No Rest for the Weary: The Trump DOL Indicates Yet Another Change to Its Independent Contractor Classification Rule Is on the Horizon
Exactly a year ago, we wrote about the final rule issued by the Biden-era U.S. Department of Labor (DOL) regarding the test for determining whether a worker is an employee covered by the Fair Labor Standards Act (FLSA), or an independent contractor exempt from FLSA coverage. The final rule became effective on March 11, 2024 (the “2024 rule”) and replaced the DOL’s independent contractor test that was adopted in 2021 during the first Trump administration (the “2021 rule”), which made it made it easier to classify workers as independent contractors. We previously wrote about the 2021 rule here.
Recent developments suggest that, under new leadership, the DOL may abandon the short-lived 2024 rule and implement changes to its guidance on this issue in the near future.
Recent Developments Suggest the DOL’s New Leadership May Abandon the 2024 Biden-Era Rule
Soon after the Biden-era’s publication of the 2024 rule, several lawsuits were filed against the agency arguing that it exceeded its authority in adopting the 2024 rule. The leading case, Frisard’s Transp., LLC v. United States DOL, No. 24-30223, is currently pending on appeal before the Fifth Circuit. The case originated when Frisard’s Transportation, LLC, along with other plaintiffs, filed a lawsuit, in the U.S. District Court for the Eastern District of Louisiana on February 8, 2024 (Case No. 2:24-cv-00347). The plaintiffs sought a preliminary injunction to block the rule, but on March 27, 2024, the district judge denied the motion, finding the plaintiffs could not show immediate irreparable harm because the rule’s impact on their business was speculative at that stage. Following this denial, the plaintiffs appealed to the Fifth Circuit on April 8, 2024, arguing that the district court erred in denying the preliminary injunction. Several amicus briefs supporting the plaintiffs were filed by organizations such as the U.S. Chamber of Commerce, the Manhattan Institute, and others, emphasizing the rule’s broad economic implications.
The Fifth Circuit was scheduled to hear oral arguments on the appeal in the Frisard’s case on February 5, 2025; however, the DOL requested to delay the scheduled argument to allow sufficient time for its newly confirmed leadership to familiarize themselves with the issues presented in the case and “determine how they wish to proceed.” The Fifth Circuit initially ordered the DOL to file a status report no later than March 25, 2025, stating its position regarding the litigation under its new leadership, but that deadline was recently extended to April 7, 2025.
Confirmation of Secretary of Labor Creates Some Difficulty in Predicting the DOL’s Next Steps
If we were asked to predict the fate of the 2024 rule on November 6, 2024, we would not have hesitated in forecasting a return to the more employer-friendly 2021 rule adopted during the first Trump administration. The subsequent nomination and senate confirmation of U.S. Secretary of Labor Lori Chavez-DeRemer, however, leaves us less confident in making that prediction. Chavez-DeRemer served as the U.S. representative for Oregon’s 5th congressional district between 2023 and 2025. Though a member of the Republican Party, Chavez-DeRemer has an unusually pro-labor congressional record as one of only three House Republicans to co-sponsor the Protecting the Right to Organize (PRO) Act, proposed legislation that would strengthen employee rights under the National Labor Relations Act and other labor laws. Significant to the question of independent contractor classification, the PRO Act would impose California’s ABC test for determining independent contractor status and make it even more difficult to classify workers as independent contractors for purposes of questions under the NLRA.
While Chavez-DeRemer has not made any specific commitments regarding the 2024 rule, she walked back her support for the PRO Act, acknowledging on several occasions that the PRO Act was “imperfect.” She also agreed that worker flexibility and independent contractors were key to growing the economy and committed to reviewing all of the DOL’s regulations to determine whether they support President Trump’s agenda.
In light of Chavez-DeRemer comments during her senate confirmation hearing, we anticipate that the DOL will ultimately rescind the 2024 rule and drop its defense of the rule in the Frisard’s case and the other pending legal challenges. Following that, the DOL may restore the more employer-friendly 2021 rule, or it might not adopt any replacement rule and simply let courts analyze questions regarding independent contractor classification under their own case precedents, without agency guidance.
What This Means for Employers
Despite the anticipated employer-friendly changes at the DOL, employers should continue to proceed with caution in classifying workers as independent contractors. Notably, the Supreme Court’s watershed decision in Loper Bright means that any new DOL guidance defining the test for distinguishing employees from independent contractors under the FLSA may not be entitled to judicial deference anyway. Employers would therefore be wise to continue evaluating the following key questions when deciding whether workers may be classified as independent contractors:
What is the nature and degree of the control that the worker has over their own work? For example, does the worker control how and when the job will be performed and the pricing for the services?
What is the worker’s opportunity for profit and loss? Is the worker required to make their own investments to perform the services?
Does the work require a special or unique skillset?
Is the work integral to the company’s core business?
Is the worker’s relationship with the company non-exclusive and are the services provided on a project-specific or sporadic basis, rather than indefinitely or continuously?
Does the company have employees performing the same services as the worker?
Employers should also keep in mind that other federal laws (such as the Family and Medical Leave Act and the Internal Revenue Code) may impose different standards for distinguishing employees from independent contractors and that courts may differ by jurisdiction in their interpretation of these standards. Additionally, many states have adopted their own standards for distinguishing employees from independent contractors under state employment laws.
Update: The NLRB Has Lost Its Quorum – DC Circuit Stays District Court’s Reinstatement of Board Member Gwynne Wilcox – and a New General Counsel Has Been Nominated
On March 28, 2025, a divided three-judge panel of the United States Court of Appeals for the District of Columbia Circuit ruled that President Donald Trump likely has the authority to remove National Labor Relations Board (NLRB) member Gwynne Wilcox, as well as Merit Systems Protections Board (MSPB) member Cathy Harris, without cause.
In granting the Government’s motion for an emergency stay of the reinstatement orders of the United States District Court for the District of Columbia, the appeals court has once again left the NLRB without a quorum.
The Future of Humphrey’s Executor Remains Unresolved
In a two-to-one decision, the panel held that the President likely had the legal authority to remove Wilcox and Harris from their positions, notwithstanding that the Executive did not show that the removals were for cause, as required under the statutes that created the agencies. In so ruling, the Court has added to the list of cases that appear to further narrow the application of the Supreme Court’s holding in Humphrey’s Executor v. United States, 295 U.S. 602 (1935). There, the Court unanimously held that the President lacked the power to remove executive officials of a quasi-legislative or quasi-judicial administrative body for reasons other than what is allowed by Congress.
In the instant case, the Trump administration argued that Humphrey’s Executor was not good law and should no longer be followed. However, the D.C. Circuit did not go so far, but rather concluded that Humphrey’s Executor did not apply because of the differences between the NLRB and the MSPB on the one hand, and the Federal Trade Commission, the agency at issue in Humphrey’s Executor, on the other.
In her dissent, Judge Patricia Millett disagreed with the majority about the applicability of Humphrey’s Executor to the NLRB and the MSPB, noting that the decision “marks the first time in history that a court of appeals, or the Supreme Court, has licensed the termination of members of multimember adjudicatory boards statutorily protected by the very type of removal restriction the Supreme Court has twice unanimously upheld.” She called the majority’s decision “a hurried and preliminary first-look ruling by this court to announce a revolution in the law that the Supreme Court has expressly avoided,” and one which would “trap in legal limbo millions of employees and employers whom the law says must go to these boards for the resolution of their employment disputes.”
