed the House on May 22, 2025, as part of the “One Big Beautiful Bill Act” (H.R. 1). The tax deductions provided under the sprawling reconciliation bill would be temporary, however, making these earnings deductible only for tax years 2025 through 2028.
H.R. 1 is part of the broader reconciliation package being hammered out in Congress. The legislation still needs to be approved by the Senate, which recently passed its own standalone bill providing a permanent tax deduction on tipped earnings. The Senate bill does not include tax relief on overtime pay (although several other Senate bills to provide a tax break on overtime are pending).
Both the House and Senate bills restrict the tax deduction to workers earning less than $160,000 per year. That is the current IRS threshold for defining “highly compensated employees” under IRC section 414(q)(1)). This is a different standard than the Department of Labor’s criteria for defining the “highly compensated employee” exemption under the Fair Labor Standards Act (FLSA). Also, under both bills employees’ tips and overtime pay would still be reportable and remain subject to payroll taxes.
There are key differences between the House and Senate bills, however. It remains to be seen which (if either) will make its way to the president’s desk. The reconciliation bill must now go before the Senate, where several Senate Republicans have indicated their intention to push for significant changes before passing the bill. Lawmakers aim to bring the bill to a vote by August. President Donald Trump has expressed his support for eliminating taxes on tips and overtime. He is expected to sign such a measure if passed by Congress.
“One, Big, Beautiful Bill”
The reconciliation package creates a temporary deduction from gross income for premium pay for overtime hours worked. The deduction applies only to compensation paid in excess of an employee’s regular rate of pay, as required under Section 7 of the FLSA. There is no cap on the amount of overtime earnings that an employee may deduct.
H.R. 1 also creates a temporary deduction from gross income for tips earned by workers — both statutory employees and self-employed independent contractors — in “traditionally and customarily tipped industries,” typically the hospitality industry (restaurants and hotels) but there are other businesses where tips are common (such as barber shops and hair salons). The legislation extends an employer tax credit for Social Security taxes paid on tips, currently applicable only to food or beverage service employees, to include tips customarily earned by employees providing beauty services such as hair care, nail care, and spa treatments.
To deter improper reclassification of regular pay as tips to qualify for the deduction, the treasury secretary would be directed to provide, within 90 days of enactment, a list of industries where tips have customarily been earned on or prior to Dec. 31, 2024.
A “qualified tip” is one paid voluntarily by the customer or client, not subject to negotiation. Earnings from mandatory service charges assessed automatically to customers would not be deductible.
Businesses would need to separately report tips and overtime earnings on employees’ W-2 forms and, for non-employees, report the portion of payments that are designated as tips, a requirement that also extends to “third party settlement organizations” such as gig economy companies.
Senate No Tax on Tips Bill
The freestanding Senate bill would provide tipped employees with a permanent tax deduction of up to $25,000 per year for qualified tips. (H.R. 1 does not cap the amount of tipped income that workers can deduct.)
Qualified tips would include tips received by employees in connection with delivering or serving food or beverages for consumption (if tipping is customary), and tips earned from providing beauty services (if tipping is customary). Like H.R. 1, the Senate measure extends the employer tax credit to beauty service establishments.The Senate measure also requires the treasury secretary to provide a list of occupations entitled to the deduction, namely, industries that “traditionally and customarily received tips on or before December 31, 2023.”
The Senate bill provides a tax deduction for tipped employees only; it does not extend the deduction to independent contractors.
The Senate-approved No Tax on Tips Act (S. 129) passed by unanimous consent on May 20, 2025, and now heads to the House for consideration.
State Laws
The pending federal bills would allow deductions from federal income taxes only. Several state legislatures in both blue and red states have introduced bills to create a deduction from state and local taxes for tips or overtime pay. These provisions vary. Some measures, for example, would eliminate tax on cash tips but retain the tax on credit card tips. Some impose affirmative reporting requirements on employers.
