Quick Hits

• An employer may request that the employee disclose which job offers the employee received from Germany’s Federal Employment Agency (Bundesagentur für Arbeit) or Jobcenter.
• The employer does not have an independently enforceable right to information about applications and their outcomes.
• The right to information under Section 242 of the German Civil Code (Bürgerliches Gesetzbuch (BGB)) extends only as far as the employer needs information to trigger the employee’s secondary burden of producing evidence (sekundäre Darlegungslast) in default-of-acceptance remuneration litigation.

The Case—Dispute Over Default-of-Acceptance Remuneration After a Termination

The employee was discharged. The employment termination proved to be invalid. The employee then claimed default-of-acceptance remuneration from the employer for the period of nonemployment. The employer refused payment and argued under Section 11 no. 2 of the German Protection Against Dismissal Act (Kündigungsschutzgesetz (KSchG)) that the employee had maliciously failed to obtain alternative earnings in the meantime.

Because employers have the primary burden of producing evidence and the burden of proof (Darlegungs- und Beweislast), the employer brought a conditional staged counterclaim (bedingte Stufenwiderklage). The employer requested extensive information. The employee was to state which job offers the employee had received from the Federal Employment Agency or Jobcenter, including the activity, working hours, location, and remuneration. The employee was also to disclose whether the employee had applied for those offers, the outcome of those applications, and what application efforts the employee had undertaken. In addition, the employer requested the production of all application materials.

In its decision of September 25, 2024 (Ref. No. 18 SLa 467/24), the Hessian Regional Labor Court (Landesarbeitsgericht (LAG) Hessen) granted these requests only to a limited extent. The employer appealed to the BAG.

The Decision—Information About Job Placement Proposals, but Not Application Details

The Fifth Senate of the BAG vacated the partial judgment for procedural reasons and remanded the case to the appellate court. The partial judgment should not have been issued because the counterclaim was subject to an inadmissible condition. On the merits, however, the BAG provided the Hessian LAG with clear guidance for the further proceedings.

Accordingly, the employer’s right to information based on Section 242 BGB extends only to the information the employer needs in order to trigger the employee’s secondary burden of producing evidence. The employer generally bears the burden of pleading and proof for the defense of maliciously failing to earn interim income. If the employer seeks to rely on job placement proposals from the state employment placement service, the employer generally does not know whether such proposals were made at all or what they contained. The employer therefore has a right to information from the employee regarding any job placement proposals and their content, which may be enforceable as an independent claim.

By contrast, there is no further right to information as to whether, how, and with what result the employee applied for those proposals. The employee must address these points only as part of the employee’s secondary burden of producing evidence. Likewise, an employee registered as unemployed does not owe information about the employee’s own efforts to find other employment.

The employer does not need this information in order to raise the defense under Section 11 no. 2 KSchG.

Key Takeaways—Limits on Information Requests in Default-of-Acceptance Cases

So far, only the press release on the judgment is available. Further details will therefore have to await publication of the full judgment.

It is already clear, however, that the BAG is confirming its existing line of case law. The decision is therefore likely to have particular relevance for litigation involving default-of-acceptance pay and malicious failure to obtain alternative earnings under Section 11 no. 2 KSchG.

For employers seeking to rely on this defense, the decision points to the following practical consequences.

• Information requests are to be limited to the essentials. This may include, for example, disclosure of all job placement proposals, including information on the activity, working hours, location, and remuneration. Requests relating to the outcomes of application efforts, or even to application materials, will be rejected by the labor courts.
• Because employers have the primary burden of producing evidence and the burden of proof they may want to conduct their own job search in parallel with the information request and document specific job offers. These job offers may also be sent to the employee in a verifiable manner.
• Only once specific employment opportunities have been identified must the employee address circumstances within the employee’s own sphere as part of the secondary burden of producing evidence. This includes, in particular, an explanation of how the employee responded to specific job placement proposals or other identified employment opportunities.

Dr. Merle Steinhuber is an associate in Ogletree Deakins’ Berlin office.

Maximilian Gössling, a trainee lawyer in Ogletree Deakins’ Berlin office, contributed to this article.

Ogletree Deakins’ Berlin office will continue to monitor developments and will post updates on the Cross-Border and Germany blogs as additional information becomes available.

