The Facts

Arthur Provencher and Michael McGuire are Vermont-based delivery drivers for Bimbo Bakeries. They claim Bimbo misclassified them as independent contractors and shorted them on overtime. Standard enough. The dispute came when they moved for conditional certification of a three- state collective covering similarly situated distributors in Vermont, Connecticut, and New York. Bimbo—incorporated in Delaware, principally based in Pennsylvania—argued under Bristol-Myers Squibb Co. v. Superior Court of California, 582 U.S. 255 (2017), that the Vermont court lacked personal jurisdiction over the out-of-state claims.

The district court sided with the plaintiffs, reasoning that Bimbo had sufficient contacts with Vermont to justify the court’s exercise of personal jurisdiction over it, and that because the FLSA is a federal statute applying nationwide, the concerns animating Bristol-Myers (cherry-picking the laws of a state in which the defendant did not expect to litigate) were absent. Bimbo secured an interlocutory appeal, and flipped the result.

The Holding

The Second Circuit reversed, joining the substantial majority of circuits that have considered the issue and holding that “before conditionally certifying an FLSA collective action and authorizing notification of potential plaintiffs who may opt in, a district court must ensure its personal jurisdiction over the defendant with regard to the claims of those to be notified.”

The Second Circuit’s reasoning boiled down to a few key points:

FLSA collective actions are not Rule 23 class actions. The Court rejected the analogy between § 216(b) collectives and Rule 23(b)(3) class actions. Opt-in plaintiffs retain individual party status, unlike absent class members whose claims are litigated through a representative. Each opt-in must independently satisfy personal jurisdiction.

Rule 4(k)(1)(A) controls jurisdictional reach. The FLSA contains no nationwide service of process provision, so the federal court’s jurisdictional reach is tethered to Vermont’s long-arm statute, which extends to the Fourteenth Amendment’s outer limit.

Bristol-Myers applies in full force. Nothing in the record suggested Bimbo's Connecticut or New York distributors suffered FLSA violations “arising from Bimbo’s contacts with Vermont.” The Court rejected the plaintiffs’ uniform-corporate-practice argument with a memorable line: the uniformity of corporate practice has “no more jurisdictional significance than the chemical consistency of Plavix’s ingredients.” It may give rise to similar claims, but it cannot “transform out-of-state dealings into in-state contacts.”

With Provencher, the appellate landscape is now decisively in employers’ favor: the Second, Third, Sixth, Seventh, Eighth, and Ninth Circuits all apply the holding in Bristol-Myers, with the First Circuit remaining an outlier. Importantly, this brings New York, one of the busiest federal forums for wage and hour litigation, squarely into the majority camp.

What This Means for Employers

Nationwide FLSA collectives are more difficult to pull off. Unless plaintiffs sue where general jurisdiction exists (state of incorporation or principal place of business), out-of-state opt-ins cannot ride along.

Expect more filings at headquarters. Plaintiffs’ attorneys have already been gravitating toward filing FLSA collectives in the state where a company is headquartered, the one jurisdiction where general jurisdiction is virtually guaranteed. That trend will likely continue.

Parallel state-by-state actions remain on the table. Employers may avoid one mega-collective, but they could still face parallel collective actions in multiple states. This is not a “get out of jail free” card, but rather a jurisdictional reshuffling.

The Rule 23 pivot is the real exposure. Several circuits, including the Third, Sixth, and Seventh, have held that Bristol-Myers does not apply to Rule 23 class actions. Expect plaintiffs to lean into state-law vehicles as the workaround, which may offer longer limitations periods (e.g., six years in NY and NJ), liquidated or treble damages, mandatory fee-shifting, and Rule 23 opt-out treatment rather than § 216(b)’s opt-in regime, meaning much higher participation rates. The playbook: file in the headquarters forum, plead an FLSA collective alongside a state-law Rule 23 class, and capture out-of-state employees through the Rule 23 vehicle even where Provencher limits the federal collective. Multistate employers should be reviewing whether their class-waiver arbitration agreements cover state wage claims as comprehensively as they cover the FLSA.

Looking Ahead

The Supreme Court has declined to take up this issue, denying cert in Fischer v. Federal Express Corp., 42 F.4th 366 (3d Cir. 2022) and passing on other occasions. With a circuit split now firmly entrenched—and the Second Circuit adding significant weight to the majority—it may only be a matter of time before the Supreme Court steps in. Alternatively, Congress could amend § 216(b) to provide for nationwide service of process, which would effectively moot the Bristol-Myers problem entirely and make it easier for FLSA plaintiffs to litigate their claims. Don't hold your breath on that one.

In the meantime, Provencher gives defense counsel real ammunition at the conditional certification stage in the Second Circuit. If you’re defending a putative multistate FLSA collective action filed anywhere outside the company’s headquarters forum, this decision should be top of mind.

For questions or guidance about these developments, please contact a member of Kelley Drye’s Labor and Employment team.

We don’t like to overreact here at Labor Days. We do believe that AI is transformative in the world, the workplace, and employment. We do not believe that we are all zombies who died when OpenAI launched and just don’t know it yet.

But a recent report floating around the medical residency world—specifically involving a tool called Thalamus Cortex—has now made old fears seem quaint. It takes the “AI-gone-wrong” riskometer from “omg, that guy has six fingers” to “we are accidentally destroying the next generation of brain surgeons.”  That’s a pretty big liability gap.

A WIRED report (which, for the record, is very much a real thing, backed by a study in The Laryngoscope) describes a nightmare scenario for any company or employer considering applications. (Which is . . . all of them.) Physicians at a national meeting noticed that applicant grades in the Cortex system were literally shifting before their eyes. [Cue horror track: the humans watch AI turn on them in real time.]  One minute you’re a straight-A superstar; the next, the AI “normalizer” has said you’re a C+ on a good day.

The CEO of the company told WIRED it was basically a UI glitch—the digital equivalent of the screen getting “stuck” because the user clicked too fast. If you’re tracking: you’ve spent hundreds of thousands of dollars on a medical degree; you’ve worked harder until now than most people work in a lifetime; and your career—remember, where you land now is the starting point for all potential future roads—has been gutted because the system was slow, and you chose to do the thing, the one thing, that no person must ever do: you clicked twice.

Saying this happened because the “user clicked too fast” is the tech version of “the dog ate my homework,” except the homework is someone’s life.

Enter Chad Markey, the hero of our story. Markey overcame genuinely extraordinary personal odds to graduate from an elite medical school with glowing recommendations—a sterling candidate. When similar peers got interviews and he faced nothing but rejections, he suspected the AI visible in the application process was penalizing him for mentioning a leave of absence for “personal reasons.” He had listed those periods as leave for ‘personal reasons’; in reality, he was obtaining medical treatment for an extremely serious, life-threatening illness, and included the more generalized description of the leave.  He asked what happened.  He didn’t get answers. [Cue dramatic track.].

So he got even. He went full Mr. Robot.

He used Python to create a synthetic dataset of 6,000 applicants and reverse-engineered the company’s own patents using Claude Code and GitHub Copilot. What he did is beyond impressive, but what it revealed is fairly obvious from all prior human experience: language matters.

It matters a lot, apparently. As it turns out, the AI’s “sentiment analysis” reportedly favored “medically accurate” descriptions over “personal reasons” by a massive margin. That was why. So a general coding instruction to prefer more specific or accurate information over less specific or potentially less accurate information—sensible at the general level—worked its way through algorithmically to apply that criterion to a person whose medical information is personal to him, and whose personal identity might have been organized around working through challenges rather than announcing them. And then rejected him.

A person would not have done that. 

The company denies that their AI actually “scored” or “ranked” Markey’s specific cycle. That isn’t entirely persuasive, apparently, because they do use AI for what they call “grade normalization”—which is related to the idea of leveling the playing field or “comparing apples to apples.” 

But they learned the hard algorithmic lesson: putting inputs into an algorithm hands those inputs over to a new process, an exponential process, that we don’t watch or really understand. So we aren’t generally aware of just how much “thinking” is going on until it goes wrong: a hand with six fingers or an unemployed Josh Markey. If you’re Chad Markey, AI might even make the exact opposite choice you would make based on the same information. In Markey’s case, the record of his perseverance in a demanding profession was exactly the thing that Cortex noticed to disqualify him. 

Why Should Employers Care About AI Hiring Tools?

The usual, self-explanatory word: litigation. 

When employers use AI, they are using a process whose moment-to-moment functioning, as used by real people, is not known. Here, let’s be intellectually honest with the word that Cortex used, one that is used a lot to try to pinpoint exactly what we don’t know about AI: “opaque.” Obviously, AI is human-designed and human-made, so it wouldn’t be true to say that we literally don’t know “how” AI works. But AI behaves independently, even if we made it. That’s the point. It’s a complex algorithm running in the background performing millions of operations you never see and synthesizing all that into outputs that feel human, or seem to have and provide exactly the information you asked for (assuming it’s not hallucinated). 

In our experience, claimants sue companies when they lack power or information, or both.  Employers have always had more power and information. Employers must acknowledge the obvious: humans know less about the systems they’re working within when they use AI at scale. So AI will legitimately weed out an inappropriate applicant—but no human will have watched the weeding.

