Illinois Ruling on Civil Liability for Employers Confirms Risks to Companies
Since their inception, the Illinois Workers’ Compensation Act (820 ILCS 305/1 et seq.) and Workers’ Occupational Diseases Acts (820 ILCS 310/1 et seq.) (the “Acts” or “Act”) have offered some certainty and predictability with respect to injuries sustained in the course of employment. The Acts provide a clear framework within which injured employees may pursue claims against their employers and ensures they can receive payment of their medical expenses, lost wages associated with their injuries, and compensation for any permanent disabilities and/or disfigurement sustained, without having to prove fault on behalf of the employer. In exchange, the employer pays for these benefits and enjoys some predictability and limitations on the allowable damages under the Acts, assured that the Acts offer the exclusive remedy against the employer, such that no civil lawsuits, where awards may include pain and suffering and be much higher in value, may be brought against them for the same injury. Generally, an employer would be entitled to the exclusive remedies provided under the Acts, assuming that the injury or disease was accidental, arose during and in the course of employment, and is compensable under the Acts. 820 ILCS 310/5(a), 11 (West 2022); 820 ILCS 305/5(a), 11 (West 2022). So, understandably, when an employer is sued in a civil court for a work-related injury, they may look to the protection of the Acts, to defend the claim and argue for dismissal based on the Acts’ exclusivity provisions.
The Acts contain a repose period of 25 years for injury or disability caused by exposure to asbestos. See 820 ILCS 310/1(f) and 820 ILCS 305/1(f). Thus, prior to 2019, no claims could be brought under the Acts more than 25 years after the date of last exposure to asbestos. In the 2015 landmark case of Folta v. Ferro Engineering, 43 N.E. 108 (Ill. 2015), Mr. Folta claimed his mesothelioma was caused, at least in part, from exposure to asbestos while working for his employer, Ferro Engineering, for whom he last worked in 1970. Mr. Folta was diagnosed with mesothelioma over 40 years later in 2011, and filed a civil lawsuit against Ferro (and others) in state court. Ferro moved to dismiss the civil suit, arguing that Mr. Folta’s exclusive remedy was found in the Workers’ Occupational Disease Act, and could not be brought as a civil action against it. However, Mr. Folta argued that because more than 25 years had passed since his exposure to asbestos at Ferro, his claim would be barred by the 25-year repose period and is not “compensable” under the Act, leaving him without any remedy if not allowed to proceed in state court. The Illinois Supreme Court affirmed that the Act’s 25-year statute of repose acts as a complete bar, and yet still held that the Act provided Mr. Folta’s exclusive remedy against his employer. The Court noted the question of “compensability” turned on whether the type of injury sustained would fall within the scope of the Act, not whether there is an ability or possibility to recover benefits under the Act. Given that Mr. Folta’s injury was compensable, the Act provided his exclusive remedy, and his claim under the Act was time-barred by the 25-year statute of repose.
While acknowledging that the outcome may be a harsh result as to the plaintiff, leaving him with no remedy against his employer for his latent disease, the Court in Folta noted its job is not to find a compromise, but to interpret the statutes as written, suggesting if a different balance should be struck, it would be the duty of the legislature to do so. And that is what happened in 2019, when the Illinois Senate and House introduced two new statutes carving out exceptions to the exclusive remedy provisions for both the Workers’ Compensation and Workers’ Occupational Diseases Acts. Under the new statutes, the Acts no longer prohibit workers with latent diseases or injuries from pursuing their claims after the repose period in civil court. The new statute added to the Workers Occupational Disease Act, 820 ILCS 310/1.1, states:
Permitted civil actions. Subsection (a) of Section 5 and Section 11 do not apply to any injury or death resulting from an occupational disease as to which the recovery of compensation benefits under this Act would be precluded due to the operation of any period of repose or repose provision. As to any such occupational disease, the employee, the employee’s heirs, and any person having standing under the law to bring a civil action at law, including an action for wrongful death and an action pursuant to Section 27-6 of the Probate Act of 1975, has the nonwaivable right to bring such an action against any employer or employers.
When Governor J.B. Pritzker signed the bill into law in May 2019, he issued a statement, indicating the purpose of the revised legislation is to allow workers to “pursue justice,” given that in some cases, the 25-year limit is shorter than the medically recognized latency period of some diseases, such as those caused by asbestos exposure. The impact on employers, however, was not addressed. And employers were left with questions, including critically, whether this new change to the law can apply retroactively, when the statute itself is silent as to the temporal scope. Having relied on the provisions of the Acts in place at the time for basic and critical business decisions, including procurement of appropriate insurance and establishment of wages and benefits, employers cannot now go back in time and change those decisions to offset the increased liability which they now face. Further, following Folta, employers have a vested defense in the Acts’ exclusivity and statute of repose provisions. So, retroactive application of the new statutes could impose new liabilities not previously contemplated and could strip defendant employers of their vested defenses, violating Illinois’ due process guarantee. Anticipating plaintiffs’ firms would file latent disease claims against employers in civil court going forward, and with decades of case law to support prospective application only, it was just a matter of time before the issue reached further judicial scrutiny.