What Happens Now While the NLRB Again Lacks a Quorum?
As we previously reported, while without a quorum, i.e., at least three Board members, the NLRB is not able to issue decisions or engage in rulemaking. Nevertheless, the Board has indicated it will continue to perform other functions, citing the NLRB’s 2011 “Order Contingently Delegating Authority to the General Counsel” contained at 76 FR 69768, which includes the ability to initiate and prosecute proceedings under Section 10(j) or Section 10(e) or (f), and contempt proceedings pertaining to the enforcement of or compliance with any order of the Board, even though this delegation has been challenged in the past.
Of course, the President retains the ability to submit nominations for the other two vacant seats on the five-member NLRB to the Senate. Confirmation of one new member would reestablish a quorum. When and whether that will happen remains to be seen. And, as to the question of the continued viability of Humphrey’s Executor, it is virtually certain that the Supreme Court will opine during its current term, either with regard to Ms. Wilcox or in other pending cases that raise the issue.
The President Has Nominated a New General Counsel for the NLRB
On March 25th, the White House announced the nomination of Crystal Carey, a management side labor lawyer, for the role of NLRB General Counsel (GC). The nomination is subject to confirmation by the Senate and it is not known when the nomination will be considered and acted upon. In the meantime, the role of the GC remains covered by William Cowen, who was named Acting General Counsel on March 3rd, following the President’s termination of Jennifer Abruzzo, a longtime NLRB attorney who served as GC under President Biden.
Epstein Becker Green Staff Attorney Elizabeth A. Ledkovsky assisted with this publication.
Important New Safe Harbors and Other Clarifying Changes to Delaware Corporate Law
The governor of the State of Delaware—consistent with his pledge to protect the “Delaware franchise”—recently signed into law amendments to Section 144 of the Delaware General Corporation Law (the DGCL) relating to certain acts or transactions involving directors, officers, controlling stockholders, and members of a control group, and Section 220 of the DGCL relating to stockholder demands for inspection of corporate books and records.
The amendments to Section 144 are intended to provide greater predictability and clarity to Delaware corporations considering acts or transactions that may implicate the fiduciary duties of directors, officers, controlling stockholders, and members of a control group. The amendments to Section 220 are intended to provide clarity and certain limits on stockholder inspection of books and records given the increasing growth in volume and scope of stockholder actions for inspection brought in the Delaware Court of Chancery.
Amendments to Section 144
The amendments to Section 144 provide safe harbor procedures for acts or transactions involving one or more directors, officers, controlling stockholders, and members of a control group that might, absent compliance with the safe harbor procedures, give rise to breach of fiduciary duty claims. The amendments to Section 144 also exculpate controlling stockholders and members of a control group from liability for duty of care violations.
The safe harbor provided by amended Section 144 is protection from equitable relief or an award of damages by reason of a claim based on a breach of fiduciary duty.
Safe Harbor for Acts or Transactions Solely Involving Directors or Officers
Acts and transactions involving one or more directors or officers or in which one or more directors or officers have an interest get the benefit of the safe harbor under amended Section 144(a) if:
The material facts as to the relationship or interest and the act or transaction are disclosed or known to all members of the board or a committee of the board and the act or transaction is authorized in good faith and without gross negligence by (i) the affirmative votes of a majority of the disinterested directors (see below) on the board (except where less than a majority of directors on the board are disinterested directors) or (ii) a majority of the disinterested directors on a committee (where less than a majority of the directors on the board are disinterested directors, the committee must consist of at least two disinterested directors), even though the disinterested directors constitute less than a quorum; or
The act or transaction is approved by an informed, uncoerced, affirmative vote of a majority of the votes cast by the disinterested stockholders (see below); or
The act or transaction is fair as to the corporation and its stockholders.
Safe Harbor for Acts or Transactions (Other Than Going Private Transactions)
Involving a Controlling Stockholder or Control Group. Acts or transactions between the corporation or one or more of the corporation’s subsidiaries on the one hand and a controlling stockholder (see below) or control group (see below) on the other hand and acts or transactions from which a controlling stockholder or control group receives a financial or other benefit not shared with the stockholders generally (each a Controlling Stockholder Transaction) get the benefit of the safe harbor under amended Section 144(b) if:
The material facts as to the Controlling Stockholder Transaction are disclosed or known to all members of a committee of the board (consisting of at least two disinterested directors) that has been expressly delegated by the board the authority to negotiate or oversee the negotiation of and reject the Controlling Stockholder Transaction and the Controlling Stockholder Transaction is approved or recommended for approval in good faith and without gross negligence by a majority of the disinterested directors then serving on the committee (Disinterested Committee Approval); or
The Controlling Stockholder Transaction is conditioned—by its terms (as in effect at the time it is submitted to stockholders for approval or ratification)—on approval or ratification by an informed, uncoerced, affirmative vote of a majority of the votes cast by the disinterested stockholders and such approval or ratification is obtained (Disinterested Stockholder Approval); or
The act or transaction is fair as to the corporation and its stockholders.
Safe Harbor for Going Private Transactions Involving a Controlling Stockholder or Control Group
A “going private transaction”—defined as a Rule 13e-3 transaction (for a corporation having a class of stock listed on a national securities exchange) or a Controlling Stockholder Transaction in which all of the capital stock held by disinterested stockholders is canceled, converted, purchased, or otherwise acquired or ceases to be outstanding (a Going Private Transaction)—gets the benefit of the safe harbor under amended Section 144(c) if:
The Going Private Transaction receives Disinterested Committee Approval and Disinterested Stockholder Approval; or
The act or transaction is fair as to the corporation and its stockholders.
Defining a “Controlling Stockholder,” “Control Group,” “Disinterested Director,” and “Disinterested Stockholder”
For purposes of applying the above safe harbor procedures, amended Section 144 defines the foregoing key terms as follows:
A “controlling stockholder” means a person that, together with affiliates and associates:
Owns or controls a majority in voting power of stock entitled to vote generally in the election of directors or in the election of directors having a majority in voting power of all directors; or
Has the right (by contract or otherwise) to cause the election of its nominees to the board and such nominees constitute a majority of all directors or a majority in voting power of all directors; or
Has the power functionally equivalent to that of a stockholder owning or controlling a majority in voting power of stock entitled to vote generally in the election of directors by virtue of ownership or control of at least 1/3 in voting power of stock entitled to vote generally in the election of directors or in the election of directors having a majority in voting power of all directors and power to exercise managerial authority over the corporation’s business and affairs.
A “control group” means two or more persons that are not controlling stockholders but by virtue of “an agreement, arrangement, or understanding” between or among them constitute a controlling stockholder.
A “disinterested director” means a director who is not party to the relevant act or transaction and does not have a material interest in, or a material relationship with a person that has a material interest in, the relevant act or transaction. Amended Section 144 also contains a rebuttable presumption as to the “disinterestedness” of directors satisfying the independence criteria of the national securities exchange (modified as provided in amended Section 144) on which a class of the corporation’s shares are listed.
A “disinterested stockholder” means a stockholder that does not have a material interest in the relevant act or transaction or a material relationship with either the relevant controlling stockholder or a member of the relevant control group or any other person with a material interest in the relevant act or transaction.