This new asymmetry—individuals with better access to legal resources (including AI itself), companies operating with increasingly self-created opacity—amplifies the dynamics that spark and fuel lawsuits. That trend suggests three things to watch:

What happens when AI makes hiring less transparent? If a candidate feels like they’re screaming into a void, they will eventually find a megaphone. Chad used a Data Access Request under the New Hampshire Privacy Act.  This costs nothing. Expect more of this.

Referring to the novelty of AI sounds like a lame excuse, not a defense. We love the idea of AI “leveling the playing field” (e.g., comparing a 3.8 at Harvard to a 3.8 at a state school). But if the algorithm is “opaque” (a direct quote from an AI auditor in the report), you aren’t leveling the field; you’re just moving the field to a different continent, and nobody knows the rules. Aspirational language (“But we were trying to do a good thing”) is not usually going to be a defense to acts that otherwise violate the law.

This is important: don’t think that what AI does is literally unknowable. It isn’t: Chad Markey proves it. If Chad can know it, you can know it, and enforcement agencies and juries will expect you to know it, too.

Will the burden of proof shift de facto to employers? It’s fundamental in a lawsuit: the plaintiff has the burden of proving their claim. When an employment discrimination plaintiff alleges that an employer terminated her because of her sex, the employer offers—doesn’t have to prove—a legitimate, non-discriminatory reason (say, poor performance or a business downturn). Then it flips back to the plaintiff to prove—yes, prove—that the reason the defendant offered is a cover for the real reason, a pretext. But it’s not hard to see the plaintiff’s bar shaping cases around this: if an employer can’t even explain how a decision was made, then why should a jury believe an applicant was passed over for good reasons rather than bad ones?

Class actions. Always save the best for last. A class action isn't about thousands of individual grievances; it’s about a single, uniform choice made by a defendant. And the “class” allegation is specifically that this choice—whether to hide gotchas in credit card agreement fine print or to pollute water—both violates the law and hurts every injured person in the same way. Individual differences in class members—their jobs or where they live, for example—don’t matter; it’s the legal injury that unites them.

I almost don’t have to write this paragraph: now imagine the class framework applied to an AI-mediated application process that categorically excludes, say, everyone of a certain ethnic subset because—if you can’t follow this leap, that’s the point—the algorithm saw a relationship between shorter job tenures and a previously-unnoticed correlation to support for candidates who always vote “yes” in favor of extending federal nutrition subsidies.

What Should Employers Do Now?

If you’re using AI to “filter,” “normalize,” or “badge” your applicants, you need to know what’s happening under the hood. If a medical student can reverse-engineer your hiring process in his dorm room, imagine what a class-action firm with a budget can do. If it’s not clear already, the “user clicked too fast” defense is embarrassing. And it would make every juror want to boycott you, not buy your products and services.

Stay human out there, and please contact a member of the Kelley Drye Labor and Employment Team if you have questions or worries.

However, a recent federal court decision—Chreky v. University of Pittsburgh Physicians, No. 2:23-cv-00856 (W.D. Pa. filed May 22, 2023)—highlights how quickly legitimate concerns can become entangled with age discrimination risk when processes are rushed, documentation is inconsistent, or internal emails create an appearance of bias.

On February 23, 2026, a federal judge refused to dismiss a 71 year old emergency physician’s age discrimination claim against University of Pittsburgh Physicians (UPP). The physician alleged that his non renewal resulted not from patient care concerns but from a predetermined “plan” to replace him with a significantly younger physician.

While UPP asserted that there were legitimate performance based reasons for the non renewal, the court concluded that a jury could find those reasons to be pretextual. In declining to dismiss the claim, the court noted that:

• Many of the alleged performance issues involving professionalism and clinical judgment were heavily clustered in late 2020, just before plaintiff was given notice.
• There were leadership emails that referenced “dead wood,” “never changing,” and stated “he is gone in June”—language a jury could view as age related.
• A younger physician toured the emergency department shortly before these events and was offered a contract dated to begin the day after the plaintiff’s contract ended.
• Some of the cited performance incidents occurred after leadership had already internally decided not to renew the physician’s contract.

The University has not lost, and still maintains that the physician was terminated for legitimate reasons. However, it now faces a jury trial.

The Message to Hospital Executives: Back to the Basics

This decision should remind all executives, HR professionals, and counsel to go back to the basics: If you become aware of genuine clinical or behavioral concerns about the performance of a senior physician, prompt action matters. Even when uncomfortable, ignoring the problem just exacerbates the issue. Thus, hospital administration, physician leadership, and human resources must be diligent in documenting those errors, giving timely notice to the physician that these issues exist, and a meaningful opportunity to fix the problem.

Fairness matters here: courts and juries do not expect that a senior employee will be terminated on 30 days’ notice. If a real performance issue arises, consider a formal performance improvement plan, with a reasonable timeline of some months to improve.

Also, be sure to keep all internal communications about performance, and not the person. Emails and text messages which reference age or make negative personal comments will be potent evidence of discriminatory animus. In other words – keep all communications professional.

This can all boil down to some simple steps:

• Corrective actions must be timely, consistent, and thoroughly documented.
• A physician improvement program (or Professional Assistance Program (PAP), Professional Improvement Program (PIP), peer review remediation) must be applied uniformly, regardless of age.
• Leadership must keep communications professional: avoid remarks, written or verbal, that could be interpreted as referencing age, retirement, or generational stereotypes.
• Be cautious as you seek a replacement.
  • Hiring a younger physician before senior staff is terminated increases visibility and risk.

A Practical Tip for Hospitals

Again, this decision really should remind all hospital managers to go back to the basics: when managing performance concerns for older physicians, and any employee, you must ensure that documentation precedes, not follows, the decision-making. Courts look closely at whether issues were longstanding and consistently addressed or whether they clustered suspiciously around a termination decision. And be sure to keep all communications professional.

For any questions about physician performance protocols or managing a challenging provider situation, please contact the Labor and Employment team at Kelley Drye.

Illinois Human Rights Act – Artificial Intelligence in Employment

Effective January 1, 2026, the Illinois Human Rights Act (IHRA) is amended to prohibit employers from using artificial intelligence (AI) that “has the effect of subjecting employees to discrimination on the basis of protected classes.” Illinois employers cannot use AI that has a discriminatory effect on employees with respect to recruitment, hiring, promotion, renewal of employment, selection for training or apprenticeship, discharge, discipline, tenure, or the terms, privileges, or conditions of employment. Additionally, the amended IHRA requires employers to provide notice to employees and applicants when using AI during any of the above-noted employment actions. 

To Do: The Illinois Department of Human Rights (IDHR) has issued draft rules implementing HB 3773. While the rules are not yet finalized, the AI provision of the statute is effective, and employers must comply with the law. Therefore, take steps to ensure compliance now. The draft rules are not binding, but they serve as a guide to identify compliance areas. Additionally, continue to monitor developments around the IDHR rules and developments at the federal level regarding employer AI obligations. 

Nursing Mothers in the Workplace Act

The Nursing Mothers in the Workplace Act requires an employer to provide reasonable break time to an employee who needs to express breast milk for one year after the child’s birth. The Act was amended effective January 1, 2026, to clarify that an employer must compensate an employee at the employee’s regular rate of compensation for this break time. Additionally, the amendment provides that an employer cannot require an employee to use paid time off during the break time or reduce the employee’s compensation during the break time in any other manner. 

To Do: Review your time keeping and compensation practices for compliance.

Family Neonatal Intensive Care Leave Act

The Neonatal Intensive Care Leave Act (NICLA) provides leave and related job protections for employees with newborns hospitalized in a neonatal intensive care unit. Employers with 16 to 50 employees must provide 10 days of unpaid leave, while employers with more than 50 employees must provide 20 days of unpaid leave. (Employers with 15 or fewer employees are not covered by the law.) The leave, which can be taken incrementally or continuously, is separate from FMLA leave and employees cannot be required to use PTO concurrently with NICLA leave. NICLA also has provisions prohibiting retaliation against employees for exercising or attempting to exercise rights under the statute, opposing practices believed to violate the NICLA, or supporting the exercise of rights by another. 

To Do: Review your leave policies and update as appropriate. 

Victims’ Economic Security and Safety Act

The Victims’ Economic Security and Safety Act (VESSA) provides protections for employees who are victims of domestic violence, sexual violence, gender violence, or any other crime of violence. As of January 1, 2026, the law requires employers to permit employees to use their employer-provided devices (such as phones, laptops, and tablets) to record incidents of domestic violence, sexual violence, gender violence, or any other crime of violence committed against the employee or their family or household members. Additionally, employers must permit employees to access the recordings and cannot retaliate or discipline an employee who uses a company-issued device to document evidence of such violence. 

To Do: Review your technology and electronic device policies for compliance. 