And that brings us to the Illinois Supreme Court’s January 24, 2025 decision in the matter of Martin v. Goodrich, 2025 IL 130509. Mr. Martin worked for BF Goodrich Company (“Goodrich”) from 1966 to 2012, where he was exposed to vinyl chloride monomer and vinyl chloride-containing products until 1974. He was diagnosed with angiosarcoma of the liver, a disease allegedly caused by exposure to those chemicals, in December of 2019, passing away in 2020. His widow filed a civil lawsuit against Goodrich alleging wrongful death as a result of his exposure, invoking the new exception found in section 1.1 of the Act to bring the matter in civil court. In response, Goodrich moved to dismiss the case based on the Act’s exclusivity provisions, arguing that section 1.1 did not apply because Section 1(f) was not a statute of repose. Alternatively, Goodrich argued that using the exception to revive Martin’s claim would infringe its due process rights under the Illinois Constitution. The district court denied Goodrich’s motion, and Goodrich asked the court to certify two questions to the US Court of Appeals for the Seventh Circuit for interlocutory appeal: first, whether section 1(f) is a statue of repose for purposes of section 1.1, and second, if so, whether applying section 1.1 to Martin’s suit would violate Illinois’ constitutional due process. Finding the questions impact numerous cases and Illinois’ policy interests, the Seventh Circuit certified the questions, and added a third question: if section 1(f) falls within the section 1.1 exception, what is the temporal reach? Answering these questions, the Illinois Supreme Court held that (1) the period referenced in section 1(f) is a period of repose, (2) the exception in section 1.1 applies prospectively pursuant to the Statute on Statutes, and therefore, (3) it does not violate Illinois’ due process guarantee.
But what did the Court mean when it held that the exception in section 1.1 applies prospectively? Goodrich argued that prospective application would mean that the exception in section 1.1 does not apply to this case, because the last exposure was in 1976, before the amendment was made, and the defendant had a vested right to assert the statute of repose and exclusivity provisions of the Act, which would prohibit the civil suit. The Court pointed out, however, that the amendment did not revive Mr. Martin’s ability to seek compensation under the Act, such that the employer’s vested statute of repose defense would apply. Rather, the amendment gave him the ability to seek compensation through a civil suit outside of the Act. So, the question becomes only whether the employer has a vested right to the exclusivity defense, such that applying section 1.1 would violate due process. The Court held that the exclusivity provisions of the Act are an affirmative defense, such that the employer’s potential for liability exists unless and until the defense is established. And a party’s right to a defense does not accrue until the plaintiff’s right to a cause of action accrues. Applying the new statute prospectively, the Court found the cause of action could be filed in civil court, because the relevant time period for considering applicability of the affirmative defense of the Act’s exclusivity is when the employee discovers his injury. Since Mr. Martin’s cause of action accrued when he was diagnosed in December of 2019, which was after section 1.1 was added, Goodrich did not have a vested exclusivity defense, so Mr. Martin’s claim may proceed without violating due process.
While the court did not apply the new statute retroactively, the effect is essentially the same from the employers’ perspective, as latent injury claims will be allowed to proceed in civil court, as long as the injuries were discovered after expiration of the repose period and after the new statutes went into effect in May of 2019. This was not the outcome defendant employers were hoping to receive, but it is what the Court decided. So, unless or until the legislative tides change again, Illinois employers should be aware of the potential for civil suits for employees’ latent injury or disease claims.
New TCPA Consent Requirements Out the Window: What Businesses Need to Know
The landscape of prior express written consent under the Telephone Consumer Protection Act (TCPA) has undergone a significant shift over the past 13 months. In a December 2023 order, the Federal Communications Commission (FCC) introduced two key consent requirements to alter the TCPA, with these changes set to take effect on January 27, 2025. First, the proposed rule limited consent to a single identified seller, prohibiting the common practice of asking a consumer to provide a single form of consent to receive communications from multiple sellers. Second, the proposed rule required that calls be “logically and topically” associated with the original consent interaction. However, just a single business day before these new requirements were set to be enforced, the FCC postponed the effective date of the one-to-one consent, and a three-judge panel of circuit judges unanimously ruled that the FCC exceeded its statutory authority under the TCPA.
A Sudden Change in Course
On the afternoon of January 24, 2025, the FCC issued an order delaying the implementation of these new requirements to January 26, 2026, or until further notice following a ruling from the United States Court of Appeals for the Eleventh Circuit. The latter date referenced the fact that the Eleventh Circuit was in the process of reviewing a legal challenge to the new requirements at the time the postponement order was issued.