Defining a “Material Interest” and “Material Relationship”
Section 144 also defines the key terms “material interest” and “material relationship” as follows:
A “material interest” means an actual or potential benefit (including avoidance of a detriment), other than one devolving on the corporation or the stockholders generally, that (i) in the case of a director, would reasonably be expected to impair the objectivity of the director’s judgment when participating in the negotiation, approval, or authorization of the relevant act or transaction and, (ii) in the case of a stockholder or other person that is not a director or officer, would be material to the stockholder or other person.
A “material relationship” means a financial, employment, familial, professional, or other relationship that (i) in the case of a director, would reasonably be expected to impair the objectivity of the director’s judgment when participating in the negotiation, approval, or authorization of the relevant act or transaction and, (ii) in the case of a stockholder, would be material to such stockholder.
Amendments to Section 220
The amendments to Section 220 define the scope of books and records that a stockholder may demand to inspect and set forth conditions that must be satisfied for the stockholder to inspect a corporation’s books and records.
Scope of Books and Records That May Be Inspected by a Stockholder
Amended Section 220 generally defines the “books and records” of the corporation that a stockholder may inspect as the certificate of incorporation, bylaws, minutes of meetings (or consents in lieu of meetings) of stockholders (for the preceding three years) and the board or committees of the board, communications with stockholders generally (within the prior three years), materials provided to the board or committee in connection with action taken by the board or committee, annual financial statements (for the preceding three years), D&O questionnaires, and contracts made by the corporation with one or more current or prospective stockholders (or one or more beneficial owners of stock), in its or their capacity as such, entered into under Section 122(18) of the DGCL.
Where the corporation does not have any minutes or consents of stockholders (for the preceding three years) or the board or committee, annual financial statements (for the preceding three years), or, in the case of a corporation having a class of stock listed on a national securities exchange, D&O questionnaires, the Delaware Court of Chancery may order the corporation to produce the functional equivalent of these books and records if the stockholder has complied with the conditions to inspection set forth in Section 220(b) and only to the extent necessary and essential to fulfill the stockholder’s proper purpose.
In addition, the Delaware Court of Chancery may order the production of other specific records if and to the extent (i) the stockholder has complied with the conditions to inspection set forth in Section 220(b), (ii) the stockholder has demonstrated a compelling need for the inspection of the records to further such stockholder’s proper purpose, and (iii) the stockholder has demonstrated by clear and convincing evidence that the specific records are necessary and essential to further the proper purpose.
Conditions to Stockholder Inspection
Amended Section 220(b) requires a stockholder demanding inspection of the corporation’s books and records to:
Make its demand in good faith and for a proper purpose (e.g., a purpose reasonably related to the stockholder’s interest as a stockholder); and
Describe with reasonable particularity in its demand for inspection the stockholder’s proper purpose and the books and records sought to be inspected (which books and records must be specifically related to the stockholder’s proper purpose).
Amended Section 220(b) expressly permits the corporation to:
Impose reasonable restrictions on the confidentiality, distribution, and use of the books and records inspected;
Require that the stockholder agree to incorporate information contained in the books and records inspected by the stockholder by reference in any compliant filed by or at the direction of such stockholder relating to the subject matter of demand; and
Redact portions of the books and records not specifically related to the stockholder’s purpose.
Effective Date of the Amendments
The amendments to Section 144 and Section 220 became effective upon signature by the governor on 25 March 2025 and apply to acts and transactions occurring before, on, or after such date, except for actions or proceedings that are completed or pending, or any demands for inspection made, on or before 17 February 2025.
Last Mile Logistics Comes to the End of the Road – Dei Gratia v Commissioner of Patents [2024] FCA 1145
In Dei Gratia Pty Ltd v Commissioner of Patents [2024] FCA 1145 (Dei Gratia), the Federal Court of Australia dismissed an appeal by Dei Gratia and confirmed the decision of the Commissioner of Patents to refuse the patent application for ‘last mile logistics’. The claimed invention purported to facilitate the delivery of goods from the last point in a distribution chain to end consumers. By selecting a preferred local outlet, customers would be able to overcome delivery issues such as the need to be at home at a specific time and the protection of perishable goods that have been left at doors in high temperatures.
The decision shed light on the difference between an invention that aims to advance computer technologies and new business and logistic methods. To be patentable, the invention must be a “manner of new manufacture.” In other words, it “must be more than an abstract idea; it must involve the creation of an artificial state of affairs where the computer is integral to the invention, rather than a mere tool in which the invention is performed.”
Submissions
Dei Gratia argued that its claim is not a mere idea to improve the delivery system, but rather a “practical implementation to achieve that idea.” It also contended that computerisation should not be limited to the improvement of the computer technology itself.
The Commissioner of Patents submitted that the claimed invention is not different from a regular business scheme implemented by generic and already known computer technologies and that “no new technology in the sense of improved functioning of computer equipment was involved.”
Decision
Section 18(1)(a) of the Patents Act 1990 defines invention as “any manner of new manufacture.” On the question of whether the claimed invention was, in fact, a manner of new manufacture, the court pointed out that although the application does not characterise the invention as a new “computer-implemented” idea, in substance it nevertheless places the computer as a central part of the logistic system, which would not function without the use of a computer. In this regard, both parties accepted that there would be no technical ingenuity involved in selecting modified delivery outlets.
In rejecting the application, the court made a clear distinction between an innovative scheme and patentable invention. As the claimed invention addressed a business problem (an improved logistics scheme), rather than a technical one, it was not patentable as it could not be characterised as a manner of new manufacture. The decision confirms that the implementation of the logistics scheme on a computer that does not involve any advance in computer technology is not patentable.
Second Circuit Clarifies ADA Standard on Reasonable Accommodations
Employers in New York, Connecticut, and Vermont should take note of a recent Second Circuit decision holding that an employee may still be entitled to a reasonable accommodation under the Americans with Disabilities Act (“ADA”) even if they can perform the essential functions of their job without accommodation.
In Tudor v. Whitehall Central School District, (2d Cir. Mar 25, 2025), a circuit court panel vacated a district court’s grant of summary judgment in favor of Whitehall Central School District (“Whitehall”) on a failure-to-accommodate claim. The employee, a teacher with a longstanding history of PTSD, had been granted an accommodation in 2008 allowing her to leave campus for short breaks during morning and afternoon “prep periods”—times when she otherwise would not have been responsible for overseeing students. In 2016, a policy change prohibited teachers from leaving campus during these periods. Whitehall later permitted a morning break and, at times, an afternoon break when coverage was available.
The case focused on the 2019–20 school year, when the employee was assigned to supervise students during the time she would ordinarily take her afternoon break. She continued to take the breaks without formal approval, which she testified heightened her anxiety due to concerns about violating school policy. She later filed suit, alleging that Whitehall failed to reasonably accommodate her disability in violation of the ADA. The district court granted summary judgment to Whitehall, reasoning that because the employee admitted during the proceedings that she could perform her job without the requested accommodation, she could not establish a required element of her claim.
The Second Circuit disagreed, emphasizing that the ADA does not require an employee to show that an accommodation is necessary—only that it is reasonable. To establish a prima facie case under the ADA, an employee must show that: (1) their employer is subject to the ADA; (2) they were disabled within the meaning of the ADA; (3) they were otherwise qualified to perform the essential functions of their job, with or without reasonable accommodation; and (4) their employer refused to make a reasonable accommodation (emphasis added). The Second Circuit held that the ability to perform the essential functions of the job without an accommodation does not foreclose an employee’s failure-to-accommodate claim. The statutory language protects employees who can perform their jobs “with or without” accommodation and obligates employers to provide reasonable accommodations unless doing so would impose an undue hardship.