Illinois Workplace Transparency Act

As we reported in our previous October 29, 2025 Labor Days post, 2026 brings changes to the Illinois Workplace Transparency Act (IWTA), first enacted in 2020. The amended IWTA, effective January 1, 2026, ushered in a host of changes, which we covered in our prior post. A few reminders: 

• The amended IWTA expands the definition of “unlawful employment practices,” expanding the types of claims that would bring a separation or settlement agreement under the auspices of the IWTA. The IWTA now covers not only discrimination, harassment, and retaliation claims, but also any unlawful practice under any state or federal law governing employment, including laws enforced by the Illinois Department of Labor, Illinois Labor Relations Board, U.S. Department of Labor, OSHA, and National Labor Relations Board. The expanded definition means that other provisions of the IWTA, including those prohibiting unilaterally imposed conditions restricting disclosure of unlawful employment practices now cover a broader range of allegations, including those related to workplace safety, wages, and labor activities.
• The amended IWTA also imposes additional requirements for certain terms of employment agreements and settlement or separation agreements. Among the changes, confidentiality provisions in settlement and separation agreements must be supported by distinct, bargained-for consideration that is separate and apart from any consideration provided for an employee’s release of claims. In practice, this means parties must determine the consideration allocated to the agreed upon confidentiality provision.

To Do: Review your employment, separation, and settlement agreements.

Employee Blood and Organ Donation Act

Effective January 1, 2026, the Employee Blood and Organ Donation Act (BODLA) is amended to extend eligibility for paid leave for organ donation to part-time employees, in addition to the full-time employees, who already can take leave for both blood donation and organ donation under BODLA. Part-time employees also receive up to 10 days of organ donation leave within any 12-month period. To determine compensation, an employer must calculate the daily average pay the part-time employee earned in the two (2) months of employment prior to the leave and compensate the employee for any leave days used. 

To Do: Review your leave policies and update as appropriate. 

Illinois Human Rights Act – Fact Finding Conferences

Illinois also amended the procedural provisions of the IHRA for 2026. The mandatory fact-finding conference has been eliminated as part of the Illinois Department of Human Rights (IDHR) investigation process. Instead, such conferences are now within the discretion of the IDHR or upon written request by the complainant and respondent within 90 days after the charge is filed and if the parties agree to an additional 120 days for the IDHR to complete its investigation. Additionally, the IDHR can impose civil penalties against employers found in violation of the IHRA, in addition to existing remedies. The civil penalties range from $16,000 to $70,000 depending on the number of violations: The changes, which are effective January 1, 2026, are not retroactive and therefore do not apply to charges pending before the effective date. 

To Do: Be aware of the new penalties that can be imposed for violations. 

Unemployment Insurance Act 

Effective January 1, 2026, the Unemployment Insurance Act is amended to establish a three (3)-year pilot program expanding eligibility for unemployment benefits to employees who voluntarily leave their jobs due to mental-health-related disabilities. The pilot includes individuals with claims between December 28, 2025 and December 24, 2028. The condition must be certified by “a licensed and practicing psychiatrist” and “the employer is unable to accommodate” the employee. While this broadens who may receive unemployment benefits, employer experience ratings will not be charged for such claims. The amendment also creates expanded tools for the Illinois Department of Employment Security to recover benefits improperly paid, especially in cases of fraud.

To Do: Monitor developments relating to the mental health pilot program. 

Workers’ Rights and Worker Safety Act 

The Illinois Workers’ Rights and Safety Act is designed to preserve worker protections under the federal OSHA, Fair Labor Standards Act, and Coal Mine Health and Safety Act in effect as of April 28, 2025, regardless of any future federal rollbacks with respect to the federal laws. If after April 28, 2025, a federal safety standard is revoked, repealed, amended, or interpreted in a way that makes it “less effective in providing safe and healthful employment and places of employment,” the Act directs the Illinois Department of Labor to promulgate rules and regulations that “adopt a standard that incorporates the federal occupational health or safety standard as it existed prior to being repealed, revoked, amended, or newly interpreted.” 

To Do: Monitor developments. 

Employers should review their policies and procedures and agreements for compliance and any necessary updates. Please contact a member of Kelley Drye’s Labor and Employment team with any questions or if you would like more information about Illinois employment law compliance. 

The amended ESSTA requires employers to provide 32 hours of unpaid sick and safe leave to covered employees, in addition to the existing paid sick and safe leave already required by the law.  This new unpaid sick and safe leave must be frontloaded upon hire and at the start of each calendar year.  Unused unpaid sick and safe leave does not carry over into the next year.  An employee’s paid sick and safe leave must be applied before an employee is required to use unpaid sick and safe leave. 

The law also expands the permitted uses for sick and safe leave (both paid and unpaid): 

• Circumstances relating to public disasters such as a fire, explosion, terrorist attack, severe weather conditions, or other event declared to be a public emergency or disaster by the President, New York Governor, or New York City Mayor  
• The employee’s need to care for a child whose school or childcare provider closed or restricted in-person operations by order of a public official due to a public health emergency or public disaster
• Safe time absences when the employee or their family member is a victim of workplace violence
• Time needed to provide care for the employee’s minor child or care recipient
• Time to initiate, attend or prepare for a legal proceeding or hearing related to subsistence benefits or housing, or to take steps to apply for, maintain, or restore such benefits or shelter, for the employee, a family member or a care recipient

The law also formally incorporates the existing 20 hours of paid prenatal leave provided for by New York State law. Finally, ESSTA now incorporates many of the situations previously covered under the Temporary Schedule Change Act, and employers are no longer required to approve up to two temporary schedule changes annually. 

In light of these new requirements, all New York City employers should review their sick and safe leave policies immediately. That means structuring leave banks so that paid leave is applied first before the 32 hours of unpaid leave, and ensuring your timekeeping, paystub reporting, and employee notices reflect both paid and unpaid balances in compliance with ESSTA’s documentation requirements. Employers should revisit existing leave categories and clarify how they interact with ESSTA’s expanded uses, especially where caregiving, emergency closures, or public-official directives might trigger leave. Managers and Human Resources teams should be trained on implementing these changes. 

For any questions about New York City’s Earned Safe and Sick Time Act (ESSTA), please contact the labor and employment team at Kelley Drye.

In this article, we discuss the Trapped at Work Act and analyze its implications as more states consider similar Stay-or-Pay laws.

What Is the Trapped at Work Act?

The Trapped at Work Act was signed into law by Governor Kathy Hochul on December 19, 2025. The Act broadly defines employer to include anyone who hires or contracts with workers. Similarly, the Act applies to all workers, including employees, independent contractors, interns, and volunteers. 

The Act, effective immediately, restricts employers from requiring workers to enter into an “employment promissory note” as a condition of employment. “Employment promissory note” includes “any instrument, agreement or contract provision that requires a worker to pay the employer, or the employer’s agent or assignee, a sum of money if the worker leaves such employment before the passage of a stated period of time.”

Significantly, there are limited categories of payments or repayments excluded from the Act. Expressly excluded from the Act are agreements between a worker and employer that:

• require the worker to repay to the employer any sums advanced to the worker by the employer, unless such sums were used to pay for training related to the worker’s employment;

• require the worker to pay the employer for any property it has sold or leased to the worker;

• require educational personnel to comply with any terms or conditions of sabbatical leaves granted by their employers; or

• are entered into as part of a program agreed to by the employer and its workers’ collective bargaining representative.

The Act does not grant workers a private right of action for violations, but the New York Department of Labor is authorized to impose civil penalties up to $5,000 per violation.

The Impact for Employers

The Trapped at Work Act comes on the heels of California and Colorado enacting similar legislation. You can find more information about the California Stay-or-Pay law here.

Employers should remain vigilant about other states proposing or enacting similar laws. The impact of these Stay-or-Pay laws may limit an employer’s ability to enter into employment-related advances, clawback provisions, or repayment agreements. While the Trapped at Work Act is unlikely to prohibit forgivable loans, incentive structures, or sign-on bonuses, employers should be aware that other state laws may impose stricter restrictions or be less clear about what is prohibited. 

For any questions about the New York Trapped at Work Act or other Stay-or-Pay laws, please contact the labor and employment team at Kelley Drye.

Here we cover what employers should look out for at the state level in New York and beyond.

States (Including New York) Continue Expansion of Leave Laws

As we covered in our 2025 outlook article last January, New York stood out for its innovations in prenatal and pregnancy-related leave, becoming the first state to guarantee paid time off (20 hours per year) specifically for prenatal care. 

Leave expansion makes the list again this year. While other states have not followed New York’s lead regarding prenatal leave, a number of other states implemented expanded paid leave laws. Some additional examples include: 

• On February 22, 2026, New York City will implement amendments to the city ordinance relating to paid sick leave, expanding the circumstances under which employees can use leave benefits. The amendments also require employers to grant 32 hours per year of unpaid sick leave in addition to the required paid safe and sick leave. 
   
• In Colorado, on January 1, 2026, amendments to the state’s paid leave scheme will become effective, requiring employers to provide an additional 12 weeks of leave to parents whose newborns are placed in neonatal intensive care. The law allows parents to then take their 12 weeks of parental leave after their newborn is discharged.
   
• In Illinois, on June 1, 2026, the state’s Neonatal Intensive Care Leave Act will become effective, requiring employers to provide 10 days of unpaid, job-protected leave for parents whose newborns are hospitalized in the neonatal intensive care unit.