That decision from the Eleventh Circuit, though, arrived much sooner than expected. Just after the FCC’s order, the Eleventh Circuit issued its ruling in Insurance Marketing Coalition v. FCC, No. 24-10277, striking down both of the FCC’s proposed requirements. The court found that the new rules were inconsistent with the statutory definition of “prior express consent” under the TCPA. More specifically, the court held “the FCC exceeded its statutory authority under the TCPA because the 2023 Order’s ‘prior express consent’ restrictions impermissibly conflict with the ordinary statutory meaning of ‘prior express consent.’”
The critical takeaway from Insurance Marketing Coalition is that the TCPA’s “prior written consent” verbiage was irreconcilable with the FCC’s one-to-one consent and “logically and topically related” requirements. Under this ruling, businesses may continue to obtain consent for multiple sellers to call or text consumers through the use of a single consent form. The court clarified that “all consumers must do to give ‘prior express consent’ to receive a robocall is clearly and unmistakably state, before receiving a robocall, that they are willing to receive the robocall.” According to the ruling, the FCC’s rulemaking exceeded the statutory text and created duties that Congress did not establish.
The FCC could seek further review by the full Eleventh Circuit or appeal to the Supreme Court, but the agency’s decision to delay the effective date of the new requirements suggests it may abandon this regulatory effort. The ruling reinforces a broader judicial trend after the Supreme Court’s 2024 decision overturning Chevron deference – and curbing expansive regulatory interpretations.
What This Means for Businesses
With the Eleventh Circuit’s decision, the TCPA’s consent requirements revert to their previous state. Prior express written consent consists of an agreement in writing, signed by the recipient, that explicitly authorizes a seller to deliver, or cause to be delivered, advertisements or telemarketing messages via call or text message using an automatic telephone dialing system or artificial or prerecorded voice. The agreement must specify the authorized telephone number and cannot be a condition of purchasing goods or services.
This ruling is particularly impactful for businesses engaged in lead generation and comparison-shopping services. Companies may obtain consent that applies to multiple parties rather than being restricted to one-to-one consent. As a result, consent agreements may once again include language that covers the seller “and its affiliates” or “and its marketing partners” that hyperlinks to a list of relevant partners covered under the consent agreement.
A Costly Compliance Dilemma
Many businesses have spent the past year modifying their compliance processes, disclosures, and technology to prepare for the now-defunct one-to-one consent and logical-association requirements. These companies must now decide whether to revert to their previous consent framework or proceed with the newly developed compliance measures. The decision will depend on various factors, including the potential impact of the scrapped regulations on lead generation and conversion rates. In the comparison-shopping and lead generation sectors, businesses may be quick to abandon the stricter consent requirements. However, those companies that have already implemented changes to meet the one-to-one consent rule may be able to differentiate the leads they sell as the disclosure itself will include the ultimate seller purchasing the lead, which provides the caller with a documented record of consent in the event of future litigation.
What’s Next for TCPA Compliance?
An unresolved issue after the Eleventh Circuit’s ruling is whether additional restrictions on marketing calls — such as the requirement for prior express written consent rather than just prior express consent — could face similar legal challenges. Prior express consent can be established when a consumer voluntarily provides their phone number in a transaction-related interaction, whereas prior express written consent requires a separate signed agreement. If future litigation targets these distinctions, it is possible that the courts may further reshape the TCPA’s regulatory landscape.
The TCPA remains one of the most litigated consumer protection statutes, with statutory damages ranging from $500 to $1,500 per violation. This high-stakes enforcement environment has made compliance a major concern for businesses seeking to engage with consumers through telemarketing and automated calls. The Eleventh Circuit’s ruling provides a temporary reprieve for businesses, but ongoing legal battles could continue to influence the regulatory landscape.
For now, businesses must carefully consider their approach to consent management, balancing compliance risks with operational efficiency. Whether this ruling marks the end of the FCC’s push for stricter TCPA consent requirements remains to be seen.
How ERISA Litigators Strengthen Plan Compliance and Risk Management – One-on-One with Jeb Gerth [Video]
Strategic ERISA (Employee Retirement Income Security Act) plan design and administration require more than just technical compliance—they call for foresight into how plans will hold up under legal scrutiny.
In this one-on-one interview, Epstein Becker Green attorney Jeb Gerth, an experienced litigator in ERISA cases, joins George Whipple to explore the critical role a litigator plays in reinforcing plan integrity. Jeb explains how incorporating a litigation perspective into the planning and administration process acts as a “stress test,” helping to identify areas that might attract legal challenges or class action claims. He also discusses key vulnerabilities in ERISA plans, such as discretionary decision-making and inadequate documentation, and how addressing them proactively can reduce the risk of costly disputes.
With class actions often resulting in significant judgments and additional exposure through fee-shifting structures, Jeb provides practical, real-world guidance on preparing plans to withstand these challenges. From uncovering hidden risks during early plan administration to enhancing fairness and clarity in plan documents for both participants and courts, this conversation offers essential strategies for leaders looking to protect their organizations from potential litigation while fostering trust and compliance.