Alabama currently exempts hourly workers’ overtime pay from state income tax and withholding. The Alabama legislation was a temporary inflation relief measure passed for the tax year beginning Jan. 1, 2024. It was extended last year to exempt overtime pay earned through June 30, 2025.
Impact on Employers
With a tax deduction on overtime pay, employees would likely be more willing to work overtime or take on extra shifts. Ironically, Congress enacted the FLSA’s overtime provisions in 1938 to prevent overwork and to spread employment to more workers and reduce unemployment. To accomplish this, the FLSA discouraged employers from requiring employees to work overtime by making it more costly. Times have changed, and the ability to earn overtime wages not subject to tax may assist with reducing chronic staffing shortages in healthcare and other industries. This could result in higher overtime costs, particularly for public employers whose workers may be less willing to take compensatory time in lieu of overtime, as the FLSA allows.
Employers might restructure compensation to provide employees more take-home pay without incurring higher payroll costs by reducing pay for non-overtime hours and permitting more overtime work that is tax-free — a win for employers and employees. No tax on overtime could also result in requests from employees to be reclassified as non-exempt because more of their earnings will be tax-free. An exempt employee earning $75,000, for example, where the full wages are subject to tax, might prefer to be a non-exempt employee and earn $50,000 in regular wages and $25,000 in overtime, not subject to income tax. Employers may be hesitant to undertake drastic changes to their pay practices, however, if the tax benefits are short-lived.
As for no-tax-on-tips, the hospitality industry will feel the biggest impact if the measure is passed. Tipped workers will benefit by having most of their earnings in tips. As such, the deduction would deflate the ongoing efforts of worker organizations that have been advocating at the state and local level to eliminate use of the tip credit and efforts by some employers to eliminate all tipping at restaurants and use service charges or higher prices instead.
The tax deduction also could be a boon for recruitment, raising the appeal of tipped work and easing the strain of ongoing labor shortages in the industry. In states that permit back-of-the-house workers (such as cooks) to participate in a tip pool (permitted under federal law if no tip credit is taken), the tax deduction may also benefit kitchen workers. But, in other states, it may widen the asserted unfairness between servers and kitchen staff regarding compensation. Hospitality employers may need to consider a review of their compensation practices as the favorable tax treatment for tips will increase the divide between the earnings of tipped and non-tipped workers.
Do Pigs Fly? New York Appears to Help Employers by Amending Pay Frequency Claim Remedies
In a move that appears to offer some relief to New York employers, Governor Kathy Hochul recently signed budget legislation that included amendments to New York Labor Law (NYLL) which will put limits on the damages available to manual workers who are paid less frequently than weekly — in violation of the NYLL’s pay frequency requirements. Here is what has happened and what employers need to know.
Background
As we previously reported, employers with New York-based employees have been facing a dramatic increase of pay frequency claims, specifically under Section 191(1)(a) of the NYLL, which requires private employers to pay manual workers their wages no less frequently than weekly (in other words, every week, and not every two weeks or bimonthly).
Historically, this pay frequency requirement did not get much attention until 2019, when, in Vega v. CM & Associates Management LLC, a New York state appellate court determined that manual workers: (i) had a private right of action for any pay frequency violation (i.e., enforcement was not reserved solely to the Commissioner of Labor); and (ii) could recover liquidated damages equal to the amount of the untimely paid wages, plus interest, attorneys’ fees, and costs.
The decision set up for plaintiffs’ attorneys a veritable all-you-can-eat litigation buffet — and they have gorged. Easy pickings for them, with the recovery of attorneys’ fees serving as additional manna. Their clients — manual workers who actually have been paid their wages in full, albeit not weekly, but rather every two weeks or bimonthly — could, through the easy proof of untimely scheduled payroll, still recover as liquidated damages an amount equal to 100% of the wages already paid but untimely received. To illustrate: for the worker paid every two weeks, the liquidated damages would equal the amount paid for the late-paid first week of that two-week payroll period.