Other New York Laws Taking Effect In (or Around) the New Year

In addition to New York City’s leave law amendments, New York employers will see a number of new laws take effect in the new year. The new laws include:

• Trapped at Work Act: On December 19, 2025, Governor Kathy Hochul signed the Trapped at Work Act, effective immediately upon signing. The Act prohibits employers from requiring their employees to enter into an “employment promissory note” as a condition of employment. An employment promissory note requires the employee to pay the employer a sum of money should the worker leave employment before a predetermined period has passed. While the Act does not grant employees a private right of action for violations, it does give the New York Department of Labor the authority to administer civil penalties up to $5,000 for each violation.
   
• New York Fair Credit Reporting Act amendments: Following New York City’s lead, New York State implemented amendments to the state’s Fair Credit Reporting Act, restricting the use of an employee’s consumer credit history in employment decisions. The law prohibits an employer from requesting, using, or otherwise discriminating against an employee based on their consumer credit history. As with New York City’s analogous statute, the Act contains a number of carve-outs. The amendments to the Fair Credit Reporting Act became effective on December 19, 2025, upon Governor Hochul’s signing. 
   
• State minimum wage increases: New York City, Long Island, and Westchester County have increased minimum hourly wages from $16.50 to $17, while the rest of the state increased minimum hourly wages from $15.50 to $16. 
   
• New York Secure Choice Program: Beginning in March 2026, New York will start implementing the New York Secure Choice Program. Established in 2021, the state-run retirement program mandates and facilitates the creation of Roth IRAs for private-sector employees. Pursuant to the Program’s enacting law, employers will be required to register or certify their exemption from the Program. Deadlines vary based on employer size. New York employers should be aware of their respective deadline.

New York City: New Mayor, New Proposals

On January 1, 2026, New York City swore in a new mayor: Mayor Zohran Mamdani. Mayor Mamdani ran on a platform that included significantly expanding worker protections. With a new brand of city leadership in place, employers can expect to see changes in workplace regulations. The new mayor’s workers’ rights platform includes proposals such as:

• Increasing the minimum wage in the city to $30/hour by 2030;
• Banning non-compete agreements for workers in New York City;
• Instituting universal childcare for all New Yorkers, which may reduce work absenteeism and increase general participation in the workforce; and
• Expanding protections for gig economy workers, possibly requiring new compliance measures and cost obligations for employers utilizing the gig economy.

As of now, these all remain proposals, and New York City employers should stay vigilant for future changes in the law.

Mayor Mamdani has also tapped Christine Clarke to lead the New York City Commission on Human Rights, the body that investigates violations of and enforces the New York City Human Rights Law, which contains provisions regarding discrimination, harassment, and retaliation in the workplace. Ms. Clarke previously served as the chief of litigation and advocacy at Legal Services NYC, which provides free legal assistance to low-income New Yorkers. 

During the announcement of Ms. Clarke’s appointment, Mayor Mamdani and Ms. Clarke acknowledged the Commission’s recent history of delays in discrimination cases and vowed to speed up the agency’s output. 

Conclusion

As we mentioned in our first roundup, legislative and policy changes in the labor and employment landscape require employers to be adaptive. If you have any questions about aligning your policies with New York’s (or any other state’s) legal requirements, contact any member of Kelley Drye’s labor and employment team.

Employers across the United States have had to manage a shifting legal and regulatory landscape. Companies with workforces both large and small have had to contend with sharp pivots in the enforcement priorities at the federal government level, a quorum-less National Labor Relations Board for most of the year, differing priorities at the state level, and an active court of public opinion.

Here, we examine some major labor and employment legal themes that defined 2025 and how they may impact employers in 2026, as well as new laws employers can expect to take effect in 2026.

The State of Diversity, Equity, and Inclusion

Shortly after he took office, there was much concern over a series of Executive Orders (“EO”) issued by President Trump, which called for dismantling of Diversity, Equity, and Inclusion (“DEI”) programs. 

While these EOs caused much concern among employers, and did appear to threaten companies who chose to keep their DEI programs, the reality in 2025 was much different. Agencies like the EEOC have not yet begun enforcing the EOs against private employers, and the administration has yet to establish a clear plan of enforcement. To date, most litigation and enforcement have been limited to federally funded schools and higher education systems.

Changes to EEOC Policy

The EEOC was rankled by the President’s firing of two commissioners early in the year, which left the agency without a quorum for some months. Now that there is a quorum and the EEOC can act, it is clear from updates to the EEOC Guidance that employers should expect the EEOC to pursue race discrimination claims on behalf of majority groups, some of which may be challenging DEI programs or affirmative action hiring. 

One such area of focus for the EEOC appears to be national origin discrimination, with emphasis on discrimination against Americans. On November 19, 2025, the Agency issued a publication emphasizing its stance on remedying what it perceives to be anti-American bias. The publication reiterates that Title VII protects against discrimination on the basis of national origin, with an emphasis on discrimination against Americans.

President Trump also issued an order in April 2025 directing the EEOC to deprioritize claims of “disparate impact.” In response to the order, the EEOC closed all investigations into disparate impact on September 30, 2025. While the EEOC’s efforts in pursuing the theory have been paused for the time being, employers are cautioned that disparate impact remains a viable theory of liability in litigation.

Some states have taken steps to mitigate the fallout from the EEOC’s disparate impact policy. In New York, for example, Governor Kathy Hochul signed a bill codifying disparate impact as a method of establishing unlawful employment discrimination under the New York State Human Rights Law.

Enforcement Under the False Claims Act

The federal government has also signaled an intent to deploy the False Claims Act (“FCA”) as an enforcement mechanism of its DEI-related policies. Under the FCA, private companies holding contracts with the government may be liable to the government for “false certifications” of compliance with federal laws. If the government views a particular DEI program or policy as violative of Title VII and other civil rights laws, the government can seek to institute an action under the FCA.

So far, the U.S. Attorney General’s deployment of the FCA has been limited to issuing Civil Investigative Demand (“CID”) letters to private employers holding contracts with the government. A CID is a legal tool established under the FCA that allows the government to demand documents, responses, and testimony without court approval, and is often a preliminary investigative step to civil action.

The names of employers receiving CIDs are not public due to the investigatory nature of the mechanism; however, it is possible that 2026 may bring to light more information regarding the progress of the Attorney General’s efforts under the FCA.

SCOTUS’s Ruling in Ames v. Ohio Department of Youth Services

The Supreme Court also weighed in on what has been dubbed claims of “reverse discrimination.” In June 2025, the Supreme Court issued an opinion in Ames v. Ohio Department of Youth Services, which struck down case law in the Sixth Circuit that created a heightened evidentiary standard for individuals claiming discrimination based on their membership in a majority group under Title VII. In a 9-0 opinion written by Justice Ketanji Brown Jackson, the Court stated that Title VII’s plain text bars discrimination against “any individual” because of a protected characteristic and does not authorize different standards for plaintiffs claiming discrimination based on a “protected characteristic” generally considered a majority group characteristic.

Since Ames, we have seen several courts in the Sixth Circuit and beyond citing to the Supreme Court’s Ames decision. For circuits previously applying the “background circumstances” test, we have seen several cases where the elimination of the “background circumstances” test has been determinative of the result.

As just one example, a district court in Kansas allowed a white male employee’s discrimination and retaliation case to proceed, in part because he was no longer required to show “background circumstances” as previously required in the Tenth Circuit before the Ames decision. The case is Horinek v. Spirit AeroSystems, Inc.

Employers Must Stay Vigilant

While for the most part private employers have yet to face direct federal challenges to their DEI programs and policies, employers should continue to stay up to date in 2026 on the shifting priorities and initiatives taking place at the EEOC and other federal and state agencies responsible for enforcement. 

In addition, we expect there to be a continuing uptick in “reverse discrimination” claims on the single plaintiff level, with employees challenging decisions which they believe were motivated by DEI programs or policies. 

AI and Employment Law

Throughout 2025, employers continued to shift their core human resources infrastructures to AI platforms, which have found usefulness in recruiting, hiring, performance evaluations, promotions, compensation, and termination decisions. The adoption has outpaced the legal framework, and some states and cities are poised to catch up in 2026. For example:

• New York City’s Local Law 144 requires annual bias audits and applicant/employee notices when a company employs an automated employment decision tool on prospective applicants and current employees. 
   
• In Colorado, the state has enacted a statute that takes effect in June 2026, which designates the use or development of AI systems for employment and hiring decisions as “high risk,” triggering greater duties for both developers of the systems and the employers using their platforms. 
   
• California has also integrated AI-decision-making into its employment regulations. Under California’s Fair Employment and Housing Act, employers may not use automated-decision systems that discriminate against applicants or employees based on protected characteristics, and must maintain automated-decision employment records for a minimum of four years.

In addition to legislation, the EEOC has already indicated that existing anti-discrimination statutes apply fully to employment decisions made by AI in a suit brought against an employer that implemented an automated software decision-making program for employment hiring decisions. The EEOC ultimately settled the case, but the EEOC’s enforcement action represents the Agency’s willingness to bring such a case under federal discrimination laws. 