VICTORY FOR TRAVEL + LEISURE: Court Dismisses Claim Over Prerecorded Calls
A bit of background.
The plaintiff Vernicky Hodge purchased two timeshare properties from the Defendant Travel + Leisure. In making those purchases, Hodge agreed to make certain monthly payments. Although Hodge would make her payments on time most of the times, sometimes she would payment her payments a few days late. In those instances, Hodge alleges Defendant would call her cell phone (sometimes three times a day), to collect on her missed/late payment. (I’m sure we’ve been here, right?). According to Hodge, Defendant used prerecorded voicemails to contact her. Based on receipt of the prerecorded calls, Hodge filed suit against Travel + Leisure.
Now, here’s the key: the use of prerecorded calls. This is the crux of Hodge’s claim, and once again, we’re seeing a plaintiff sue over receiving prerecorded calls. As Eric has mentioned countless times, companies that use prerecorded calls to reach consumers really ramp up their risk exposure.
As a litigator, I come across many prerecorded call cases and it is quite unfortunate.
However, there is a good outcome here. Stick with me.
Defendant moved to dismiss Hodge’s TCPA claim arguing that Hodge failed to sufficiently allege that Defendant used prerecorded voicemails to contact her.
At the pleading stage, a defendant can move to dismiss a claim if there are not sufficient factual allegations supporting an element of the claim.
Here, Plaintiff sues Travel + Leisure for violations of Section 227(b) of the TCPA, which makes it a violation to use an ATDS or an artificial or prerecorded voice without prior express consent.
Because an ATDS is not at issue, Plaintiff must allege sufficient allegations to demonstrate a prerecorded call or an artificial voice was used.
The Court noted Hodge only made two factual allegations regarding prerecorded calls:
Hodge alleged that “she would be left prerecorded messages purportedly from ‘Sarah from Wyndham Vacation Resorts’ ” when declining to answer Defendant’s calls.
Hodge alleged that “[o]n answered calls, Plaintiff would similarly be greeted by an artificial or prerecorded voice message.”
Other than these allegations, Hodge simply alleged, in conclusory fashion, that Defendant used prerecorded and/or artificial voice messages and placed dozens of calls to Plaintiff’s cell phone using a prerecorded voice message. But the Court found that these allegations are merely conclusory and conclusory allegations are not sufficient to state a claim. A complaint must contain sufficient factual allegations.
Therefore, the Court dismissed Hodge’s TCPA claim, with leave to amend.
Unfortunately, it is rare that a Court will dismiss a claim based on a pleading deficiency without giving the plaintiff another try to remedy the deficiency. But regardless, this is a win for Travel + Leisure.
We will keep a close eye on this one to see if it makes it passed the pleadings stage.
Hodge v. Travel + Leisure Co., Case No.: 5:24-cv-06116-EJD, 2025 WL 327741 (N.D. Cal. Jan., 29, 2025)
Yes, New FCC Recordkeeping Requirement is Likely Dead– But You Should Follow It Anyway. HERE’S WHY.
So this is a really important blog post and I am sorry to drop it on a Friday but with ASW suddenly on my agenda wanted to get it out today.
A ton of folks have been asking us whether the FCC’s new recordkeeping rules are going into effect with the one-to-one rule thrown out. It is actually an interesting question because the Court was not asked to toss that part out directly, but it seeming did so as part of its Vacatur order anyway.
Troutman Amin, LLP‘s read is that the FCC’s recordkeeping ruling is dead along with the rest of the one-to-one rule– but get yourself a lawyer for legal advice and don’t just rely on this blog.
Regardless, even assuming the recordkeeping rule is dead–and it likely is– you should still follow the requirement of ingesting a complete record of consent (including a screenshot or some sort of visualization) each and every time you buy a lead.
Why?
I could give you 1,000 examples. But I am only going to give you one.
FTC v. Day Pacer, 2025 WL 25217 (7th Cir. 2025).
Remember these guys?
A couple of lead generators chased by the FTC to death and beyond.
They got hit for $28MM in penalties and the FTC chase their companies and then their personal bank accounts and then their estates when one of them died.
Now the appellate court told the FTC not to chase after dead people’s estates, but beyond that it agreed with the FTC on its liability findings.
But what had these guys actually done wrong?
They bought opt in data and made calls to try to generate leads and then sold transfers to buyers.
In other words they were lead generators.
The problem for them is when the FTC came knocking on the door they couldn’t produce the underlying lead record.
And please understand, they DID produce lead DATA.
They produced URLs and everything. But the Court rejected this evidence as incomplete and inadmissible– the forms themselves were not provided. And on that basis alone these guys got crushed.
Again, please understand– these companies were destroyed not because they did anything illegal but because they couldn’t prove they had acted legally.
The burden is on the caller to prove consent. Always has been. That burden cannot just be met with a string of data. Somebody has to come forward with the consent record.