In reaching this conclusion, the court relied on the ADA’s plain text and aligned itself with the majority of other circuits in rejecting the idea that an employee must show an accommodation is necessary to perform the essential functions of their job in order to be entitled to one. It reiterated that the ADA is a remedial statute that must be construed broadly to eliminate discrimination against individuals with disabilities, and to say that an accommodation must be necessary in order to be reasonable would run counter to this purpose. The Second Circuit did note, however, that Whitehall may still raise other defenses on remand, including whether the employee had a qualifying disability or whether the requested accommodation would have posed an undue hardship.
A key takeaway for Second Circuit employers is that the ADA requires them to consider and, where appropriate, provide reasonable accommodations—even when an employee can perform essential job functions without one.
WHEN GOOGLE FOLLOWS YOU TO THE DMV: Where Consent Gets Lost in the Traffic
Happy CIPA Sunday! What feels like a routine online interaction with your state could be something else entirely. Imagine for a moment that you’re renewing your disability parking placard online. It’s another government form to fill out from the comfort of your home. You input your personal information, including sensitive details about your disability, and click submit. You don’t realize that an invisible digital hand may reach through your screen (figuratively speaking), quietly collecting your most sensitive personal information. Isn’t that a scary thought? This isn’t the plot of the new season of Black Mirror (or is it?); it’s the allegation at the center of Wilson v. Google L.L.C., No. 24-cv-03176-EKL, 2025 U.S. Dist. LEXIS 55629 (N.D. Cal. Mar. 25, 2025).
Here, Plaintiff was just trying to renew her disability parking placard through California’s “MyDMV” portal when she allegedly fell victim to what her lawsuit describes as Google’s secret data collection. According to the Opinion, Plaintiff provided the DMV with her personal information, including disability information,” only to later discover that Google secretly used Google Analytics and DoubleClick embedded on the DMV’s website when she renewed her disability parking placard to collect her personal information unlawfully. Like millions of Americans, Plaintiff trusted that her interaction with a government agency would remain private. This information, Plaintiff alleges, was then used to generate revenue for its advertising and marketing business. If proven true, Google essentially eavesdropped on what should have been a private interaction between a citizen and her state government.
The following legal issues reveal the complex landscape of privacy law in America. Pliantiff’s lawsuit hinges on two critical privacy laws. First, the Driver’s Privacy Protection Act (“DPPA”) is a federal law designed to prevent unauthorized disclosure of personal information from DMV records. Second, the California Invasion of Privacy Act (“CIPA”) protects against “the substantive intrusion that occurs when private communications are intercepted by someone who does not have the right to access them.” Campbell v. Facebook, Inc., 951 F.3d 1106, 1118 (9th Cir. 2020). Initially, these laws weren’t crafted with the advancement of digital technology in mind. However, they’re now legal shields designed for a different era and being tested against surveillance technologies. Together, these laws create a safety net meant to protect our personal information, but are they strong enough to catch Big Tech’s increasingly sophisticated data collection methods?
Google’s defense strategy is smart and calculated to exploit procedural technicalities rather than addressing the fundamental privacy questions at stake. Their first move was to argue that the California DMV was a “required party” under Fed. R. Civ. P. 19. They asserted the entire case should be dismissed since the DMV couldn’t be joined (due to sovereign immunity). It’s a clever technical legal argument that, had it succeeded, could have created a precedent for tech companies to evade privacy lawsuits involving government websites. Judge Eumi K. Lee wasn’t buying it, though. She rejected Google’s argument, finding that dismissing Plaintiff’s claims outright “would be draconian, particularly because Plaintiff seeks other relief too—including damages.” Wilson, 2025 U.S. Dist. LEXIS 55629, at *7. The Court rightfully distinguished the case from Downing v. Globe Direct L.L.C., 806 F. Supp. 2d 461 (D. Mass. 2011), noting that, unlike in Downing, where a vendor was explicitly contracted to include advertising, Plaintiff had alleged that Google encourages website operators—including the DMV—to use Google’s tools to obtain personal information that Google uses for its own advertising business.
Conversely, regarding Plaintiff’s DPPA claim, Google had more success. The Court focused on a technical but crucial question: Did Google obtain Plaintiff’s personal information from a motor vehicle record? The Ninth Circuit had previously ruled in Andrews v. Sirius XM Radio Inc. that the DPPA does not apply when “the initial source of personal information is a record in the possession of an individual, rather than a state DMV.” Andrews v. Sirius XM Radio Inc., 932 F.3d 1253, 1260 (9th Cir. 2019). With this in mind, Judge Lee determined that because “the personal information that was allegedly transmitted to Google came from Plaintiff, it was not from a motor vehicle record.” Wilson, 2025 U.S. Dist. LEXIS 55629, at *11. This distinction creates a troubling loophole in privacy protection. Your data is protected when it sits in a DMV database, but it loses that protection when you’re transmitting it to the DMV. This is a seemingly minor distinction. Whether data was pulled from a DMV database or intercepted while being entered by a user made all the difference for Plaintiff’s DPPA claim, which was dismissed with leave to amend.
Isn’t this getting spicy? But here’s where the plot thickens. While Plaintiff’s DPPA claim stumbled, her state law claim under CIPA survived Google’s dismissal motion. Google had asserted it couldn’t be liable under CIPA because it was merely acting as a “vendor” for the DMV—an extension of the government website rather than a third-party eavesdropper. This is a fantastic assertion by Google’s defense team. Think of it as Google claiming to be the DMV’s trusted assistant rather than an uninvited guest at a private conversation. However, Judge Lee rejected this defense, noting that Plaintiff had sufficiently alleged that “Google intercepted and used her personal information for its own advertising services” and thus “did not act solely as an extension of the DMV.” Id. at *13. The Court further found that Plaintiff had adequately alleged Google acted “willfully” by detailing how Google “specifically designed” its tracking tools to gather information and “intentionally encourages” website operators to use its tools in ways that circumvent users’ privacy settings. Id. at *14. That kind of intentionality matters when pleading willfulness under CIPA.
In Google’s defense, Google tried to shield itself behind its terms of service, which allegedly prohibited websites from sharing personally identifiable information with Google. But Judge Lee noted that assertion created “a question of fact” that couldn’t be resolved at the pleading stage. Id. at *15. With this observation, the Court relied on Smith v. Google LLC, explaining that while “Google argues that judicially noticeable policy documents suggest that Google did not actually want to receive personally identifiable information and expressly prohibited developers from transmitting such data, this presents a question of fact that the Court cannot resolve at this stage.” Id. (quoting Smith v. Google, L.L.C., 735 F. Supp. 3d 1188, 1198 (N.D. Cal. 2024)). As a result, the message is clear…fine print in terms of service won’t necessarily provide legal cover for actual data collection practices if it occurs.