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Quick Hits

• In Joyner v. Frontier Airlines, the Tenth Circuit reversed a district court’s ruling that customer service agents at a Denver airport were transportation workers exempt from federal arbitration law.
• The Tenth Circuit found the lower court had improperly relied on the work the named plaintiffs had actually performed, rather than what a typical class member did.
• The case hinged on whether the employees regularly handled passengers’ bags and thus took part in interstate commerce.

Under the Federal Arbitration Act (FAA), mandatory arbitration agreements in employment contracts are enforceable, but the statute exempts from its coverage contracts of transportation workers involved in moving goods across state or national borders.

In 2022, the Supreme Court of the United States ruled that airline cargo loaders were transportation workers and thus exempt from the FAA because they loaded and unloaded baggage that crossed state lines. On May 28, 2026, the Supreme Court held that workers who locally deliver goods that originate from other states may qualify for the FAA exemption, even if they do not personally cross state lines or interact with vehicles that do.

Background

Menzies Aviation provides ground, fuel, and air cargo support services, including ticketing, check-in, and boarding, for Frontier Airlines at Denver International Airport. In May 2024, a group of ticketing and gate agents sued Menzies and Frontier under Colorado’s wage-and-hour laws, alleging that the companies improperly deducted time for unpaid lunch breaks the employees never received, forced employees to work through mandatory rest breaks, failed to pay overtime wages, and withheld earned sales commissions.

The companies moved to compel arbitration, since all the plaintiffs had signed arbitration agreements. The employees argued they were transportation workers engaged in interstate commerce and thus exempt from the FAA because they sometimes handled passengers’ luggage. However, the companies argued that the plaintiffs were not engaged in interstate commerce because they could do their jobs without directly handling baggage.

On May 27, 2025, the U.S. District Court for the District of Colorado denied the motion to compel arbitration, finding the employees had furnished credible evidence that they routinely handled baggage. It did not take into account testimony from an employee who trained customer service agents and testified that they did not regularly lift luggage. The companies appealed.

The Tenth Circuit’s Ruling

The U.S. Court of Appeals for the Tenth Circuit explained that, in cases like this one, courts must first define the relevant class of workers in a class action, then determine whether that class is engaged in interstate commerce. It concluded the lower court was wrong to classify the plaintiffs as transportation workers by focusing exclusively on the work the three named plaintiffs performed, rather than on what the entire class typically did. Instead, courts considering class actions “must focus on the work performed by a typical member of the class, not on the work performed by any particular employee,” the Tenth Circuit noted.

The court concluded it could not address the other arguments in the appeal. “A conclusion that the district court erred in defining the working attributes of the relevant class renders moot all the district court’s subsequent findings and conclusions,” the court stated.

The U.S. Court of Appeals for the Tenth Circuit’s jurisdiction encompasses Colorado, Kansas, New Mexico, Oklahoma, Utah, and Wyoming.

Key Takeaways

The determination of an FAA exemption is very fact-specific and dependent on job duties related to interstate commerce. This case turned on whether typical class members routinely lifted luggage, not on what the individual plaintiffs did.

When attempting to compel arbitration in class actions, employers in the Tenth Circuit may wish to consider what the class of employees typically does, rather than what a specific employee does in the course of a workday. Individual variance from the norm can affect a court’s analysis.

Ogletree Deakins’ Arbitration and Alternative Dispute Resolution Practice Group will continue to monitor developments and will provide updates on the Arbitration and Alternative Dispute Resolution, Class Action, Colorado, Trucking and Logistics, and Wage and Hour blogs as additional information becomes available.

Eric M. Fox is co-chair of Ogletree Deakins’ Arbitration and Alternative Dispute Resolution Practice Group and a shareholder in Ogletree Deakins’ San Diego office.

Christopher C. Murray is co-chair of Ogletree Deakins’ Arbitration and Alternative Dispute Resolution Practice Group and a shareholder in Ogletree Deakins’ Indianapolis office.

This article was co-authored by Leah J. Shepherd, who is a writer in Ogletree Deakins’ Washington, D.C., office.