If you work with trustworthy partners that always stand behind you and can produce millions of consent records on request 7 years from now… fine.
Otherwise you are at risk if you are not absorbing full consent records.
I know lead generation has lived a charmed life. Folks are so used to doing things the wrong way and getting away with it that my words sometimes fall flat and even seem insincere against the weight of their real-world experience.
But let those who have ears to hear hear.
Investigations: Employers Can Avoid Getting in Their Own Way with Some Planning
At some point, every employer will need to investigate an employee’s complaint. An investigation is an important tool that employers can use to fix a workplace problem and minimize liability. Or, an investigation can create extra risk for employers over and above the risk of the original workplace issue. That extra risk arises when an employer makes mistakes, does not have or follow its own policies, or fails to follow through with an investigation.
Get a Checklist
To avoid increasing your risks, consider having an all-inclusive checklist you can use any time an investigation is needed. The checklist can include items such as:
Investigative plan
IT/litigation hold notice and/or preliminary steps
Issues list
To do list
Witness list
Documents reviewed list (including email or internet searches)
Witness scripts– examples:
Upjohn warning for lawyers to explain that the company lawyer does not represent individual employees and to explain attorney-client privilege
Johnnie’s Poultry warning for union settings to explain that participation is voluntary and there will be no retaliation for answers or refusal to answer
Interview notes
Witness statements
Call, email, and voice mail lists
Issue resolution list
Remedial action list
Draft of what will become the final report
Look at Policies
In addition to preparing a checklist, you should also review any policies that relate to investigations. First, do employees know how to report issues? Be sure your policies communicate the rules but are also clear about how employees should report complaints and other issues you want to know about. Further, as part of the complaint procedure, it should be very clear who is responsible for receiving reports of complaints or other wrongful conduct. But you should not stop there—train employees who receive complaints on what to do when they get one. They should also find opportunities to remind everyone how to make a report, and consider documenting these reminders so that employees cannot claim that they did not know how to report a problem in the workplace.
Second, consider whether you need an escalation policy—guidance for when the investigation should be escalated beyond the human resources department. You should think about whether to escalate a complaint that involves
an employee on the leadership team or a board member,
an employee in the human resources department,
a “bet the company” allegation,
an accusation that an internal investigation might be biased,
an allegation of criminal behavior, or
an issue that the employer already knows is leading to litigation.
In these cases, you want to think about whether you need an independent investigator from outside the company to avoid bias or fairness concerns. Having a policy regarding when to do so makes the decision even easier.
Before you Start the Investigation
After deciding to conduct an investigation, there are a number of additional decisions to make:
Who will the investigator be? This person will be the employer’s “star witness” if the matter ever reaches litigation. Has the investigator ever investigated anything else or been trained to investigate? It is worth considering whether a lawyer will be an ideal witness.
Will the investigation be conducted under attorney-client privilege? In many cases, an employer will want to use the investigation as an exhibit proving it was reasonable and to avoid liability, so this takes careful planning from the outset of the investigation.
If a lawyer is directing the investigation, what is considered attorney work product and what is not? Will the report be protected or will there be a separate memo with legal advice? Plan this out in advance.
How will potential conflicts of interest be handled during the investigation?
Will the interviews be conducted in person or remotely? Do you want to record them?
Will the investigator ask witnesses to sign witness statements or will the investigator write up memos of interview summaries?
Closing Out the Investigation
After the investigator completes the investigation and goes back through the checklist to make sure that they have resolved all of the issues on the list and checked off all of the to-do items, the final steps are to (1) take appropriate action, (2) notify the complaining employee and the employee who has been accused of wrongful conduct of the results, and (3) document the investigation with the final report. Often, employers take care of step one and then skip over steps two and three. These steps each play an important role in winding up the investigation.
Step One: Appropriate Action
If the investigation found a policy violation, who determines the appropriate action and who will make sure it is implemented? Not every policy violation merits termination but the punishment should send the message that this behavior is not okay. If the investigation found no policy violation, you may not need disciplinary action. You may, however, want to retrain employees or supervisors about policies. You also may want to reassign employees to avoid future conflicts (assuming you can do so without it looking like retaliation). You may want to calendar a follow up with the complainant in a few weeks to make sure there are no further issues and no perceived retaliation.
Step Two: Notify Employees of the Results
Following up and notifying employees of an investigation’s results can make an employee feel heard, and increase trust of the employer. When an employer does not circle back with the complainant or waits a long time to do so, employees tend to look outside for help. Not surprisingly, plaintiffs’ lawyers often raise lack of follow up and closure during litigation. The EEOC’s 2024 Enforcement Guidance on Harassment in the Workplace recommends that, following an effective investigation, both the complainant and the alleged harasser are informed about the employer’s conclusions and any actions it plans to take as a result of the investigation. If an employer has conducted a reasonable investigation and then taken remedial action, why not tell the employee who made the complaint that the employer has taken these actions? If the employee files a lawsuit, they will find out anyway.