As human resources departments begin to implement AI systems into their workforce management infrastructure, employers should be aware of how these new technologies conduct their decision-making processes, and make sure they comply with existing laws.

Conclusion

As is clear from the legislative, policy, and technological trends and changes noted above, the labor and employment enforcement landscape is ever-changing, requiring employers to be adaptive and malleable. If you have any questions regarding your current workplace policies or compliance with legal requirements, contact any member of Kelley Drye’s labor and employment team.

AB 692 aligns with growing federal scrutiny, most notably from the CFPB and the FTC, which have highlighted such repayment obligations as potential functional equivalents of noncompete restrictions.

Two Important Exceptions to AB 692

Transferable Credential Tuition Costs 

A contract related to the repayment of the cost of tuition for a transferable credential that meets the following is allowed if:

1. The contract is offered separately from any contract for employment;
2. The contract does not require obtaining the credential as a condition of employment;
3. The contract specifies the repayment amount, which does not exceed the cost to the employer of the credential received by the worker;
4. The contract provides for a prorated repayment amount and does not require an accelerated payment schedule upon separation; and
5. the worker is not required to repay the employer if the worker is terminated, unless the worker is terminated for misconduct.

Discretionary Monetary Bonuses at the Outset of Employment

Contracts for discretionary or unearned payments such as sign-on bonuses are permitted provided the employer meets the following conditions:

• The repayment terms are contained in a separate agreement than the employment contract.
• The employee is notified of the right to consult with an attorney regarding the agreement and is provided with at least five business days to do so.
• Repayment is prorated based on the remaining term of the retention period, not to exceed two years, and not subject to accruing interest.
• The employee has the option to defer their receipt of the payment to the end of the retention period without any repayment obligation.
• An employer may only require repayment if the separation from employment is at the employee’s sole discretion (i.e., the employee resigns) or is due to employee misconduct.

Employers using sign-on bonuses or other discretionary bonuses subject to repayment obligations should ensure that any new agreements entered into meet these parameters. 

AB 692: The High-Level Do’s and Don’ts

What Employers Can No Longer Do

• Require repayment of training or onboarding costs when an employee resigns or does not complete a minimum employment term.
• Tie sign-on or retention bonuses to repayment obligations based on length of service.
• Rely on legacy training repayment agreements that conflict with AB 692 for any contract entered into on or after January 1, 2026.
• Pursue or threaten repayment in ways that could be interpreted as retaliation.

What Employers Should Do Now

• Where needed, draft new agreements providing for the repayment of sign-on bonuses that comply with the new requirements of AB 692.
• Review and revise offer letters, onboarding packets, training materials, tuition agreements, and repayment language to ensure compliance for contracts executed on or after January 1, 2026.
• Assess whether existing training programs can be restructured to fit within the statute’s limited exception for voluntary, transferable training.
• Train HR, recruiting, and operational teams to avoid using outdated agreements or inadvertently committing to now-prohibited terms.
• Shift retention strategies toward professional development, role progression, performance-based incentives, and workplace culture rather than financial penalties tied to duration of employment.

Employer Takeaways

AB 692 reinforces California’s long-standing view: employees should be able to leave a job without financial penalties for doing so and applies that view in new contexts. Employers using sign-on bonuses with repayment obligations should pay special attention to making sure any new employment agreements are compliant with the new requirements. 

While this law restricts common employer practices—especially in industries with significant onboarding or specialized training costs—it does not prevent employers from investing in workforce development. It simply requires that those investments be structured without repayment triggers that limit employee mobility. With the law applying to contracts executed on or after January 1, 2026, employers should begin reviewing templates and policies now to avoid compliance gaps.

If you have any questions regarding AB 692, please contact a member of our Kelley Drye Labor and Employment team. 

A growing comfort with mobile work, however, should not encourage employers to ignore admittedly boring but lethal legal missteps that apply to remote work in ways that are often ignored. Among the most boring, as the phrase signals: reimbursement of business expenses (including cell phone charges). And as with many things legal, the dullness of the subject camouflages real economic liabilities for employers.

Arguably, nothing more clearly illustrates the blurred lines created by remote work than the use of personal mobile cell phones for business-related purposes. Often when employees work from home, they must use a personal cell phone to fulfill the duties of their position. Are employers then required to reimburse the employee for use of their personal cell phone on work-related matters? California employers may be well aware that the answer to this question is yes, and that non-compliance risks class action liability. However, employers across the country should know that the list of other states with similar statutes is not short.

What Federal Law Requires (and Doesn’t)

Federal law does not have an explicit expense reimbursement requirement. However, an employer violates the Fair Labor Standards Act (FLSA) if an employee’s unreimbursed business expenses bring their wages below the applicable minimum wage or results in unpaid overtime. As the obligations on employers to reimburse expenses are not particularly onerous under the FLSA, state law has supplied higher standards for business expense reimbursements.

California: The Center of Employee Reimbursement Litigation  

California’s Labor Code § 2802 requires employers to reimburse employees for all necessary business expenses. Employees may pursue private civil action for an employer’s failure to comply with the statute, including class action litigation. In 2014, a state appellate court in California permitted employees to bring a class action suit against an employer for failing to reimburse expenses incurred in relation to the use of personal phones for work purposes. In certifying the class and allowing the claims to proceed, the court stated that “when employees must use their personal cell phones for work-related calls, Labor Code section 2802 requires the employer to reimburse them.” Cochran v. Schwan’s Home Service, Inc., 228 Cal.App.4th 1137, 1140 (Cal. App. 2014). The court even interpreted § 2802 to apply in situations where the employee already has an unlimited plan and incurs no additional out-of-pocket cost for business use of their personal cell phones.

This interpretation has fueled large class actions in California, particularly as remote work and BYOD (Bring Your Own Device) policies have become widespread. Employers who fail to provide stipends or reimbursements for phone and internet use have faced multimillion-dollar class actions. See e.g., Krug v. Bd. of Trustees of Cal. State Univ., 110 Cal.App.5th 234 (Cal. App. 2025).

Other States With Expense Reimbursement Obligations  

Other states have passed similar expense reimbursement laws. While the language varies, the common thread is that employers must cover necessary expenses incurred in the course of employment. Although many of these states have not seen cases applying such statutes in the context of personal cell phone reimbursements, courts could interpret these statutes to include obligations to reimburse cell phone and internet costs in the remote or hybrid work setting.

For example, the Illinois Wage Payment and Collection Act (IWPCA) requires employers to reimburse all necessary expenditures within the employee’s scope of employment. Illinois courts have suggested that a company’s failure to reimburse an employee’s submitted expenses for cell phone payments, Internet, and other home office expenses may constitute a violation of the IWPCA. See Prokhorov v. IIK Transport, Inc., 2024 WL 6870247, at *2 (N.D. Ill. Oct. 18, 2024) (stating that an employee who properly submits a request for reimbursement for cell phone and Internet use may have a claim under the IWPCA if the employer fails to reimburse).

Other states with similarly worded expense reimbursement statutes include:

• Iowa: Iowa Code 91A.3(6)
• Massachusetts: Mass. Gen. Laws ch. 149, § 148A (according to guidance published by the Massachusetts Attorney General, § 148A requires employers to reimburse “unavoidable and necessary expenses”)
• Minnesota: Minn. Stat. § 177.24(4)-(5)
• Montana: Mont. Code Ann. § 39-2-701
• New Hampshire: N.H. Rev. Stat. Ann. § 275:57
• New York: N.Y. Lab. Law § 198-c
• North Dakota: N.D. Cent. Code § 34-02-01
• South Dakota: S.D. Codified Laws § 60-2-1
• Washington D.C.: D.C. Mun. Regs. tit. 7 § 910
• Seattle, Washington (local ordinance): Seattle Mun. Code § 14.20.020 

Practical Compliance Steps for Employers   

As evidenced by litigation in California, noncompliance with expense reimbursement laws can create class action risk and potentially large liabilities. Employers should be vigilant regarding the applicable expense reimbursement laws in their state(s) of operation, and consider the following actions:

• Audit policies and practices: Do you require employees to use personal phones for work?
• Implement stipends or reimbursement programs: Even a modest monthly stipend can mitigate risk.
• Monitor state law developments: The list of states with reimbursement requirements is not short—and growing.
• Train managers: Ensure they understand when requiring personal device use triggers reimbursement obligations.

If you have any questions about the laws in your particular state or your current policies relating to expense reimbursement, please contact a member of the Kelley Drye Labor and Employment team.

In addition to social media, CBP plans to collect extensive “high-value” data: email addresses from the past decade, phone numbers, IP metadata, and detailed family information, including names, dates of birth, and places of residence of parents, spouses, siblings, and children. These new requirements represent a significant expansion beyond previous vetting, which was typically limited to verifying discrete facts. The expanded vetting is likely to scrutinize broad patterns of online speech.

At the same time, the Department of State announced that beginning December 15, 2025, all H-1B workers, H-4 dependents, and student/exchange visa applicants (F, M, J) will undergo mandatory social-media and “online presence” review. Applicants must set all social-media accounts to “public” visibility to permit consular inspection. The State Department framed the expansion as a national-security necessity, emphasizing that “every visa adjudication is a national security decision” and that a visa is “a privilege, not a right.”