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Quick Hits

• On August 11, 2026, the Missouri Court of Appeals for the Western District granted mandamus relief in State of Missouri ex rel. Waddell v. Atkins and ordered a trial court to vacate an order compelling arbitration.
• The court held that a case relates to a sexual misconduct dispute when the asserted causes of action arise from alleged sexual assault or harassment, and that the EFAA invalidates a predispute arbitration agreement for the entire action, rather than only claims directly involving sexual misconduct.
• The decision is one of Missouri’s first state appellate rulings to directly apply the EFAA.

Background

Alan Waddell worked as a housekeeper at a Missouri nursing home and rehabilitation facility. He alleged that his supervisor sexually assaulted and harassed him on multiple occasions. After Waddell reported the abuse, he alleged his employer terminated his employment in April 2023, citing failure to report for shifts. Waddell further alleged the employer later rehired him at a different facility, promising he would not have to interact with his former supervisor. As part of the rehiring process, Waddell signed a mutual arbitration agreement. Waddell resigned in July 2023, after the employer allegedly directed him to attend an event at which his former supervisor would be present.

In April 2025, Waddell sued, asserting claims for defamation, tortious interference, wrongful discharge in violation of public policy, and other violations, but no standalone sexual assault or harassment claims. The defendants moved to compel arbitration under the agreement Waddell signed at rehiring. The trial court granted the motion, and Waddell sought mandamus relief from the Court of Appeals.

The Court of Appeals’ Analysis

The court’s analysis addressed two components of the EFAA: (1) whether the statute substantively applied to Waddell’s claims and (2) whether the arbitration agreement was a “predispute” agreement under the EFAA.

EFAA Applicability

The defendants argued the EFAA did not apply because Waddell did not plead a standalone sexual assault or harassment cause of action. The court rejected this argument, drawing a critical distinction between a “claim” and a “dispute.” The court pointed out that the EFAA refers to a “case” that “relates to” a sexual assault or harassment “dispute,” but it does not require the plaintiff to bring a direct claim for sexual misconduct. Because Waddell’s petition alleged underlying conduct involving sexual assault and harassment, and his causes of action all arose from that conduct, the court found the statutory standard was met, citing federal authority to support its conclusion.

The court further held that the EFAA invalidates predispute arbitration agreements as to the plaintiff’s entire “case,” not just the individual claims directly involving sexual misconduct.

Disputes Arising Under the EFAA

The defendants’ most significant argument was that the arbitration agreement was a post-dispute agreement and therefore outside the EFAA’s reach because Waddell signed it after the alleged misconduct occurred and after he reported the abuse. The court disagreed.

At the time Waddell signed the arbitration agreement during his rehiring, the parties were not adverse. The employer had offered reemployment, and Waddell had accepted. The court, however, concluded the “dispute” did not arise until the employer allegedly reneged on its commitment to keep Waddell away from his former supervisor.

Key Takeaways

The Waddell decision is one of the first state appellate court rulings in Missouri to directly apply the EFAA and deny enforcement of a predispute arbitration agreement. Case law under the EFAA continues to develop as courts in various jurisdictions address a number of important issues regarding the statute’s application.

Ogletree Deakins’ Kansas City and St. Louis offices and Arbitration and Alternative Dispute Resolution Practice Group will continue to monitor developments and will provide updates on the Arbitration and Alternative Dispute Resolution and Missouri blogs as additional information becomes available.

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Quick Hits

• Noncompliance with the DEI anti-discrimination clause at FAR 52.222-90 can result in debarment or suspension, a sanction on par with fraud, bribery, and antitrust violations as grounds for a governmentwide exclusion from federal contracting.
• The FAR Council proposed a rule on September 18, 2026, that would stamp the three-tier enforcement structure of the DEI clause into the FAR: contract-level remedies (cancellation, termination, or ineligibility), governmentwide exclusion (debarment or suspension), and potential False Claims Act liability.
• Because the clause already flows down to subcontracts—including those for commercial products and services if delivery or performance is in the United States—at any tier, prime contractors face heightened exposure for subcontractor noncompliance and placing importance on monitoring and flow-down administration.
• Contractors can consider reviewing current DEI-related policies and practices, update codes of conduct and training programs, and consider submitting comments on the proposed rule by October 19, 2026, via regulations.gov (FAR Case 2026-011).

The proposed rule is part of the Revolutionary Federal Acquisition Regulation Overhaul (RFO), covering revisions to FAR Parts 9, 27, and 47, and the corresponding clauses and provisions in Part 52. Government contractors should pay close attention to the revisions to FAR Part 9, which formally codify noncompliance with FAR clause 52.222-90, Addressing DEI Discrimination by Federal Contractors, as a cause for debarment and suspension.