The smorgasbord was enhanced by the COVID-19 pandemic and the advancement of remote work, as unwitting employers from outside New York, who did not have weekly pay frequency requirements at home, failed to adjust their payroll schedule for manual workers based in New York. Risk for employers also was compounded by the uncertain, fact-intensive inquiry required to determine who qualifies as a “manual worker,” which the New York Labor Law defines as “a mechanic, workingman, or laborer,” and the New York Department of Labor (NYDOL) has broadly interpreted to mean workers who spend at least 25% of their working time engaged in physical labor.
In January 2024, however, the gravy train was rocked by a different New York appellate court (in Grant v. Global Aircraft Dispatch, Inc.), which disagreed with the Vega court and held that the NYLL afforded manual workers no “private right of action to recover liquidated damages, prejudgment interest, and attorneys’ fees where a manual worker is paid all of his or her wages biweekly, rather than weekly[.]”
Legislative Response and Potential Impact
This split in the New York appellate courts remained unresolved, but the New York legislature appears to have tried to address it with the recently enacted amendments (at p. 54) to the NYLL. Specifically, under the amendments, when manual workers are regularly paid no less frequently than semi-monthly, liquidated damages may be recoverable, but are limited, as follows:
For a first-time violation, the employer will be liable for “no more than 100% of the lost interest” for any late wage payment.
For untimely payments made after May 9, 2025, the employer may be liable for liquidated damages equal to 100% of any untimely paid wage if, after May 9, 2025, the employer has been “subject to one or more previous findings or orders for violations of [the manual worker pay frequency provision] for which there is no proceeding for administrative or judicial review . . . is pending and the time for initiation of such proceeding [has] expired and relating to employee performing the same work.
This means that in any currently pending action, and on any claim made after May 9, 2025, a manual worker-claimant cannot recover, as liquidated damages, the amount of the wages challenged as untimely paid, unless the employer has one or more fully determined pay frequency violations relating to employees performing the same work as claimant after May 9, 2025.
In short, the amendments do nothing more than eliminate the liquidated damages remedy against first-time violators. As a result, manual workers may be less inclined to litigate only to recover lost interest. However, here is what the amendments did not do:
They could have gone further. The amendments did not codify Grant, thus suggesting that manual workers (and perhaps non-manual workers) have a private right of action for pay frequency violations. Notably, however, the amendments did not directly address or modify any of the statutory language that prompted the Grant court to hold that no such private right of action actually exists.
Attorneys’ fees also appear to be recoverable, which will likely keep plaintiffs’ attorneys motivated to pursue pay frequency claims irrespective of the absence of liquidated damages.
The amendments apply only to manual workers, leaving open the question as to whether non-manual workers have a private right of action for liquidated damages under the NYLL for pay frequency violations.
What Should Employers Do?
With the amendments, New York looks to have given some measurable relief to employers that are confronting (or may confront in the future) Vega-inspired litigation. Employers will certainly appreciate the ability to avoid liquidated damages, but the amendments are unlikely to staunch the flow of manual worker pay frequency claims against them.
Accordingly, employers with New York-based employees still need to be vigilant and take protective measures.
Any employer currently defending a manual worker’s pay frequency claim should not only invoke the amendments to limit exposure, but also, in the first instance, cite Grant and assert the defense of no private right of action. As noted above, the amendments may not completely defuse that defense (perhaps even more so in any pay frequency claim brought by a non-manual worker).
Employers should audit their pay practices to ensure that all NYLL pay frequency requirements are met, especially for manual workers. As noted above, the hardest part of any such analysis (which should be done with assistance of legal counsel) is determining whether an employee falls within the broad definition of “manual worker” under the NYLL.
Large employers also might consult legal counsel to determine whether they are eligible to (and, if so, whether they should) apply to the NYDOL for permission to pay manual workers bi-weekly, rather than weekly, as per the NYLL.