Step Three: Document the Investigation
This is the most important step employers can take to protect themselves from liability if you end up in litigation. The final report should be any employer’s Exhibit A in a lawsuit. The report should describe the allegations, summarize the interviews, documents, and other evidence, and discuss the employer’s policies. The report should also identify the facts that are consistent and that conflict among the witnesses’ statements and/or the documents. Finally, the report should draw a conclusion about what happened based on the credible evidence. Do you want the investigator to decide whether a policy was violated or just provide the facts to someone who will make that decision? Do you want the investigator to recommend action (and risk having the company not follow it)?. The report or the investigative file should reflect Steps One and Two.
It’s not hard to find legal opinions describing investigations gone wrong. Employers that take some time to put together a consistent method for conducting investigations, review and remind employees of their policies, and make some important decisions at the outset of each investigation will reap the benefits later of such careful planning.
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What Employers Need to Know About President Trump’s Removal of NLRB Member Gwynne Wilcox and Two EEOC Commissioners
In a significant move, President Donald Trump has fired a member of the National Labor Relations Board (“NLRB” or “Board”) without reference to the statutory protections that typically shield Board members from being removed without cause. While incoming administrations, regardless of party, have historically taken steps to populate federal appointments with individuals aligned with their goals and policies, the Trump Administration is doing so at a pace and intensity rarely, if ever, seen before. President Trump’s removal of NLRB member Gwynne Wilcox (“Wilcox”) has immediate impact on employers, unions, and workers, as it leaves the Board without the quorum needed to issue decisions in labor cases. The President’s authority to remove Board members will be tested in court and could impact the future of the NLRB and the landscape of U.S. labor law.
Background
In September 2023, the Senate confirmed Wilcox to a second five-year term through the end of August 2028. Former Chairman and Democrat appointee Lauren McFerran’s (“McFerran”) term expired on December 16, 2024, after the Senate voted not to advance her nomination, signaling the Republican-led Senate’s intention to change the Board’s composition. At the time of McFerran’s non-renewal, there was already a vacancy on the Board, leaving two possible spots for President Trump to fill upon taking office. President Trump’s removal of Wilcox on January 27, 2025, now leaves three of the five seats for NLRB members vacant and eliminates what would have otherwise been a Democratic majority on the Board. The only current members (for now) are Republican appointee Marvin Kaplan, who the President named the Chair of the NLRB on Inauguration Day, and Democrat appointee David Prouty, whose term is set to end in August 2025.
Impact on the NLRB and Employers
The immediate consequence of Wilcox’s removal is the NLRB’s lack of a quorum, meaning it cannot issue decisions and will leave many pending cases in limbo. The Board’s authority to issue decisions will be halted until a quorum is restored, either through the Senate confirming a new member appointed by President Trump or Wilcox being reinstated.
For employers, this development could be a double-edged sword. On one hand, the freeze in NLRB decisions may delay rulings that could have been unfavorable to employers with pending cases before the Board. On the other hand, during the Biden administration, the Board issued a number of decisions that were favorable for unions and expanded protections for employee rights under the National Labor Relations Act. Without any further rulings, those decisions will remain the law for now. It is widely expected that a Trump NLRB would look to overturn much of that precedent and issue pro-employer decisions. The Board’s ability to do that is now hindered until the member seats are filled.
President Trump’s Constitutional Justifications
President Trump’s legal justification for the removal of Wilcox hinges on a 2020 Supreme Court decision in Seila Law LLC v. CFPB. In Seila Law, the Supreme Court held the executive authority did not extend to removal of members of multi-member agency boards that are: 1) balanced on partisan lines; and 2) perform legislative and judicial functions but not executive functions. Such a “removal shield” prohibits the president from exercising executive authority to remove members from agency boards if meeting these conditions. In firing Wilcox, President Trump specifically cited Seila Law, claiming the NLRB does not qualify for the exception because it is not balanced on partisan lines and because it exercises executive powers, such as issuing regulations and pursuing enforcement actions in federal court.
President Trump’s interpretation will be challenged in federal court. Wilcox has already indicated her intention to pursue “all legal avenues” to contest her removal, citing long-standing Supreme Court precedent that protects NLRB members from being fired without cause. In addition to addressing the extent of presidential powers to remove NLRB members, the legal fight over Wilcox’s firing ultimately may provide a precedent for companies and the numerous lawsuits that have been filed over the past year pursuing constitutional challenges against the NLRB, including on the basis that the Board’s members and administrative law judges are unconstitutionally shielded from removal by the president.
Simultaneous Overhauls at the EEOC
President Trump’s recent actions are not limited to the NLRB. On January 28, 2025, President Trump also fired Jocelyn Samuels and Charlotte Burrows, two Democratic commissioners of the Equal Employment Opportunity Commission (“EEOC”), along with the EEOC’s general counsel, Karla Gilbride. This move eliminates the Democratic majority on the EEOC. By dismissing the EEOC commissioners, President Trump has taken steps to advance his second-term civil rights law agenda.