E.O. 14398 establishes that agencies should not do business with contractors that engage in any racially discriminatory diversity, equity, and inclusion (DEI) activities and directs the FAR Council to amend the FAR accordingly. The order defines “racially discriminatory DEI activities” as disparate treatment based on race or ethnicity in the recruitment, employment (e.g., hiring or promotions), contracting (e.g., vendor agreements), program participation, or allocation or deployment of an entity’s resources. “Program participation” is broadly defined to include membership or participation in, or access or admission to, training, mentoring, or leadership development programs; educational opportunities; clubs; associations; or similar opportunities sponsored or established by the contractor or subcontractor.

The FAR Council took a two-phase approach. In its first phase, the FAR Council issued model class deviations to replace each FAR part. On April 17, 2026, prescribing wide class deviations, the FAR Council issued implementation guidance directing agencies to incorporate FAR 52.222-90 into new solicitations and existing contracts valued over the micro-purchase threshold. The clause requires contractors to agree not to engage in any racially discriminatory DEI activities; furnish information and reports—including broad access to books and records—as required by the contracting officer for compliance purposes; accept that noncompliance may result in cancellation, termination, or suspension of the contract; report any subcontractor’s known or reasonably knowable conduct that may violate the clause; and recognize that compliance is material to the government’s payment decisions under the False Claims Act. The clause flows down to subcontracts at any tier for which the place of delivery or performance is in the United States. Agencies were required to begin using the clause by April 24, 2026, and to modify existing contracts by July 24, 2026.

Now, this proposed rule is part of the second—more durable—phase, using the formal notice-and-comment rulemaking process. This proposed rule is one of twelve rules constituting the FAR Council’s phase two rulemaking effort under E.O. 14275, Restoring Common Sense to Federal Procurement (April 15, 2025), which directed the first comprehensive overhaul of the FAR in its forty-year history.

Proposed Revisions to FAR Part 9: Implementation of E.O. 14398

FAR Part 9, Contractor Qualifications, governs the standards and procedures the government uses to determine whether a prospective contractor is responsible and eligible to receive a federal contract award. It includes the rules for contractor responsibility determinations, qualification requirements, and, critically, the framework for debarment and suspension at Subpart 9.4. The most significant change to FAR Part 9 in this proposed rule is the formal implementation of E.O. 14398 into that debarment and suspension framework.

In particular, the proposed rule would add a new subparagraph at FAR 9.406-2(b)(1)(viii), providing that the suspending and debarring official may debar a contractor for “[f]ailure to comply with the requirements of the clause at 52.222-90, Addressing DEI Discrimination by Federal Contractors.” Importantly, the proposed debarment cause falls within FAR 9.406-2(b)(1)’s preponderance-of-the-evidence framework, not the conviction-or-civil-judgment causes in FAR 9.406-2(a).

Debarment is one of the most severe administrative consequences in federal procurement: a debarred contractor is excluded from receiving new government contracts, the exclusion can last up to three years, and it applies governmentwide. Other causes for debarment listed in FAR 9.406-2 include conviction of fraud, tax evasion, bribery, and violations of antitrust statutes. The inclusion of 52.222-90 noncompliance alongside these causes continues to reflect the weight the administration is placing on the DEI clause.

The proposed rule would also add a new subparagraph at FAR 9.407-2(a)(11), providing that the suspending and debarring official may suspend a contractor suspected, upon adequate evidence, of noncompliance with 52.222-90. Unlike debarment, suspension does not require a completed investigation or adjudication. It is an interim measure that can be imposed based on adequate evidence of a violation and has an immediate, governmentwide effect on a contractor’s ability to receive new awards. This means a contractor could be blocked from the federal marketplace on an allegation of noncompliance even before the underlying facts have been fully resolved. Suspension is not permanent, however, and carries an outer limit of eighteen months unless legal proceedings are initiated.

