Category: Employment litigation

Blank Rome Labor & Employment Alert: NLRB General Counsel Issues Memorandum Outlining Top Priorities

Daniel J. Sobol, Brandon S. Shemtob, and David G. Rodriguez

Daniel Sobol headshot photo
Brandon Shemtob headshot photo
David Rodriguez headshot photo

The National Labor Relations Board’s (“NLRB”) General Counsel, Crystal Carey, drew applause, as well as some criticism, earlier this year when she departed from her predecessors by declining to issue a “Mandatory Advice Memo”—a memorandum that would have outlined her litigation priorities and identifying caselaw she wished to overturn by instructing the NLRB’s regional offices to submit all such cases to the agency’s Division of Advice. Instead, in January 2026, she issued a memorandum declaring her top priority as tackling the NLRB’s historic case backlog.

Timed to coincide with the recent confirmation of James Macy as the Board’s third Republican appointee, it appears that the General Counsel is prepared to declare a victory, of sorts, over the federal watchdog’s backlog and to press forward with efforts to overturn Union-friendly precedent—much of which was issued during the latter half of the Biden Administration. Traditionally, the NLRB’s five-member quasi-judicial Board overturns prior precedent where it has three votes in favor of doing so. Member Macy’s confirmation earlier this month provided the Board with just such a majority.

To read the full alert, please visit our website.

From Fixable to Fineable: ICE’s Overhaul of I-9 Violation Classifications

Mark Blondman and Gabrielle I. Weiss ●

For nearly 30 years, employers completing Form I-9s operated under a forgiving framework: make a minor administrative mistake, like a missing date, an omitted title, and you had 10 days to fix it without penalty. That safety net just got a lot smaller. Without a formal announcement or rulemaking process, U.S. Immigration and Customs Enforcement (“ICE”) recently posted updated guidance that reclassifies many common administrative errors as “substantive” violations subject to immediate fines. The practical effect is significant: errors that used to be correctable now carry per-violation penalties ranging from $288 to $2,861, and they add up fast.

Here’s what changed, why it matters, and what employers should be doing about it.

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Same ABCs, New Rules: New Jersey Finalizes Updated Regulatory Framework for Worker Classification

Gabrielle I. Weiss ●

On May 5, 2026, the New Jersey Department of Labor and Workforce Development (“NJDOL”) filed its final rule adopting N.J.A.C. 12:11, which provides regulatory guidance on how the state’s longstanding “ABC” test is applied to determine whether a worker is an employee or an independent contractor. The final rule, which carries an operative date of October 1, 2026, arrives after a contentious rulemaking process that drew sharp criticism from financial services and insurance to construction and app-based transportation. While the ABC test itself is nothing new in New Jersey—it has been the statutory standard for nearly 90 years—these rules represent the first comprehensive regulatory framework explaining how the NJDOL interprets and applies the test. Critically, the ABC test in New Jersey governs not just unemployment insurance but also the state’s Wage and Hour Law, Wage Payment Law, Earned Sick Leave Law, and Temporary Disability Benefits Law, giving these rules a practical reach far broader than similar regulations in most other states. Employers operating in the state should begin evaluating their independent contractor relationships now to prepare for implementation.

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DOL Proposes New Joint Employer Rule Under the FLSA, FMLA, and MSPA

Nikki D. Kessling ●

The U.S. Department of Labor’s (“DOL”) Wage and Hour Division announced a proposed rule on April 22, 2026, to address how “joint employer” status is determined under the Fair Labor Standards Act (“FLSA”), Family and Medical Leave Act (“FMLA”), and Migrant and Seasonal Agricultural Worker Protection Act (“MSPA”). The DOL’s previous attempt at a joint employer rule, issued in 2020, was rescinded in 2021 following its partial invalidation in New York federal court. The proposed rule was published in the Federal Register on April 23.

The DOL’s new proposal—which appears to be a practical effort at clarification rather than an attempt to blaze new trails—would set a unified standard across the FLSA, FMLA, and MSPA for when two or more entities share responsibility for the same workers. Companies using staffing agencies, subcontractors, franchise models, or other multi-employer arrangements should take note.