Conclusion
President Trump’s removal of an NLRB member and two EEOC commissioners reflects the administration’s broader strategy to reshape independent agencies to align with the administration’s policy goals. President Trump’s assertion of power to remove NLRB members and EEOC commissioners marks a pivotal moment in labor relations and regulatory oversight of employers. The legal battles and policy shifts that follow are expected to shape the landscape for employers, creating a period of uncertainty. Attorneys in the Labor & Employment practice group at Blank Rome are prepared to assist as potential changes in labor law enforcement and agency operations arise.
Federal Appeals Court Holds New Jersey’s Cannabis Law Provides No Private Right of Action
The Third Circuit Court of Appeals has held that the New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act (“CREAMMA”) does not permit a private citizen to bring a civil action for enforcement of the provisions prohibiting discrimination against cannabis users. Erick Zanetich v. Wal-Mart Stores East, Inc. et al., Docket No. 23-1996 (3d Cir. Dec. 9, 2024).
CREAMMA was passed to control and legalize cannabis in a similar fashion to the regulation of alcohol for adults, including preventing the sale or distribution of cannabis to people under the age of 21. The law also provides certain protections to current and prospective employees, including preventing employers from refusing to hire a job applicant because of the applicant’s use or non-use of cannabis, as well as from taking an adverse employment action against an employee based solely on a positive cannabis drug test. However, CREAMMA does not expressly allow citizens to bring a private cause of action, such as a civil action, to remedy alleged employment discrimination suffered because of an individual’s use of cannabis. This conclusion recently was challenged and the Third Circuit confirmed that CREAMMA does not confer a private right of action.
Zanetich applied for an asset protection position at a Walmart facility in Swedesboro, New Jersey. Zanetich was offered the job, subject to taking and passing a drug test. After Zanetich tested positive for cannabis, the job offer was rescinded. He subsequently filed a two-count Complaint against Walmart alleging Walmart discriminated against him for his use of cannabis in violation of CREAMMA and that Walmart wrongfully rescinded his job offer in violation of public policy. Walmart removed the case to federal court and moved to dismiss. The District Court granted Walmart’s motion, with prejudice, dismissing the case and finding that CREAMMA does not contain an implied remedy for violations of its employment-related protections, nor does the public policy exception to the recission of a job offer based on a positive drug test for cannabis apply to Zanetich’s claims. As the case was dismissed with prejudice, Zanetich did not have the opportunity to cure any defects in the Complaint by filing an amended Complaint.
Zanetich appealed this decision to the Third Circuit Court of Appeals, which affirmed the District Court’s decision to dismiss the Complaint.
There was no dispute CREAMMA does not expressly provide for a private right of action, and, the Third Circuit ultimately held that CREAMMA did not imply a private right of action either. Specifically, the Court held CREAMMA protects both cannabis and non-cannabis users and, therefore, Zanetich could not establish the statute provided him with any special benefit. The Court further noted that if the Legislature wanted to include a private right of action for citizens, it would have done so explicitly. Finally, the Third Circuit held the CREAMMA’s explicitly-stated underlying purposes concerned the use and distribution of cannabis, which does not support a private right of action to enforce the employment-related provisions. Therefore, the Court upheld the District Court’s dismissal of Zanetich’s first claim.
The Court also analyzed the applicability of Pierce v. Ortho Pharm. Corp, which creates an exception to the at-will employment doctrine for employees who were terminated in violation of public policy. Ultimately, the Third Circuit held this exception only applies to former employees terminated from their position because of their complaints about a suspected violation of a clear mandate of public policy. As Zanetich was not a former employee, but instead was a prospective applicant, the Third Circuit upheld the District Court’s dismissal of this claim as well.
As Predicted, Silicon Valley Bank Failure Will Test Fiduciary Duties of Officers and Directors Under California Law
Late last year, I wrote that the the Board of Directors of the Federal Deposit Insurance Corporation had voted unanimously to approve the staff’s request for authorization to file a suit against six former officers and 11 former directors of Silicon Valley Bank and its holding company, SVB Financial Group. I wasn’t surprised because over a year ago, I had pondered whether the possibility of litigation against the bank’s directors and officers. At the time, I observed that the litigation would likely involve California corporate law:
Because both First Republic Bank and Silicon Valley Bank are California corporations, California corporate law will likely be applied to suits against directors and officers. However, the situation is more complex in the case of Silicon Valley Bank because it was a subsidiary of a bank holding company incorporated in Delaware – SVB Financial Group. Therefore, the applicable law may depend upon whether the director or officer is sued in his or her capacity as a director or officer of the holding company or the bank.
On January 16, 2025, the FDIC as receiver filed its complaint in the U.S. District Court for the Northern District of California. According to the complaint the defendants held identical titles at the holding company. The complaint consists of three counts:
Gross negligence against both the director and officer defendants;
Negligence against the officer defendants; and
Breach of fiduciary duty against both the director and officer defendants.