Adding 52.222-90 noncompliance to the debarment and suspension causes list elevates the consequences from the contract level to the governmentwide enforcement level. Prior to this proposed rule, the clause itself already authorized contract-specific remedies, including cancellation, termination, and ineligibility for further government contracts. The proposed rule, if finalized, would layer governmentwide exclusion on top of those contract-level remedies, making clear that the government may pursue debarment or suspension to exclude a contractor from doing business with all federal agencies. Combined with the clause’s recognition that compliance is material to the government’s payment decisions under the False Claims Act, the enforcement framework encompasses three distinct tiers of risk: contract-level remedies, governmentwide exclusion through debarment or suspension, and potential False Claims Act liability.

Contractor Considerations Going Forward

Federal contractors and subcontractors may take this proposed rule as an opportunity to accelerate their compliance efforts around FAR 52.222-90. As an initial step, contractors can review the proposed rule and consider submitting comments by the October 19, 2026, deadline via regulations.gov, citing FAR Case 2026-011.

Because the DEI anti-discrimination clause is already in effect through the class deviation process, contractors may also confirm that their existing contracts have been modified to include the clause and that their internal compliance programs address its requirements. Now may be an appropriate time to review current workforce and DEI-related policies and practices to evaluate whether any could be characterized as “racially discriminatory DEI activities” under the clause’s definitions, with particular attention to recruitment, hiring, promotions, vendor agreements, program participation, and resource allocation. Because the clause flows down to subcontracts at any tier, prime contractors can consider whether appropriate flow-down language is in place and assess mechanisms to monitor and manage subcontractor risk.

Ogletree Deakins’ Diversity, Equity, and Inclusion Compliance Practice Group, Government Contracting and Compliance Practice Group, and Workforce Analytics and Compliance Practice Group will continue to monitor developments and will post updates on the Diversity, Equity, and Inclusion Compliance, Government Contracting and Compliance, and Workforce Analytics and Compliance blogs as additional information becomes available.

This article and more information on how the Trump administration’s actions impact employers can be found on Ogletree Deakins’ Administration Resource Hub.

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Quick Hits

• On September 17, 2026, eight states (California, Colorado, Illinois, Maryland, Massachusetts, New Jersey, New York, and Wisconsin) prevailed on summary judgment in their lawsuit challenging the Education Department’s February 5, 2025, internal directive mandating the termination of federal education grants involving DEI-related programming. The court vacated the directive in its entirety and declared it unlawful. State of California et al. v. U.S. Dep’t of Education et al., No. 25-CV-10548-AK (D. Mass. Sep. 17, 2026).
• The court found the directive arbitrary and capricious on four grounds and contrary to three independent sources of law, including the governing grant statutes, the General Education Provisions Act’s (GEPA) notice-and-comment requirement, and the Uniform Guidance’s limits on post-award terminations.
• The ruling joins a growing line of federal court decisions blocking anti-DEI funding actions and reinforces the compliance uncertainty facing employers that hold federal grants or contracts.

Background

On January 21, 2025, President Trump issued Executive Order 14173, directing federal agencies to remove references to DEI from grant procedures and to terminate DEI-related mandates. A week later, Executive Order 14190 directed the secretaries of education, defense, and health and human services to develop a plan for eliminating federal funding tied to “discriminatory equity ideology” in K–12 schools.

On February 5, 2025, Acting Secretary of Education Denise Carter issued an internal directive titled “Eliminating Discrimination and Fraud in Department Grant Awards,” instructing all Education Department personnel to review new, pending, and issued grants and to terminate those deemed inconsistent with the administration’s priorities. The directive identified DEI as programming that could constitute discriminatory practices, but did not define “DEI,” did not provide examples of prohibited activities, and was not subject to notice-and-comment rulemaking.

Seven Education Department personnel conducted the reviews over roughly one week. Within two weeks, the Education Department terminated 104 of 109 TQP and SEED grants, more than $600 million, while flagging topics such as cultural responsiveness, anti-racism, social-emotional learning, systemic privilege, and racial justice. As of June 2, 2025, none of the grantees who filed objections had received a response.

The eight plaintiff states, California, Massachusetts, New Jersey, Colorado, Illinois, Maryland, New York, and Wisconsin, collectively held more than forty active TQP and SEED grants totaling over $250 million, funding teacher recruitment, training, and retention in high-need and underserved school districts. The grants were slated to flow to universities, school districts, and nonprofits.

The Court’s Reasoning

The court found the directive unlawful on two independent grounds under the Administrative Procedure Act (APA) and declined to reach the states’ constitutional claims.