Legal and Practical Risks: Free Expression, Bias, Privacy, and Data Retention

The new policies represent a major expansion of social-media vetting for nonimmigrant visa holders and Visa Waiver Program travelers. The U.S. government is expected to closely examine applicants’ online posts, particularly those touching on politically sensitive subjects that diverge from official U.S. positions. Visa Waiver Program applicants will have to provide their social-media identifiers on ESTA applications, and failing to do so may lead to adverse outcomes.

There are concerns the security value of social media screening policies to the government is speculative and pose serious risks of misinterpretation, bias, and overreach. Online content is highly context-dependent—shaped by language, culture, humor, slang, and even emojis—making it easy for reviewers to draw incorrect conclusions. Because individuals’ intent on wrongdoing can simply hide problematic accounts, mandatory reporting may be ineffective, while also inviting inconsistent or arbitrary decisions by consular and border officials.

There are also concerns that expanded vetting could also chill free expression. Applicants may feel compelled to sanitize their online presence, and Americans might self-censor when communicating with friends or family abroad. Additional concerns include the potential for disproportionate impacts on people from certain regions and the possibility of large-scale data collection and algorithmic monitoring without clear limits on how the information will be used or retained.

Compliance Tips for Foreign Travelers and Employers

The CBP proposal, the State Department’s new requirements, and related executive-branch mandates represent a sweeping expansion of government request to access applicants’ online speech and private digital histories. Supporters frame the changes as necessary for national security. Critics counter that the measures will be invasive, ineffective, and likely to curtail free expression while producing discriminatory outcomes.

Foreign travelers to the United States, including those with employment, student, visitor, or business-related visas, or travelers under the VWP, would be wise to consult experienced immigration counsel prior to applying for a visa or ESTA and traveling to the United States. For questions regarding visas, travel or other immigration matters, contact Kelley Drye Senior Associate Alla Taher at [email protected] or (312) 982-9921.

On August 15, 2025, Illinois Governor J.B. Pritzker signed House Bill 3638 into law, amending the IWTA. The amendment expands protections for employees and imposes additional limitations on employers. The changes are effective January 1, 2026, and apply to any employment agreement entered into, modified, or extended on or after that date, except for collective bargaining agreements.

The amended IWTA continues to use the definitions of “employee,” and “employer” from the Illinois Human Rights Act (“IHRA”), and to include “non-employee” contractors and consultants covered by the IHRA in the definition of employee. Therefore, the amended IWTA’s coverage extends to contractors and consultants performing services for the employer pursuant to a contract.

Employers with Illinois employees, consultants, or contractors should review their employment agreements, settlement agreements, and termination agreements, and make updates as necessary to ensure compliance with the amended IWTA before January 1, 2026, the effective date of the amended Act.

Expanded Definition of “Unlawful Employment Practice”

The amendment expands the definition of “unlawful employment practice.” The prior definition encompassed only acts of “unlawful discrimination, harassment or retaliation” as enforced by the Illinois Department of Human Rights or the Equal Employment Opportunity Commission. Under the amended Act, the definition of “unlawful employment practice” encompasses any unlawful practice under any state or federal law governing employment, including laws enforced by the Illinois Department of Labor, Illinois Labor Relations Board, U.S. Department of Labor, Occupational Safety and Health Administration, and National Labor Relations Board.

The expanded definition means that other provisions of the IWTA, including those prohibiting unilaterally imposed conditions restricting disclosure of unlawful employment practices now cover a broader range of allegations, including those related to workplace safety, wages, and labor activities.

New Protection for “Concerted Activity” to Address Work-Related Issues

The amended Act adds new protections for an employee’s “concerted activity” to address work-related issues. “Concerted activity” means “activities engaged in for the purpose of collective bargaining or other mutual aid or protection” as provided under the National Labor Relations Act, as it existed on January 19, 2025, and the Illinois Education Labor Relations Act, Illinois Public Labor Relations Act, and Labor Dispute Act.

In addition to barring certain agreements that prohibit, prevent, or otherwise restrict a current, prospective, or former employee from reporting allegations of unlawful conduct in the workplace, the amended Act also bars provisions that prohibit, prevent, or otherwise restrict such employees from “engaging in concerted activities to address work-related issues.”

Additional Limits on Employment Agreement Terms

Prohibited unilateral terms. The IWTA prohibits unilateral contract terms imposed as a condition of employment or continued employment with the purpose or effect of preventing an employee or prospective employee from making truthful statements or disclosures about alleged unlawful employment practices. The amended Act adds terms with the purpose or effect of preventing an employee or prospective employee from engaging in concerted activity to address work-related issues to prohibited unilateral terms.

The existing IWTA also prohibits unilateral terms which require the employee or prospective employee to waive or otherwise diminish any existing or future claim, right, or benefit related to an unlawful employment practice. The amended Act adds the following terms to the contract provisions which, if unilaterally imposed, are void:

• Shortening an applicable statute of limitations.
• Requiring the application of non-Illinois law to an Illinois employee’s claim.
• Requiring a venue outside of Illinois to adjudicate an Illinois employee’s claim.

Conditions on mutual terms. Under the IWTA, parties can reach mutual terms that would be void if imposed unilaterally, provided that certain conditions are satisfied. The amended Act expands on the conditions for mutuality. The expanded conditions include an acknowledgement of the employee or prospective employee’s right to (1) “engage in concerted activities to address work-related issues,” and (2) participate in a proceeding relating to unlawful employment practices, including “any litigation brought by any federal, State, or local government agency or any other person who alleges that the employer has violated any State, federal, or local law, regulation or rule.” The latter provision broadens the original language to include private litigation and enforcement by any government agency (and is not limited to agencies that enforce discrimination laws).

New Requirements for Confidentiality Provisions in Settlement and Termination Agreements

Under the IWTA, employers may use confidentiality provisions in settlement agreements and termination agreements with current, prospective, and former employees, provided that certain conditions for the use of such provisions are satisfied. Under the amended Act, employers may continue to use confidentiality provisions, but they are now subject to the following additional requirements to be valid:

• The “valid, bargained for consideration in exchange for the confidentiality” required by the Act must be “separate” from any consideration the employer is providing in exchange for the employee’s release of claims.
• While the Act still requires that “confidentiality is the documented preference” of the employee, the amendment specifies that an employer may not unilaterally include language in an agreement stating that confidentiality is the employee’s preference.
• Confidentiality provisions cannot apply to “concerted activities related to workplace conditions.”

Expanded Rights for Employees to Testify in Proceedings

The pre-amendment IWTA protects the rights of current, prospective, and former employees to testify in administrative, legislative, and judicial proceedings concerning alleged criminal conduct or unlawful employment practices, when required or requested to do so by court order, subpoena, or written request from the government. The amended Act adds arbitral proceedings to the list of proceedings in which employees have the right to provide testimony. It also clarifies that employees have the right to provide such testimony in depositions in connection with any of the covered proceedings.

Additional Damages Available

The amended IWTA expands available remedies. Current, prospective, and former employees may now receive an award of “consequential damages,” in addition to reasonable attorneys’ fees and costs for a successful challenge to the validity or enforceability of an agreement. In addition, consequential damages and attorneys’ fees and costs are now available to current, prospective, and former employees in defending an action for breach of a confidentiality agreement pursuant to the Act.

If you have questions or would like more information about the IWTA amendment and what it means for your agreements, please contact your usual counsel at Kelley Drye, or a member of our Labor and Employment team.

• The upshot? Employers should be careful how they design workplace training, as so-called “reverse” discrimination claims aren’t going anywhere and now even training could be found to cause a problem.

The Case Background

Plaintiff Leslie Chislett, a Caucasian female, brought a Section 1983 claim against her employer, the City Department of Education (DOE), claiming that she was demoted, subsequently forced to resign, and was subjected to a hostile environment due to her race, stemming from mandated DEI training. The district court had granted summary judgment dismissing all three claims.

In a September 2025 decision, the Second Circuit upheld the dismissal of the demotion and constructive discharge claims, but revived her hostile work environment claim. The panel ultimately found Plaintiff raised sufficient questions of fact surrounding her allegations that mandatory implicit bias training may have created an unlawfully hostile workplace.

Allegations of a “Hostile” DEI Training Environment

Ms. Chislett, a former city teacher with 10+ years of experience, claimed that she was harassed and was forced to resign after a series of DOE-mandated equity trainings created an environment that she and fellow Caucasian coworkers perceived as intolerably “hostile.” The lawsuit claimed that when Ms. Chislett and others raised these concerns to their superiors, they were ultimately ignored.

Plaintiff claimed that multiple mandatory training sessions contained content that was offensive and incited “racial tension” within the workplace, with one training instructor telling participants that “white colleagues must take a step back and yield to colleagues of color” and “recognize that values of [w]hite culture are supremacist.” Plaintiff alleged that this tension “simmered” long after the training sessions were complete and resulted in content being applied into workplace interactions that targeted her on the basis of her race. She alleged, for instance, that when she criticized black employees she was called a “racist”. When these interactions were reported, Plaintiff claimed that her concerns were dismissed.