This case feels like déjà vu for privacy advocates because we’ve seen this before. Similar allegations were raised against LinkedIn in Jackson v. LinkedIn Corp., 744 F. Supp. 3d 986 (N.D. Cal. 2024). The parallels between these two cases are vastly similar, involving allegations that tech giants are harvesting sensitive data from DMV websites. Google even tried to use these similarities against Plaintiff, characterizing her allegations as “entirely boilerplate” and “almost identical to the same allegations” asserted against LinkedIn in the Jackson case. Wilson, 2025 U.S. Dist. LEXIS 55629, at *15. However, the Court rejected this argument too, noting that the similarity between the complaints does not render Plaintiff’s allegations conclusory, especially given that both cases challenge similar alleged conduct by two different advertising companies. Google tried to compare Byars v. Hot Topic, Inc., 656 F. Supp. 3d 1051 (C.D. Cal. 2023), where the Court criticized “copy-and-paste” privacy complaints filed in bulk. However, Judge Lee pushed back, emphasizing that, unlike in Byars, Plaintiff’s Complaint here includes “at least 48 paragraphs of detailed allegations specific to Google” and cannot be dismissed as generic boilerplate. Wilson, 2025 U.S. Dist. LEXIS 55629, at *16.
So what’s the takeaway? When you enter personal information into a government site, like renewing your vehicle registration or applying for a disability placard, it feels like a private exchange. But behind the screen, third-party tools might be collecting your data. It sounds like Black Mirror, but it’s essentially happening. It’s as if you’re filling out a paper form at the DMV counter, only to discover that a marketing executive is peering over your shoulder, taking notes on your personal information. The legal distinction between information stored in a government database and information you’re actively entering may seem arbitrary from a privacy perspective. But it creates a significant gap in legal protection.
As the case progresses, Plaintiff has been granted leave to amend her DPPA claim, and her CIPA claim will proceed. This case reminds us that data privacy isn’t just about keeping private things—well… private—it’s about controlling who knows what about us and how that information is used. With every click and keystroke, who else might be watching as you type?
As always,
Keep it legal, keep it smart, and stay ahead of the game.
Talk soon!
D.C. Circuit Rules Trump Can Remove Independent Agency Members Without Cause
On March 28, 2025, the U.S. Court of Appeals for the District of Columbia Circuit ruled that President Donald Trump likely has the authority to remove National Labor Relations Board (NLRB) member Gwynne Wilcox and Merit Systems Protections Board (MSPB) member Cathy Harris without cause.
Quick Hits
The D.C. Circuit Court ruled that President Trump likely has the authority to remove NLRB member Gwynne Wilcox and MSPB member Cathy Harris without cause, staying previous reinstatement orders from lower courts.
The ruling leaves the NLRB and MSPB without enough members to hear cases.
The decision addresses significant constitutional questions regarding the president’s power to remove members of independent agencies, boards, and commissions and Congress’s authority to restrict removal.
In a split decision, the D.C. Circuit stayed two rulings by federal district courts in Washington, D.C., that had reinstated NLRB member Wilcox and MSPB member Harris to their respective independent agencies. President Trump had removed Wilcox and Harris, both democratic appointees, earlier this year, leading them to file legal challenges.
Writing separate concurring opinions, Circuit Judges Justin R. Walker and Karen LeCraft Henderson found that the government was likely to succeed on the merits that the president, as the head of the executive branch, has the authority to remove members of both the NLRB and MSPB because the agencies wield “substantial executive power.”
“The forcible reinstatement of a presidentially removed principal officer disenfranchises voters by hampering the President’s ability to govern during the four short years the people have assigned him the solemn duty of leading the executive branch,” Judge Walker wrote in his concurring opinion.
While Judge Henderson agreed “with many of the general principles in Judge Walker’s opinion about the contours of presidential power under Article II of the Constitution,” she concluded “the government’s likelihood of success on the merits [was] a slightly closer call.” Additionally, she emphasized that the government had clearly shown that it would face irreparable harm if the stays were not issued.
The stays prevent Wilcox and Harris from serving as members of the NLRB and MSPB, leaving each of their agencies without a quorum to hear cases. The NLRB is a five-member board created by the National Labor Relations Act that enforces labor law through representation and unfair labor practice cases. The MSPB is a three-member bipartisan board adjudicating personnel and merit systems issues involving federal employees.
Circuit Judge Patricia Millett, issued a separate dissenting opinion sharply criticizing the appeals court for granting the stays and stripping the agencies of their quora that the district court orders had maintained, “leav[ing] languishing hundreds of unresolved legal claims.”
The Wilcox and Harris cases have raised fundamental constitutional and separation of powers questions over the president’s authority to remove members of independent agencies, boards, and commissions and Congress’s authority to restrict removal. The Trump administration has argued that provisions limiting the president’s removal power are unconstitutional and infringe the president’s authority as the executive.
However, a 1935 decision by the Supreme Court of the United States, in Humphrey’s Executor v. United States, upheld restrictions on the president’s authority to remove officers of certain types of independent agencies—in that case, a commissioner of the Federal Trade Commission.
Next Steps
The D.C. Circuit’s ruling supports the president’s ability to remove the governing members of independent agencies without cause, allowing President Trump to move forward with efforts to reshape the NLRB and other agencies. However, the stays are not a final decision, and the litigation remains ongoing. Given the significant constitutional issues, the case could ultimately be resolved by the Supreme Court.
Beltway Buzz, March 28, 2025
The Beltway Buzz™ is a weekly update summarizing labor and employment news from inside the Beltway and clarifying how what’s happening in Washington, D.C., could impact your business.
FMCS Cuts Staff Dramatically. Following through on President Donald Trump’s executive order, “Continuing the Reduction of the Federal Bureaucracy,” which we recently examined here at the Buzz, this week, the administration all but shut down the Federal Mediation and Conciliation Service (FMCS). FMCS is an independent agency established by the U.S. Congress in the Taft-Hartley Act of 1947 “to prevent or minimize interruptions of the free flow of commerce growing out of labor disputes, to assist parties to labor disputes in industries affecting commerce to settle such disputes through conciliation and mediation.” FMCS will reportedly retain approximately 15 employees—down from the 220 employees it maintained in 2024.
Personnel News. There were significant developments this week on the agency personnel front as President Trump seeks to install his political appointees at executive branch agencies. For example:
NLRB. Today, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit, in a 2–1 decision, ruled that President Trump was permitted to remove Gwynne Wilcox, a President Biden–appointed member of the National Labor Relations Board (NLRB), whose five-year term expires on August 27, 2028. A lower-court judge had issued a decision preventing the president from removing Wilcox without cause, but today’s appellate court ruling lifts the injunction while the litigation proceeds. The case will likely reach the Supreme Court of the United States.
EEOC. President Trump nominated Andrea Lucas, currently the acting chair of the U.S. Equal Employment Opportunity Commission (EEOC), to another five-year term on the Commission. Lucas has served as a commissioner since 2020, and her current term will expire on July 1, 2025. The Commission currently consists of Lucas and Democratic Commissioner Kalpana Kotagal, with three vacancies.
OFCCP Director. President Trump appointed management-side attorney Catherine Eschbach to serve as the director of the Office of Federal Contract Compliance Programs (OFCCP). The position does not need Senate confirmation, so Eschbach will immediately replace Acting Director Michael Schloss. With the revocation of Executive Order (EO) 11246, OFCCP now only enforces affirmative action and discrimination laws related to veterans and workers with disabilities. According to some media reports, Eschbach will lead the effort at OFCCP to review already-submitted affirmative action plans for potential discrimination. Lauren B. Hicks and T. Scott Kelly have the details.