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What Does IBM’s $17 Million FCA Settlement Portend for Government Contractors Wrestling with Compliance?

Jennifer A. Short, Dominique L. Casimir, Brooke T. Iley ●

On Friday, April 10, 2026, the Department of Justice (“DOJ”) announced a $17 million False Claims Act (“FCA”) settlement with International Business Machines (“IBM”), based on the company’s alleged violations of federal anti-discrimination laws. The settlement is the first under the DOJ’s Civil Rights Fraud Initiative, created last May with the objective of investigating and prosecuting “illegal DEI” practices, primarily through an FCA lens. Coupled with a new Executive Order—issued on March 26—that imposes contract prohibitions on “racially discriminatory DEI activities” in federal government contracts and subcontracts, the IBM settlement signals an escalation in the government’s focus on DEI programs and employment policies.

The DOJ Press Release and Settlement Agreement

The Alleged “Covered Conduct” Identifies Specific Problematic Practices. 

DOJ alleged that IBM improperly made employment decisions based on protected characteristics through specific programs and actions, described as the “Covered Conduct” for purposes of the settlement agreement:

  • Compensation Incentives: A “diversity modifier” linking bonus compensation to demographic targets
  • Hiring and Promotion Criteria: Basing interview eligibility or prioritization on race, sex, or national origin
  • Demographic Goals for Business Units: Developing race and gender targets tied to employment decisions
  • Limited-Access Programs: Limiting training, mentoring, and leadership development to employees meeting specific demographic criteria, such as minorities.

To read the full alert, please visit our website.

California’s AB 692 Reins in “Stay or Pay” Provisions in California Employment Agreements

Taylor C. Morosco ●

Taylor C. Morosco's headshot photo

California’s Assembly Bill (“AB”) 692 took effect on January 1, 2026, significantly limiting the use of commonplace “stay-or-pay” clauses in offer letters and agreements, which require employees or prospective employees to repay certain costs if their employment ends.

AB 692 underscores California’s commitment to limit the use of contractual provisions restricting or disincentivizing workforce mobility. Although the new law does not apply retroactively (essentially grandfathering in “stay-or-pay” clauses entered into before January 1, 2026), employers must audit agreements and practices, and plan for compliance to avoid significant potential liability going forward.

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Philadelphia Enacts POWERful New Worker Protection Ordinance

Julia C. Riskowitz

On May 27, 2025, Mayor Cherelle Parker signed the Protect Our Workers, Enforce Rights (“POWER”) Act into law, which expands the Philadelphia Department of Labor’s enforcement options for violations of the City’s expanding roster of worker protection laws. Under this new ordinance, which is now in effect, workers in Philadelphia have expanded protection against labor infractions; and employers face a host of new and enhanced compliance requirements.

Key provisions of the new legislation include:

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Court Temporarily Hits the Brakes on EO 14173 Ending Illegal Discrimination: What Employers Should Know

 Anthony B. Haller, Brooke T. Iley, and Theresa A. Topping ●


Big Picture

On February 21, 2025, a federal judge in the District Court of Maryland granted a temporary injunction blocking portions of President Trump’s Executive Orders “Ending Illegal Discrimination and Restoring Merit Based Opportunity” (“14173”) and “Ending Radical and Wasteful Government DEI Programs” (“14151”) (collectively the “EOs”). To learn more about each EO’s directives read Blank Rome’s previous coverage on 14173 here and 14151 here. This is a temporary nationwide ban on certain portions of the EOs.

After pointing out that the Trump Administration has declared “DEI to be henceforth illegal”, the Court found the EOs do not “define any of the operative terms” such as “illegal DEI”, “equity-related”, “promoting DEI”, or “illegal discrimination or preferences”. This vagueness fails to provide companies and organizations with proper notice as to what types of programs are prohibited. Further, the Court found that the EOs likely violate the First Amendment by expressly threatening “the expression of views supportive of equity, diversity and inclusion.” This is a nationwide ban.