Eventually, Chislett claimed that the work environment and her interactions with subordinates became so stressful that she had to take a leave and then was forced to resign.

The Second Circuit’s Decision

The Second Circuit reversed the summary judgment and ultimately held that Ms. Chislett put forward sufficient examples of race-based comments and other hostility during and after the bias trainings that could convince a jury she was subjected to a hostile work environment.

The Court was especially concerned with comments made by trainers which reflected negatively on “white culture” and that there had been one session where there was a physical segregation of white employees, who were “singled out by staff” based on race. The court also noted there was evidence of “racialized” comments made to plaintiff outside of the training, such as calling her “white and fragile” and accusing her of having “white privilege”.

Importantly, the Second Circuit explicitly stated: “We do not suggest that the conduct of implicit bias trainings is per se racist.” Instead, the opinion focused on the ways in which the trainings were conducted and ultimately applied, holding that employment trainings that “discuss any race ‘with a constant drumbeat of essentialist, deterministic, and negative language [about a particular race], . . . risk liability under federal law.’” (Citing De Piero v. Pa. State Univ., 711 F. Supp. 3d 410, 424 (E.D. Pa. 2024)).¹

The court was very disturbed with allegations that plaintiff reported these issues, but that no action was taken. It made clear that “when a municipal agency consistently ignores the racial harassment of employees in trainings and workplace interactions, it can be held liable”.

Broader Context: The Rise of “Reverse” Discrimination Claims

We had predicted that reverse discrimination cases were likely to gain traction in 2025 and beyond, as employees and employers alike began reacting to the second Trump administration’s public pushback against DEI policies. This decision is part of this trend.

Every case turns on its unique facts and this one case does not mean that companies need to discontinue providing anti-discrimination trainings. It does mean that employers need to be mindful of the content of that training.

Guidance for Employers

• You may require training, but watch the content: Anti-discrimination training is good, and may even be mandated by state and local law depending on industry. However, as we’ve previously advised, employers must be mindful to conduct such training in a neutral manner to avoid liability.
  • Whether designed in house or delivered by an outside consultant, make sure that HR or a legal team review the content and make sure that no racial or ethnic group would be offended.
• Be responsive to complaints: If an employee raises concerns that they are being singled out or otherwise targeted on the basis of any characteristic, those complaints must be taken seriously and addressed, regardless of the race of the employee.
  • Be sure to document your responses, and follow up to ensure that the employee is not enduring any retaliation.

As employers consider updating their training and policy materials, it is important to make sure these efforts are handled in a lawful manner. You can contact a partner within the Kelley Drye Labor & Employment team to have your policies audited or updated.

1. For liability to be attached under section 1983, a plaintiff must demonstrate a causal link between a specific municipal policy and the hostile work environment. 

ABB 288 expands the Public Employee Relations Board’s (“PERB”) jurisdiction by authorizing the administrative body to act where the NLRB has expressly or impliedly ceded its jurisdiction, including in cases where the NLRB would normally pre-empt the PERB. ABB 288 is triggered when the NLRB (i) lacks a quorum, (ii) faces constitutional injunctions, or (iii) fails to act within statutory timeframes. In such situations, the bill empowers the PERB to step in and conduct union elections, adjudicate unfair labor practice charges, and impose civil penalties or binding arbitration orders, practices typically in the purview of the NLRB.

Legal challenges are imminent. AB 288 directly tests the boundaries of federal preemption under the NLRB’s enacting statute, the National Labor Relations Act (“NLRA”), which has long been interpreted by the United States Supreme Court to occupy the field of private-sector labor relations. In New Process Steel, L.P. v. NLRB, 560 U.S. 674 (2010), the Court held that the NLRB cannot issue decisions without a quorum, a vulnerability AB 288 seeks to exploit. The NLRB has already sued New York over its similar “Trigger Bill,” and California’s version—arguably more expansive—may face similar litigation from both the Board and private employers.

The bill was signed into law by Governor Gavin Newsom on September 30, 2025 and is currently in effect as of the date of this blog post.

Employer Takeaways: Navigating a Shifting Compliance Landscape

California employers should prepare for a dual-track enforcement regime. Key compliance tips include:

• Expect delay, AB 288 likely will face significant legal challenges before its provisions are enforceable.
• Audit labor policies to ensure they align with both NLRA and AB 288 standards, especially regarding union access and organizing rights.
• Train HR and legal teams on PERB procedures, which differ from NLRB processes and may include expedited timelines and broader remedies.
• Monitor union activity closely, as PERB may impose binding arbitration or civil penalties for delays in bargaining or unfair labor practices—remedies not available under the NLRA.
• Prepare for parallel proceedings, as employers could face charges before both PERB and the NLRB, increasing litigation risk and complexity.

AB 288 signals a growing willingness among states to fill perceived federal enforcement gaps. Whether it survives judicial scrutiny remains to be seen—but for now, California employers should prepare to adapt to a more assertive and expansive labor enforcement environment.

If you have any questions concerning AB 288, please contact your usual counsel at Kelley Drye, or a member of our Labor and Employment team.

What does this settlement mean, not just for P. F. Chang’s, but for other employers with weekend and Sunday operations? 

The EEOC settlement comes at a time when the Trump administration and Supreme Court continue to promote religious freedom, with a particular focus on “eradicating anti-Christian bias[.]” See President Donald Trump’s Action Eradicating Anti-Christian Bias. This article discusses the reaction by the courts and the Trump administration to claims for religious accommodations, and the administration’s enforcement of those obligations going forward. 

Groff v. DeJoy 

In June 2023 the Supreme Court issued its ruling in Groff v. DeJoy, which modified the legal standard courts must use to determine whether an employer has to grant a religious accommodation. Previously, courts applied a “de minimis cost” standard in deciding whether an employer’s refusal to grant a religious accommodation violated federal law. In Groff, the court rejected the “de minimis cost” standard in favor of a much higher “undue hardship” standard. Employers are now required to demonstrate that a religious accommodation is a substantial burden in the overall context of the employer’s business to deny the accommodation request. 

For more information about the Groff decision and immediate recommendations for employers, please see our previous article here.

Judicial Response to Groff

Since the Supreme Court’s decision in Groff, the new religious accommodation standard has been cited by state and federal courts nearly 500 times. Lower courts have been tasked with analyzing whether a religious accommodation constitutes an “undue burden” in various contexts, including vaccine mandates, religious speech, and different exemptions from work duties, with mixed results. We have outlined some of the results from different circuit courts:

• In the vaccine context, three recent circuit court decisions upheld denials of religious accommodations for overlapping reasons. The Second Circuit found that violating state law to accommodate a religious request constituted an undue hardship. Braccia v. Northwell Health Sys., 2025 U.S. App. LEXIS 23365 (2d Cir. 2025). The Sixth Circuit found that health and safety as well as time spent away from work constituted undue hardship. Henry v. S. Ohio Med. Ctr., 2025 U.S. App. LEXIS 23487 (6^th Cir. 2025). The Ninth Circuit found that a combination of a variety of factors to accommodate a religious request constituted an undue hardship, including risk to health and safety, risk to business operation and costs, and risk of future liability. Petersen v. Snohomish Reg'l Fire & Rescue, 2025 U.S. App. LEXIS 22477 (9^th Cir. 2025).
• In the context of religious speech outside of the workplace, the Eight Circuit allowed a religious accommodation claim to proceed to trial where a jail administrator posted online about a religious war that the “Muslim people would perpetrate against Christian and Jewish people[.]” The court said a genuine issue of material fact existed whether continuing to employ the administrator constituted an undue hardship. Naylor v. Cnty. of Muscatine, 2025 U.S. App. LEXIS 21088 (8^th Cir. 2025).
• In the context of religious speech inside the workplace, the Seventh Circuit permitted a teacher’s religious accommodation claim to proceed where the teacher requested an accommodation to call students by their last names because he found identifying a transgender student by a name contrary to their biological sex a sin. The court denied the school’s motion for summary judgment that the teacher’s accommodation request constituted an undue hardship. Kluge v. Brownsburg Cmty. Sch. Corp., 2025 U.S. App. LEXIS 19662 (7^th Cir. 2025).

The fallout from Groff is still being tested in courts throughout the country. However, the sheer number of cases in the last two years demonstrates that issues surrounding religious discrimination and accommodations in the workplace are not going away anytime soon.

The EEOC and P. F. Chang’s

In addition to the increase in litigation, the EEOC has increased its pursuit and enforcement of claims regarding discrimination because of religion. 

In the P. F. Chang’s matter, a job applicant interviewed at one of P. F. Chang’s locations in Birmingham, Alabama, and asked during the interview that he be exempted from work on Sundays due to his religion. When the applicant found out he was not hired for the job, he suspected it was his Sunday-off request, and filed a charge with the EEOC claiming that P. F. Chang’s failure to provide a religious accommodation violated Title VII. The EEOC investigated the applicant’s claim and concluded that the business’ failure to accommodate the applicant did violate his rights. 