Workplace Safety Commissions. President Trump nominated Jonathan Snare to serve on the Occupational Safety and Health Review Commission. Snare was recently appointed deputy solicitor of labor and served in various positions within the DOL from 2003 to 2009. Additionally, the president nominated Marco Rajkovich Jr. to serve on the Federal Mine Safety and Health Review Commission (FMSHRC). Rajkovich chaired the FMSHRC during President Trump’s first term.
DOL Office of Disability Employment Policy. Julie Hocker has been nominated to serve as assistant secretary for disability employment policy at the DOL. Hocker previously served as commissioner of the Administration on Disabilities within the U.S. Department of Health and Human Services.
Republican Committee Chair Outlines Suggested Policy Priorities for New Secretary of Labor. Late last week, the Republican chairman of the House Committee on Education and the Workforce, Representative Tim Walberg (MI), sent a letter to Secretary of Labor Lori Chavez-DeRemer, outlining policy issues that the committee believes are ripe for action by the new secretary. The letter specifically recommends the withdrawal or rescission of several regulatory actions issued by the Biden administration, such as:
The Wage and Hour Division’s (WHD) final rules on overtime, independent contractors, tipped workers, and Davis-Bacon regulation, among others. Also singled out is the WHD’s proposed rule eliminating the subminimum wage for workers with disabilities (Rep. Walberg underscored the importance of withdrawal of this proposal in a separate letter sent this week).
The Occupational Safety and Health Administration’s (OSHA) final walkaround regulation and electronic injury and illness recordkeeping rule, as well as proposed rules relating to excessive heat in the workplace and emergency response.
Representative Walberg also encouraged “DOL to enforce its laws while providing robust compliance assistance to workers and businesses instead of continuing the enforcement-only approach taken by the Biden-Harris administration.” The administration’s first regulatory agenda will provide a roadmap of agency priorities when it is issued in June or July this summer.
House Committee Examines Opportunities to Amend FLSA. On March 25, 2025, the U.S. House of Representatives Committee on Education and the Workforce’s Subcommittee on Workforce Protections held a hearing entitled, “The Future of Wage Laws: Assessing the FLSA’s Effectiveness, Challenges, and Opportunities.” The hearing focused on ambiguous and outdated provisions in the Fair Labor Standards Act (FLSA) and how they could be updated for the modern economy and workforce. For example, legislators and witnesses discussed legislative options to simplify the calculation of an employee’s “regular rate” for purposes of calculating overtime pay as well as a familiar bill that would allow employees to choose paid time off or “comp time” instead of cash wages as compensation for working overtime hours. Witnesses also advocated for passage of both the Modern Worker Empowerment Act and Modern Worker Security Act, as well as the readoption of the Payroll Audit Independent Determination (PAID) program, a pilot program the DOL launched during the first Trump administration that allowed employers to self-report federal minimum wage and overtime violations, but terminated in January 2021, soon after former President Joe Biden came into office.
CHNV Parole Programs Terminated. On March 25, 2025, the U.S. Department of Homeland Security (DHS) published a notice terminating the parole programs for individuals from Cuba, Haiti, Nicaragua, and Venezuela (“CHNV parole programs”), “unless the Secretary [of Homeland Security] makes an individual determination to the contrary.” Individuals whose parole is terminated must leave the United States by April 24, 2025. According to the notice, the DHS estimates that 532,000 people have entered the country through these parole programs. Among other reasons for terminating the parole programs, the DHS concluded that they “exacerbated challenges associated with interior enforcement of the immigration laws.” Individuals from these countries who have Temporary Protected Status, as well as individuals residing in the United States pursuant to parole programs relating to Ukraine and Afghanistan, are not impacted by the notice. Evan B. Gordon, Daniel J. Ruemenapp, and Hera S. Arsen have the details.
One Person, One Vote. On March 26, 1962, the Supreme Court of the United States issued its pivotal decision in Baker v. Carr, which changed the process by which our political representatives are chosen. The issue concerned the drawing of legislative districts in Tennessee. At the time of the initial legal challenge, the population of urban districts had dramatically increased compared to rural districts. Plaintiff Charles Baker argued that by not redrawing or reapportioning the districts, Tennessee violated the Equal Protection clause of the U.S. Constitution because citizens in rural districts were overrepresented compared to those in the more populated urban districts. The case was initially dismissed as a “political question,” but the Supreme Court reversed, holding that apportionment of state legislatures is a justiciable matter. The decision in Baker v. Carr opened the door for a series of legislative malapportionment cases decided by the Supreme Court in the 1960s and formed the basis for the “one person, one vote” principle. But not everything about the case turned out great. The deliberations among the Supreme Court justices were so intense and exhausting that Justice Charles Evans Whittaker suffered a nervous breakdown and had to recuse himself from the case.
NLRB Firing Decision Stayed; Board to Stay Without a Quorum
On March 28, 2025, the United States District Court of Appeals for the D.C. Circuit stayed the District Court’s order reinstating former National Labor Relations Board (“NLRB” or “Board”) Member Gwynne A. Wilcox. The Board is again left without a quorum, which, under the National Labor Relations Act (“NLRA” or the “Act”), requires at least three members. See New Process Steel, L.P. v. NLRB, 560 U.S. 674 (2010).
As reported here, on March 6, 2025, a D.C. federal judge had reinstated Member Wilcox, finding that President Trump’s unprecedented firing violated Section 3(a) of the NLRA, which states that, “[a]ny member of the Board may be removed by the President, upon notice and hearing, for neglect of duty or malfeasance in office, but for no other cause.” 29 U.S.C. 153(a).
The D.C. Circuit did not include a majority opinion with its order, which simply indicated that “the emergency motions for stay be granted.” Instead, the Court attached two concurring opinions (by Judge Justin Walker and Judge Karen Henderson, respectively) and one dissenting opinion (by Judge Patricia Millett).
The opinions focused on the constitutionality of Section 3(a)’s removal protections, grappling with Seila Law LLC v. Consumer Financial Protection Bureau, 591 U.S. 197 (2020), Collins v. Yellen, 594 U.S. 220 (2021), and Humphrey’s Executor v. United States, 295 U.S. 602 (1935), to determine whether the NLRB exercises sufficient “executive power,” such that it might not be covered by the Humphrey’s Executor exception to presidential removal. As referenced here, that decision affirmed Congress’ power to limit the president’s ability to remove officers of independent administrative agencies created by legislation.
As Judge Henderson indicated in her concurrence, the “continuing vitality” of Humphrey’s Executor might be in doubt after Seila and Collins, and the Trump administration will likely seek to overturn the decision through the Wilcox appeal. In the interim, and possibly until the Supreme Court rules on this issue, the Board will remain without a quorum. As reported here, while the NLRB indicated that it will function to the extent possible absent a quorum, employers can expect Board processes to move slowly and resolution of matters pending to be delayed.
We will continue to track the Wilcox litigation and its impact upon the NLRB.
What are the Odds that FanDuelDraftKingsBet365 Can Save Tax-Exempt Bonds?
A document leaked earlier this year and attributed to the House Ways and Means Committee included the repeal of tax-exempt bonds[1] as a source of revenue to help defray the cost of extending the provisions of the Tax Cuts and Jobs Act that otherwise will expire at the end of 2025. Apoplexy ensued.
This consternation is fueled by the notion that Congress has the untrammeled authority to prevent states, and the political subdivisions thereof, from issuing obligations the interest on which is excluded from gross income for federal income tax purposes. This notion appears to ignore a line of precedent that culminated in making Bet365, DraftKings, FanDuel, et al. indistinguishably omnipresent.