It’s Time Again for Employer’s to File Their EEO-1 Reports
This is a reminder that the 2024 EEO-1 Component 1 data collection opened on Tuesday, May 20, 2025. All employers who have at least 100 employees and employers who are federal government contractors who have at least 50 employees are required to complete and submit an EEO-1 Report (a government form that requests information about employees’ job categories, ethnicity, race, and gender) to the Equal Employment Opportunity Commission (EEOC) and the U.S. Department of Labor every year. The deadline to file the 2024 EEO-1 Component 1 report is Tuesday, June 24, 2025.
Per the EEOC, “The collection period will not extend beyond the Tuesday, June 24, 2025 “Published Due Date” deadline. Additionally, beginning with the 2024 EEO-1 Component 1 data collection, all communications sent to filers will be electronic. No notifications about the 2024 collection will be sent to filers via postal mail. To meet this deadline, the EEOC strongly encourages eligible filers to begin the filing process as soon as possible.”
Additionally, the EEOC has stated that it will not provide a “failure to file” period as offered in previous years, and employers should not expect an extension. For more information please visit here.
Navigating Earn-Out Disputes: Key Considerations for Private Funds
Times of economic volatility often increase disparities between a seller’s valuation and the buyer’s valuation of the same company. Earn-out provisions are one tool frequently used to address such disparities. An earn-out provision requires the buyer to make one or more post-closing payments (the “earn-out consideration”) to the seller if the company being sold (the “earn-out entity”) meets certain milestones during a defined post-closing period (the “earn-out period,” which is usually between one to five years). These milestones may include EBITDA, gross revenue, net income, the expansion of the business into defined geographic or product areas, or other metrics.
Earn-out provisions can be fertile grounds for post-closing disputes between the seller and buyer. Specifically, earn-out provisions often lead to disputes as to whether the identified milestones were satisfied during the earn-out period, and if so, the amount of earn-out consideration that the buyer is obligated to pay. First, the seller and buyer approach earn-out provisions with competing incentives. The seller is motivated by the opportunity to receive further consideration for the transaction. Meanwhile, the buyer may be incentivized to argue that the identified milestones have not been met, and thus the seller is not entitled to any additional consideration. The seller may respond to such arguments by arguing that the buyer failed to make appropriate efforts to manage the earn-out entity in a manner to meet those milestones.
As earn-out provisions are often used in private equity merger and acquisition transactions involving portfolio companies, the management team is often left with the task of interpreting the earn-out provision and applying it to the performance of the portfolio company. While it is impossible to eliminate the risk of a dispute related to an earn-out provision, there are steps that can be taken to mitigate that risk, both pre- and post-closing.
One category of disputes that can result from an earn-out provision are disputes related to the milestone(s) identified in the earn-out provision. Earn-out milestones often rely upon metrics such as EBITDA, gross revenue or net income. When drafting the earn-out provision, the parties may believe that determining whether such well-recognized accounting metrics have been achieved will be straightforward. However, once control of the earn-out entity passes to the buyer, it may alter the company’s accounting practices or make other operational decisions that impact the company’s financial performance. Meanwhile, earn-out provisions often require the buyer to produce post-closing financial documents to the seller so it may analyze whether the milestones have been met. The seller’s review of those financial documents can fuel arguments that accounting practices or other vehicles have been used to prevent the milestones from being met.
The best way to mitigate this particular risk is for the parties to focus on the precise language in the earn-out provision related to the milestones. They should consider whether to include any limitations on the buyer’s power to alter accounting practices, such as the use of inter-company debt to finance the earn-out entity, and the company’s operations. The buyer and seller should consider including examples of how the milestones will be calculated and what specific documents the buyer will need to provide to the seller to review those post-closing calculations.
In two recent cases, Fortis Advisors LLC v. Johnson & Johnson (“Johnson & Johnson”) and Shareholder Representative Services LLC v. Alexion Pharmaceuticals (“Alexion”), the Delaware Court of Chancery has emphasized the use of “bespoke” earn-out provisions to mitigate this category of risk. The court noted that earn-out provisions must be tailored to the specifics of the company involved in the transaction and its products and emphasized the importance of counsel and their clients working closely together to craft language that addresses the details of how the company’s operations impact the milestones.