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New Year, New FTC Chair, and Renewed Focus on Non-Compete Agreements

 Anthony B. Haller, Theresa A. Topping, and Kevin M. Passerini ●

It is nearly impossible to think about the Federal Trade Commission (“FTC”) without thinking about the chaos caused by the non-compete ban it approved last year over vociferous dissent only to have the ban vacated and set aside nationwide by the Northern District of Texas. Curiosity remains about what the impact of the change in administration will have on the FTC’s approach to this issue of paramount importance to employers. But with President Trump’s appointment of Andrew Ferguson to lead the FTC, what follows is some insight on the current state of play and the FTC’s probable mindset.

Where We Were Last Year

As a recap, the FTC’s “Final Rule” announced on April 23, 2024, would have banned nearly all non-compete provisions and provisions functioning as non-competes (in the FTC’s view). That Final Rule, which was set to go into effect on September 4, 2024 (the “Effective Date”), would have impacted not only traditional restrictive covenant agreements with employees and contractors but likely also agreements with employee equity holders as well as claw-back and repayment agreements with employees presented with signing bonuses or training and education opportunities.

As expected, businesses and trade organizations swiftly challenged the Final Rule, with lawsuits filed against the FTC in Pennsylvania, Florida, and Texas seeking to set aside the Final Rule: a lawsuit brought by a tree-service company, ATS Tree Services, LLC in the Eastern District of Pennsylvania; a lawsuit brought by the Properties of Villages Inc.in the Middle District of Florida, and lawsuits brought by tax-advisory firm Ryan, LLC and the U.S. Chamber of Commerce in the Northern and Eastern Districts of Texas, respectively. The lawsuits yielded distinct outcomes. The Texas court preliminarily enjoined enforcement of the Final Rule as to the plaintiff only, pending a final ruling on the merits. The Pennsylvania court upheld the Final Rule. The Florida court preliminarily enjoined the Final Rule as to the plaintiff only, on similar but not identical grounds to the Texas court, even while accepting some of the Pennsylvania court’s analysis.

The limited holdings and contradictory outcomes made the chaos sewn by the FTC even worse in the weeks leading up to the Effective Date. Ultimately, the Texas court provided clarity, issuing its final ruling on the merits and vacating and setting aside the Final Rule nationwide holding that its issuance was outside FTC’s authority granted by Congress and that the Final Rule was otherwise arbitrary and capricious under the Administrative Procedure Act. The FTC has appealed both the Florida and Texas rulings, and the plaintiff in the Pennsylvania ruling voluntarily dismissed its lawsuit after the Texas court ruling.

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Employers Are Extra Grateful This Thanksgiving After Federal Court Sets Aside DOL’s Salary Threshold Increase

Theresa A. Topping ●

Salary threshold. . .$35,568.00. . .the Eastern District of Texas. . .not the classic answers you expect to hear from your loved ones around the Thanksgiving table when you ask, “Hey guys, what are you most thankful for?” While family, friends, food, and a roof over your head are all great, the fact that the United States District Court for the Eastern District of Texas shot down the Department of Labor’s (“DOL”) attempt at increasing the overtime salary threshold to $58,656.00 is right up there for employers.

The DOL’s Not-So-Final “Final Rule”

Back on April 23, 2024, the DOL announced their “final rule,” which entailed a multi-phase increase of the “white-collar exemption” (the executive, administrative, and professional employees (“EAP”)) salary threshold from $35,568.00 to $43,888.00, starting on July 1, 2024, and then up to $58,656.00, starting on January 1, 2025 (with increases automatically occurring every three years thereafter). Notably absent were any changes to the DOL’s “duties” test, which must be analyzed in conjunction with a salary when determining whether an EAP employee is exempt from overtime. At the time of its announcement, the DOL projected their final rule would make four million workers newly eligible for overtime payments and cost employers nationwide roughly $1.4 billion in the first year alone. Being thankful for a $35,568.00 threshold is looking more and more understandable now, isn’t it?

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