Curious? Read on after the break.
The concern that Congress has the unfettered right to proscribe the issuance of all tax-exempt bonds emanates from the U.S. Supreme Court’s (the “Court”) decision in South Carolina v. Baker.[2] The Court held in that case that Congress violated neither the principles of intergovernmental tax immunity[3] nor the Tenth Amendment to the U.S. Constitution by enacting a prohibition against the issuance of tax-exempt bearer bonds.
The portion of the Court’s opinion pertaining to the Tenth Amendment cited Garcia v. San Antonio Metropolitan Transit Authority, 469 U.S. 528 (1985), for the proposition that the political process establishes the limitations under the Tenth Amendment on Congressional authority to regulate the activities of the states and their political subdivisions. Under this formulation of Tenth Amendment jurisprudence, the courts do not define spheres of Congressional conduct that pass or fail constitutional muster. The Court concluded that the political process functioned properly in this instance and did not fail to afford adequate protection under the Tenth Amendment to South Carolina.
The Court also rejected the contention that Congress had, in violation of the Tenth Amendment, commandeered the South Carolina legislature by prohibiting the issuance of tax-exempt bearer bonds and questioned whether the concept of anti-commandeering originally contained in FERC v. Mississippi, 456 U.S. 742 (1982), survived the Court’s decision in Garcia.
Aside from the portion that dealt with the Tenth Amendment, Justice Antonin Scalia joined the opinion of the Court, and Chief Justice William Rehnquist concurred in the Court’s judgment but did not join the Court’s opinion. In the view of Justices Rehnquist and Scalia, the Court should have upheld the prohibition against the issuance of tax-exempt bearer bonds because it had a de minimis effect on state and local governments, which would have ended the analysis under the Tenth Amendment. They asserted that the Court’s opinion regarding the Tenth Amendment mischaracterized the holding of Garcia and unnecessarily cast doubt on whether the Tenth Amendment prohibits Congress from dictating orders to the states and their political subdivisions.
Justice Sandra Day O’Connor dissented and stated that “the Tenth Amendment and principles of federalism inherent in the Constitution prohibit Congress from taxing or threatening to tax the interest paid on state and municipal bonds.” In Justice O’Connor’s view, the prohibition against the issuance of tax-exempt bearer bonds intruded on state sovereignty in contravention of the Tenth Amendment and the structure of the Constitution. This incursion would have negative effects on state and local governmental budgets and activities – effects she said that would only metastasize as Congress enacted further restrictions on the issuance of tax-exempt obligations, including, potentially, the elimination of such obligations.[4]
Four years later, when confronted anew with an anti-commandeering question in New York v. United States,[5] the Court demonstrated that it was receptive to the argument that the protection of state prerogatives under the Tenth Amendment is not limited to the political process. The Court held that Congress cannot compel a state government to take title to radioactive waste or, alternatively, assume liability for such waste generated within the state’s borders, because the Tenth Amendment forbids the issuance of orders by the federal government to the various state governments to carry out regulatory schemes adopted by the federal government.
In her opinion for the Court in New York, Justice O’Connor developed the themes articulated in her dissent in Baker. Namely, the Tenth Amendment was ratified to ensure that the federal government adhered to the federalist structure devised by the Constitution, a structure that contrasted starkly with the Articles of Confederation that the Constitution replaced. Under the Articles of Confederation, the federal government had limited, if any, power to govern the citizens of the various states. Instead, the Articles of Confederation constrained the federal government to acting upon the state governments, and state governments were the sole sovereign with respect to their citizens. Under this constraint, the federal government could not tax the citizens; it could only issue requisitions to the state governments to raise funds.
The federal government at that time did not possess the wherewithal to enforce the dictates and requisitions it had imposed upon the states. As a result, the United States was hardly a cohesive whole. The Constitution was ratified to create a more robust federal government and, thus, a truly unified United States. Under the Constitution, the federal government may use the powers conferred upon it to directly govern the citizens. Justice O’Connor observed that the Tenth Amendment guarantees adherence to the Constitutional structure, because it prohibits the federal government from issuing orders, dictates, and requisitions to the state governments, as the federal government could do under the Articles of Confederation.
The Court applied the foregoing rationale to hold in Printz v. United States[6] that the Tenth Amendment precludes the federal government from commandeering state officials to carry out a federal regulatory program. The Court once again followed this rationale when it held in Murphy v. National Collegiate Athletic Association[7] that, where Congress had not prohibited sports gambling throughout the United States, the Tenth Amendment barred Congress from preventing a state legislature from enacting laws that permit sports gambling within the state. As a result of Murphy, 39 states now allow sports gambling, and the FanDuelDraftKingsBet365 Borg has relentlessly endeavored to assimilate us.
This durable line of Tenth Amendment precedent should give one pause before concluding that Congress can completely repeal the ability of state and local governments to issue tax-exempt bonds. As noted above, a complete repeal of tax-exempt bonds is projected to generate $364 billion in revenue to the federal government over a 10-year period. Under New York, Printz, and Murphy, Congress clearly cannot issue a requisition to the states seeking remittance of $364 billion to help finance a federal income tax cut. The elimination of tax-exempt bonds is the economic equivalent of such a requisition by the federal government to the states and their political subdivisions. State and local governments will be required to pay bondholders higher, taxable interest rates on debt obligations that they issue.[8] If the projections noted above are accurate, $364 billion of this increased interest paid by state and local governments will be remitted by the bondholders to the federal government.[9]
Does the Tenth Amendment allow the federal government to impose an indirect requisition on state and local governments that the federal government cannot issue directly? Does the legal incidence of the tax on the bondholders suffice to avoid the anti-commandeering principle developed by New York, Printz, and Murphy? If it does, would the Court distinguish its holding in Baker on the basis that prohibiting the issuance of tax-exempt bearer bonds has a trivial effect on state and local governmental sovereignty, while a full elimination has a much more profound effect? If Congress eliminates tax-exempt bonds, will one or more states invoke the right of original jurisdiction[10] to present these questions directly to the U.S. Supreme Court?
With all this on the table, it might be a bad bet to conclude that Congress can parlay the elimination of tax-exempt bonds into a revenue offset to help pay for a federal tax cut.
[1] The document scored the repeal of tax-exempt bonds as raising $250 billion over 10 years and the repeal of “private activity bonds” as generating $114 billion over the same timeframe. The reference in that document to “private activity bonds” means “qualified bonds” under Section 141(e) of the Internal Revenue Code of 1986, as amended. Qualified bonds are private activity bonds that would, absent legislative enactment by Congress, constitute taxable bonds. Some common examples of qualified bonds include qualified 501(c)(3) bonds (which are frequently issued to finance educational, healthcare, and housing facilities owned or operated by 501(c)(3) organizations), exempt facility airport bonds (which are issued to finance improvements to terminals and other airport facilities in which private parties, such as airlines, hold leasehold interests or other special legal entitlements), and exempt facility qualified residential rental project bonds. For ease, references to “tax-exempt bonds” in this post are to both tax-exempt governmental use bonds and tax-exempt qualified bonds.
[2] 485 U.S. 505 (1988).