Another category of risk lies in the seller’s argument that the buyer purposely or negligently impacted the earn-out entity’s performance to preclude it from meeting the identified milestones and thus avoiding the payment of some or all of the earn-out consideration. Earn-out provisions frequently require the buyer to use “commercially reasonable efforts,” “good faith efforts,” “best efforts” or some similar variation in their operation of the earn-out entity. In Johnson & Johnson, the court noted that “there is no agreement in case law over whether [these phrases] create different standards” and Delaware courts have viewed some of these provisions, especially those that include the term “reasonable,” as “largely interchangeable.”
The threshold issue related to this particular risk is to identify whether the earn-out consideration is expected unless the earn-out milestones are not satisfied, or whether the earn-out consideration is required only after the milestones have been met. The difference in approach impacts which party has the burden of proof in any litigation.
In addition, the risk related to “best efforts” provisions or similar terms can be mitigated by including explicit language about what the buyer needs to due to satisfy the “best efforts” clause. Obviously, the analysis of whether certain actions satisfy a “best efforts” clause is factually dependent, and the more detail the parties can agree to include in the earn-out provision, the less risk they will have a dispute whether the buyer has satisfied such a provision. Another alternative is to avoid such terms completely and instead include language that prevents the buyer from taking actions with the intent or purpose to prevent the earn-out entity from meeting the milestones.
In sum, the use of an earn-out provision usually comes with increased risks of a post-closing dispute. The best way to mitigate that risk is to invest time in the discussions and drafting of the earn-out provision and to ensure that the provision is specifically tailored to the earn-out entity and its products.
Additional Authors: Seetha Ramachandran, Nathan Schuur, Robert Sutton, Jonathan M. Weiss, William D. Dalsen, Adam L. Deming, Adam Farbiarz and Hena M. Vora.
NLRB Stalemate Continues: Supreme Court Keeps Wilcox Sidelined For Now
On May 22, 2025, the U.S. Supreme Court issued a decision granting President Trump’s emergency application to stay D.C. Circuit Court orders that reinstated National Labor Relations Board (“NLRB” or the “Board”) member Gwynne A. Wilcox and Merit Systems Protection Board (“MSPB”) member Cathy A. Harris. This stay will remain in effect while the D.C. Circuit Court continues to review whether their removals were lawful.
Earlier this year (as previously reported), Trump’s controversial firing of Wilcox sparked legal battles. Wilcox sued, arguing that her dismissal violated federal law that only permits removal of Board members for “neglect of duty or malfeasance.” The D.C. Circuit Court reinstated Wilcox, restoring the Board to a quorum of at least three members. However, on April 9, 2025, the Supreme Court temporarily blocked her return, foreshadowing its latest decision.
The Supreme Court’s ruling underscores the President’s power to remove executive officials at will, drawing a sharp distinction between independent federal agencies and the Federal Reserve. While the Court allowed Trump to remove officials from the NLRB and MSPB, it made clear that this authority does not extend to the Federal Reserve, which it described as a “uniquely structured, quasi-private entity” warranting special independence.
In a forceful dissent, Justice Kagan – joined by Justices Sotomayor and Jackson – argued that the ruling undermines the long-standing precedent set by Humphrey’s Executor v. United States, 295 U.S. 602 (1935), which protected members of bipartisan, expert-led agencies like the NLRB from at-will dismissal by the President.
The Supreme Court’s decision on Wilcox’s reinstatement highlights the shifting balance of power between the executive branch and independent agencies. The D.C. Circuit will weigh the merits of the legality of these removals, with a forthcoming appeal to the Supreme Court likely to follow. The outcome could reshape the legal framework governing administrative agencies for years to come. For now, the NLRB remains without a quorum, which will continue to logjam federal labor law proceedings until a third NLRB member is appointed and confirmed.