The EEOC and P. F. Chang’s entered into a pursuit conciliation deal after the agency’s investigation. Without admitting liability, the restaurant chain did agree to a number of concessions. First, the amount of money ($80,000) is significant for a waiter position. Also, in addition to the money, the settlement included requirements to revise workplace policies surrounding religious accommodations, provide training to employees about their rights to receive religious accommodations and the business’ obligations to grant religious accommodations, and post notices regarding the resolution of this matter and laws enforced by the EEOC.

In other words, P. F. Chang’s now has to tell all of their staff that they too can request a Sunday accommodation, if they follow a religion which recognizes Sunday as the Sabbath. This could clearly present a challenge for the business, as it tries to juggle future accommodation requests, but still provide sufficient staff on Sunday. 

Other EEOC Enforcement

The P. F. Chang’s resolution is just one of several religious discrimination matters that the EEOC has published. Consistent with the purported goals of the Trump administration, since August, the EEOC has issued six press releases about discrimination charges or resolutions related to religious discrimination. 

In addition to the P. F. Chang’s settlement, the EEOC has promoted:

• An August 1 charge of discrimination against an Illinois hospital for the failure to provide reasonable religious accommodations for employees who requested to be exempt from receiving the COVID vaccine.
• An August 4 settlement with a dental company in North Carolina where an employee claimed her religious accommodation to wear scrub skirts instead of scrub pants was unlawfully denied.
• An August 13 settlement with a health care system operating hospital in Illinois and Wisconsin relating to a vaccine mandate issue for more than $1 million in monetary relief.
• An August 20 settlement with a Washington-based staffing and recruiting agency for over $200,000 where the agency denied a religious accommodation request to attend Friday prayer.
• An August 25 settlement with Buffalo Wild Wings over the refusal to hire a candidate after the candidate requested to wear different clothing due to the candidate’s religious beliefs. 

Significance and Recommendations for Businesses

The executive and judicial scrutiny over religious accommodations in employment pose substantial risks for employers. Even if a settlement is reached, such as the EEOC settlement with P. F. Chang’s, the EEOC maintains its independent authority to investigate and pursue actions against systemic discrimination because of religion. 

Employers must review and update any policies regarding religious accommodations and processes for reviewing requests for religious accommodations. Other recommendations include:

• Thoroughly document religious accommodation requests;
• Detail the impact related to the particular business or industry;
• Lay out reason(s) for acceptance or denial of religious accommodation requests; and
• Consider including your accounting or finance department, where applicable, to document the specific costs associated with each request.

Indeed, while accommodation requests must be reasonable, if a request is denied – especially if this denial results in discipline or denial of a job – the employer should be very careful to note why the request was going to cause it substantial harm in costs or to its operations.   

If you have any questions concerning religious accommodations under federal, state, or local law, please contact your usual counsel at Kelley Drye, or a member of our Labor and Employment team.

How the Proclamation Alters the Current H-1B Visa Process

Currently, the H-1B process requires employers to enter employee candidates into an H-1B lottery which includes a $215 registration fee, and if selected, then there are additional fees ranging from $780 - $5,000. The Proclamation dramatically increases the fee amount and will make it difficult for most employers to sponsor H-1Bs. As of now, it appears that the lottery will remain in place along with the new restrictions. If so, employers will still need to first register employee candidates for the lottery, and then if the candidate is selected, the employer can proceed with the H-1B petition but will have to pay the $100,000 visa fee.

The new restrictions do not apply to all H-1B visas. The Proclamation states that the restrictions do not apply to employees who the Secretary of Homeland Security determines are, or work for a company or in an industry that “are in the national interest and [the applicant] does not pose a threat to the security or welfare of the United States.” Also, the White House clarified that the new fee is a one-time fee per application and does not apply to existing H-1B holders (prior to 12:01 a.m. EDT on September 21, 2025).

Key Takeaways for Businesses

The Proclamation calls on the Secretaries of Commerce, State, and Labor, as well as the Attorney General to work together to implement the restrictions. It is crucial for employers with H-1B employees or who seek to sponsor H-1B employees to consult with immigration counsel regarding the impact of this Proclamation. Notably, there are alternative avenues for employers to sponsor high-performing and/or high-value employees, including for example, the O-1 Visa for extraordinary ability or achievement. Immigration counsel can help guide employers through this complex and ever-evolving immigration landscape.

Broadly, the Memo takes the view that any decision to hire, promote, or provide training or support programs in any part because of membership in protected classes illegally discriminates against those outside that protected class. According to AG Bondi, “purportedly benign labels, objectives, or intentions” are immaterial and will not protect a program from DOJ’s scrutiny or excuse unlawful discrimination. More specifically, AG Bondi asserts that labeling a program as promoting goals “such as ‘DEI,’ ‘Equity,’ or other euphemistic terms does not excuse unlawful discrimination” based on protected characteristics. Nor would “facially neutral criteria” like “cultural competence” or “lived experience” if the underlying goal remains to advantage those with certain protected characteristics over others. The Memo asserts that such practices may violate Titles VI, VII, or IX of the Civil Rights Act or the 14th Amendment. The Memo also notes that enforcement action might be based on retaliation against individuals who “object to or refuse to participate in discriminatory programs, trainings, or policies.”

The Memo places federal fund recipients on notice that DOJ may argue their “support [of] third-party programs that discriminate”—i.e., doing business with entities who employ DEI programs—is also unlawful. Liability based upon third-party programs is fundamentally more difficult for the Government to establish, but the viability of such claims is likely to depend on the specific language of the relevant contracts or funding programs.

Finally, the Memo takes the position that failing to preserve “sex-separated intimate spaces and athletic competitions” violates Title IX.

There are two key takeaways.

First, the Memo does not and cannot make conduct illegal. Courts, not DOJ, decide whether DEI or similar programs violate federal law. The Memo does no more than place the public on notice of the Government’s litigating position and enforcement priorities. (Indeed, the Memo itself acknowledges that its directives are “non-binding suggestions to help entities comply with federal antidiscrimination laws and avoid legal pitfalls.”) If DEI programs are not unlawful discrimination, then they cannot be the basis for a false statement of compliance with antidiscrimination laws.

Second, the Memo is still relevant to evaluating both scienter and materiality under the FCA. Even were a court to find a federal funding recipient’s DEI program technically violated antidiscrimination laws, the FCA is a fraud statute, requiring both a knowing or reckless false statement and materiality to the Government’s payment decision. Each of those elements provides a separate opportunity to defeat an FCA claim brought by the Government. With this Memo, DOJ seeks to eliminate any ambiguity as to how it views these issues, and thereby limit defendants’ ability to argue a lack of scienter or materiality. By placing the public on notice of exactly what it will argue is illegal, DOJ seeks to combat putative defendants’ arguments that they were not at least reckless in representing that their DEI programs complied with the law, or that the programs were irrelevant to a payment decision.

According to news reports and postings, Good Pierogi, the vendor at the center of the dispute, has twice refused to serve Dershowitz, citing disagreements with Dershowitz’s politics. The storied attorney has in turn threatened to sue the pierogi stand.

• As Mr. Dershowitz searches in vain for a pierogi, we looked at whether he has a claim?

Unfortunately for Dershowitz, the answer is NO. But, the final answer may turn on what Dershowitz alleges.

If he tried to claim that he was denied service based on his politics or the clients he has served, it would seem no. Neither Massachusetts state law nor federal law recognize a claim for discrimination on the basis of political beliefs, affiliations, or activities in public accommodations. In fact, almost all jurisdictions, including New York, do not protect political beliefs or political associations under the applicable public accommodation laws.

There are some places where he may succeed. Had the conduct occurred in Washington D.C., Dershowitz may be able to sue under D.C.’s public accommodations law (D.C. Code § 2-1402.31). Or possibly even under California’s broad public accommodations law (CA Civ. Code § 51(b)), which has been interpreted by the state’s Supreme Court to protect political affiliation. Marina Point, Ltd. v. Wolfson, 30 Cal. 3d 724 (1982).

But what if he claimed that this was religious discrimination, as in his latest encounter with Good Pierogi Dershowitz alleged anti-semitism? Putting aside the merits, there he may have a claim. Massachusetts does prohibit religious discrimination, and a refusal to serve a customer based on their religion is actionable (M.G.L. Chap. 272, § 98).

Employers will note, though, that if Dershowitz had been an employee of Good Pierogi and had instead experienced termination or other discriminatory action as a result of his political affiliations, Dershowitz may be able to seek relief under the laws of Massachusetts (and New York). A number of states have adopted labor codes prohibiting discrimination on the basis of political affiliation or political activities in the employment setting. New York’s Labor Code, for example, prohibits an employer from discriminating against an employee or applicant on the basis of the individual’s political activities (NYLL § 202-D(2)(a)). “Political activities” as defined by the statute are running for office, campaigning for a candidate for public office, or participating in fund-raising activities for the benefit of a candidate, political party or political advocacy group. In this hypothetical, the lawyer-turned-pierogi-vendor’s longstanding political presence might provide him a case.

We profess no opinion on the merits of these claims but do wish Mr. Dershowitz the best of luck as he scours the Vineyard for a good pierogi.