[3] In so holding, the Court overruled Pollock v. Farmers’ Loan & Trust Co., 157 U.S. 429 (1895). The Court in Pollock espoused the doctrine of intergovernmental tax immunity to conclude that the federal government lacks the authority under the U.S. Constitution to tax the interest on obligations issued by state or local governments.
[4] Justice O’Connor was quite prescient.
[5] 505 U.S. 144 (1992).
[6] 521 U.S. 898 (1997).
[7] 584 U.S. 453 (2018).
[8] The Public Finance Network estimates that the repeal of tax-exempt bonds will raise borrowing costs for state and local governments by $823.92 billion between 2026 and 2035, which will result in a state and local tax increase of $6,555 per each American household.
[9] It should be noted that taxing the interest paid on state and local debt does not, as some claim, result in an economic charge imposed on the wealthy. As an initial matter, retirees and others of more modest means hold a significant amount of currently outstanding tax-exempt bonds, because they want to allocate a portion of their savings to a secure investment. Assuming arguendo that tax-exempt bondholders tend to be wealthier, they will be compensated for the tax in the form of increased interest rates. They will suffer no economic detriment because their after-tax return on taxable state and local bonds will equal the return available on tax-exempt bonds. State and local governments will, however, need to raise taxes or limit governmental services so that they can pay the higher interest rates demanded on taxable obligations. Less wealthy constituents will bear the brunt of this. The less wealthy tend to be the recipients of more governmental services than the wealthy. Moreover, the less wealthy devote a larger share of their income to the payment of sales tax (the form of taxation on which state and local governments increasingly rely) than is the case with wealthier constituents. Consumption taxes, such as sales taxes, are by their nature regressive, because the less wealthy spend a greater percentage of their income than do the wealthy, who can save a larger share of their income. These savings are not subjected to a consumption tax.
[10] U.S. Const. Art. III, Sec. 2.
D.C. Federal Court Judge Blocks Efforts to Dismantle the CFPB
On Friday, Judge Amy Jackson of the United States District Court for the District of Columbia granted a preliminary injunction sought by the National Treasury Employees Union, over efforts by Acting Director Russell Vought to shutter the agency. The union, which represents the Bureau’s employees, had sought an injunction that would have stopped Vought from eliminating jobs and contracts at the agency, and protect key CFPB functions from being shut down while the litigation was in progress.
In her opinion, Judge Jackson stated that the union had made a convincing case for emergency relief. She noted that the “defendants were fully engaged in a hurried effort to dismantle and disable the agency entirely – firing all probationary and term-limited employees without cause, cutting off funding, terminating contracts, closing all of the offices, and implementing a reduction in force that would cover everyone else.” She stated that “[t]hese actions were taken in complete disregard for the decision Congress made 15 years ago, which was spurred by the devastating financial crisis of 2008 and embodied in the United States Code, that the agency must exist and that it must perform specific functions to protect the borrowing public.” She concluded that if the defendants were not enjoined, “they will eliminate the agency before the Court has the opportunity to decide whether the law permits them to do it, and as the defendants’ own witness warned, the harm will be irreparable.”
The preliminary injunction bars Vought from deleting agency records, firing employees without cause or seeking to “achieve the outcome of a work stoppage.”
Putting It Into Practice: The decision is a major win for CFPB employees and their union. Many employees fired by the Acting Director were put back on the CFPB’s payroll earlier this month, under a temporary restraining order issued in a separate Maryland court case brought by the City of Baltimore (see our discussion here). Judge Jackson’s preliminary injunction seems to require the rehiring of the remainder. We will continue to monitor this case for new developments.
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Illinois Federal Judge Blocks DOL From Enforcing Termination, Certification Provisions in Trump DEI-Related EOs
On March 27, 2025, a federal judge for the U.S. District Court for the Northern District of Illinois temporarily blocked the U.S. Department of Labor (DOL) from enforcing portions of two provisions in President Donald Trump’s diversity, equity, and inclusion (DEI)-related executive orders (EO).
Quick Hits
A federal judge in Illinois issued a temporary restraining order blocking the DOL from enforcing certain provisions in two executive orders aimed at eliminating “illegal” DEI programs.
The judge found certain provisions are coercive and undefined, likely violating the First Amendment.
The ruling comes amid multiple ongoing legal challenges related to DEI initiatives.
U.S. District Judge Matthew F. Kennelly issued a temporary restraining order (TRO) prohibiting the DOL from enforcing a “termination provision” that requires federal agencies to terminate grants or contracts with organizations that promote DEI and a “certification provision” that requires grant recipients to certify under the False Claims Act (FCA) that they do not have DEI or diversity, equity, inclusion, and accessibility (DEIA) programs.
The judge found that the termination and certification provisions in President Trump’s EO 14151 and EO 14173 are likely to violate the First Amendment of the U.S. Constitution and cause irreparable harm to the plaintiff, the Chicago Women in Trades (CWIT), a nonprofit group that helps prepare women to earn jobs in the trades.
Judge Kennelly said that the termination provision was “coercive” and could suppress disfavored speech because its vagueness created a chilling effect on CWIT’s activities.
“Here, the government is not selectively funding some programs, but not others; it is indicating an entire area of programming that is disfavored as ‘immoral’ (as well as illegal) and threatening the termination of funding unless grantees bring their conduct into line with the government’s policy agenda,” Judge Kennelly wrote in the decision.
The judge further found the certification provision, which requires grant recipients to certify they do not operate any DEI programs that “violate any applicable Federal antidiscrimination laws,” is problematic because the EO does not clearly define what constitutes “illegal” DEI activities and because its references to “programs promoting DEI” targets constitutionally protected speech there is a likely a First Amendment violation.
Notably, the court limited its ruling on the termination provision only to the plaintiff, CWIT, rather than issuing a nationwide injunction. However, the certification provision does apply nationwide but only to those being issued by the DOL and not all federal agencies.
The ruling comes just less than two weeks after the U.S. Court of Appeals for the Fourth Circuit, in a similar lawsuit, granted the government’s request to stay a nationwide preliminary injunction that had blocked the termination and certification provisions and a provision directing the attorney general to enforce civil rights laws against DEI programs in the private sector.
Following the Fourth Circuit’s stay of the nationwide preliminary injunction, CWIT sought an immediate TRO in its lawsuit. The group argued the stay created renewed urgency to stop the DOL from cutting its federal funding unless it “cease[s] all diversity, equity, inclusion and accessibility activities” and “scrub[s] all diversity, equity, and inclusion initiatives and related language from its programming.”
In addition to the CWIT case and the Maryland case, which is led by the National Association of Diversity Officers in Higher Education, civil rights groups led by the National Urban League have filed another legal challenge in the U.S. District Court for the District of Columbia. The groups are also seeking to block several provisions of EO 14151 and EO 14173, in addition to EO 14168, which defines sex as binary for purposes of federal policy. The D.C. court held a hearing on the group’s motion for preliminary injunction on March 19, 2025.
Next Steps
The TRO in the CWIT case is limited to the DOL, but its reasoning suggests that the judge may issue a broader preliminary injunction. The DEI-related EOs have created uncertainty for employers over what types of programs the government will consider to be “illegal” DEI programs and sparked several legal challenges. Inconsistent rulings in the federal courts have added to the uncertainty, and the possibility remains that the cases or issue of whether the DEI-related EOs are constitutional could ultimately land before the Supreme Court of the United States. The outcome of the cases will have far-reaching implications for employers and the promotion of programs meant to foster diversity in the workforce.