With respect to the fiduciary duty count, the FDIC is alleging breaches of both the duty of care and the duty of loyalty. The alleged source of these duties is common law and as to the director defendants, Section 309 of the California Corporations Code.
Illinois Supreme Court Announces Policy on Artificial Intelligence
Last year, the Illinois Judicial Conference Task Force on Artificial Intelligence (IJC) was created to develop recommendations for how the Illinois Judicial Branch should regulate and use artificial intelligence (AI) in the court system. The IJC made recommendations to the Illinois Supreme Court, which adopted a policy on AI effective January 1, 2025.
The policy is consistent with the American Bar Association’s AI Policy. The policy states that “the Illinois Courts will be vigilant against AI technologies that jeopardize due process, equal protection, or access to justice. Unsubstantiated or deliberately misleading AI generated content that perpetuates bias, prejudices litigants, or obscures truth-finding and decision-making will not be tolerated.” In addition, the Illinois Supreme Court reiterated that “The Rules of Professional Conduct and the Code of Judicial Conduct apply fully to the use of AI technologies. Attorneys, judges, and self-represented litigants are accountable for their final work product. All users must thoroughly review AI-generated content before submitting it in any court proceeding to ensure accuracy and compliance with legal and ethical obligations. Prior to employing any technology, including generative AI applications, users must understand both general AI capabilities and the specific tools being utilized.”
Simultaneously, the Illinois Supreme Court published a judicial reference sheet that explains what AI and generative AI are, and what judges should watch for if litigants are using AI technology, including hallucinations, deepfakes, and extended reality. We anticipate more state courts will develop and adopt policies for AI use in the court system. Judges, lawyers, and pro se litigants should stay apprised of the court rules in the states in which they are active.
MGM Inks $45M Class Action Settlement for 2019 and 2023 Data Breaches
MGM Resorts agreed to pay $45 million to settle over a dozen class action lawsuits concerning 2019 and 2023 data breaches. A federal court in Nevada preliminarily approved the settlement, which, according to lawyers, covers over 37 million MGM customers.
The 2019 incident occurred when millions of customers’ names, addresses, telephone numbers, and other personal information were stolen from MGM’s system and published on a cybercrime forum. In 2023, the group Scattered Spider was allegedly behind an attack on MGM and other Las Vegas resorts, where customers’ personal information, including social security numbers, was stolen. MGM reportedly sustained over $100 million in damages following the attack.
ASIC Continues Increased Scrutiny Into AFS Licensees For Hire
ASIC has accepted a court enforceable undertaking (CEU) from Private Wealth Pty Ltd (Sanlam) after it admitted that it failed to discharge its general Australian financial services (AFS) licensing obligations in connection with its authorised representatives.
ASIC’s investigation into Sanlam centred around its failure to adequately supervise the large number of corporate authorised representatives (CARs) and authorised representatives (ARs) operating under Sanlam’s AFS license. At one point, Sanlam had appointed 42 CARs and 71 ARs, including operators of online trading platforms and crypto-based investment products. In addition, some of the CARs managed large pools of investor assets and serviced large retail client bases.
ASIC stated that Sanlam’s internal frameworks were not adequately tailored to the specific risks associated with products offered through its AFS licence and were insufficient to supervise the number of CARs and ARs appointed. ASIC was particularly concerned that Sanlam’s representatives used its AFS licence to offer risky financial products to retail clients.
Under the CEU, Sanlam must appoint an independent compliance expert to review Sanlam’s systems, processes and controls in respect of the general AFS licensee obligations and to implement appropriate remedial action plans.
ASIC Action Against Lanterne
In April 2024, the Federal Court ordered that Lanterne Fund Services Pty Ltd (Lanterne) pay a $1.25 million penalty after failing to comply with the general AFS licensee obligations.
Similarly to Sanlam, Lanterne had appointed over 60 CARs and 205 ARs spanning a wide range of financial services businesses. Given the lack of any formal documented risk management systems and having only one full-time employee, ASIC Commissioner Alan Kirkland remarked that the compliance arrangements “were woefully inadequate for a business of this scale and posed significant risk to investors”.
In addition to the large penalty handed down, the Federal Court also ordered that Lanterne appoint an independent expert to review and report on Lanterne’s systems, processes and controls, and implement the expert’s recommendations.
What Should You Do?
These ASIC actions show that ASIC is focusing on AFS licensees that make available their AFS licence to product issuers by way of CARs. Accordingly, AFS licensees that appoint such authorised representatives should ensure that they review their procedures, risk management systems and resources to ensure they comply with the applicable obligations.
In addition, product issuers that rely on a CAR from an AFS licensee should ensure that their AFS licensee has appropriate procedures and sufficient resources in place as ASIC action against the licensee poses significant risks for the issuer’s business.