First, the directive was arbitrary and capricious. The court identified four defects:

• The directive failed to define “DEI” or explain what it prohibited. The Education Department terminated grants involving anti-racism, social-emotional learning, and “Family and Community in the Classroom,” and defense counsel acknowledged at oral argument that the directive reached practices that do not violate civil rights law, such as affirmative action.
• The directive reversed the Education Department’s longstanding promotion of DEI-related programming through competitive-preference priorities published in the Federal Register, without acknowledging the change or engaging with the evidence that supported the prior approach.
• The Education Department did not weigh the reliance interests of states and institutions that had built infrastructure, hired personnel, and developed programs in reliance on multi-year grants and published priorities.
• The Education Department did not consider the obvious alternative of providing grantees with notice and an opportunity to cure, even though its own regulations and Title VI and Title IX contemplate less drastic measures before funding is discontinued.

Second, the directive was contrary to law on three grounds:

• The TQP, SEED, and GEPA statutes impose substantive requirements on grantees to recruit diverse educators, serve underserved populations, and ensure equitable access. The directive treated those very objectives as grounds for termination.
• The Education Department bypassed GEPA’s notice-and-comment requirement for rules with binding legal effect on education funding.
• Adopting the reasoning of New Jersey v. OMB, the court held that the Uniform Guidance does not authorize terminations based on agency priorities adopted after an award was made.

Scope of Relief

The court vacated the directive in its entirety and declared it unlawful. Rejecting the Education Department’s argument that relief should be limited to the plaintiff states, the court held that APA vacatur operates on the policy itself and is not party-restricted. The court denied a permanent injunction as duplicative, noting that preclusion principles give the states a basis to challenge any replacement directive.

Why This Matters for Employers

The case involves education grants, but three aspects of the court’s reasoning carry over to employers in any federal funding relationship.

• Vagueness. The court’s finding that the Education Department never defined “DEI” echoes a problem employers have faced since the executive orders were issued: the administration’s policies have not drawn a clear line between lawful and unlawful DEI-related programs, hiring practices, and workforce policies. Multiple federal decisions, including the U.S. Department of Agriculture (USDA) ruling and rulings in other Education Department challenges, have now found that vagueness fatal under the APA.
• Reliance interests. The court credited the concrete investments institutions made in recruiting pipelines, training programs, mentoring, and professional development based on existing priorities and multi-year grants. That reasoning applies to any employer-grantee that has built workforce programs around federal funding.
• Post-award termination limits. The Uniform Guidance holding applies government-wide. Any federal agency that has relied on 2 C.F.R. § 200.340(a)(4) to terminate grants based on priorities adopted after the award faces the same constraint, including agencies that fund workforce development, public health, and social services programs run by employers. The GEPA notice-and-comment holding is education-specific, but the principle that agencies cannot use internal directives to effectively repeal published rules with binding effect is consistent with what courts have found in the USDA case and federal contractor cases.

However, the Uniform Guidance holding may have a short shelf life. On May 29, 2026, the Office of Management and Budget (OMB) published a proposed rule that would rewrite § 200.340 to expressly authorize “discretionary termination” based on program goals, agency priorities, or the national interest” as they exist at the time of the termination.” OMB had targeted an October 1, 2026, effective date, but Congress included a provision in the Continuing Resolution (Section 157) that delays implementation of the proposed rule through December 11, 2026. The proposed rule is also expected to face its own legal challenges.

The court’s ruling does not restore individual grant awards already terminated under the directive. Those claims must be filed with the Court of Federal Claims. The Education Department’s separate June 2025 Guidance governing continuation awards remains in effect under a different regulatory authority (34 C.F.R. § 75.253). The Education Department could appeal.

This ruling is part of a pattern. Courts have blocked anti-DEI funding actions at the Education Department, the USDA, and in the federal contractor space. But the administration is working to change the rules that produced those losses, and the next round of litigation will test whether those changes hold up.

Ogletree Deakins’ Diversity, Equity, and Inclusion Compliance Practice Group, Government Contracting and Compliance Practice Group, Higher Education Practice Group, and Workforce Analytics and Compliance Practice Group will continue to monitor developments and will provide updates on the Diversity, Equity, and Inclusion Compliance, Government Contracting and Compliance, Higher Education, and Workforce Analytics and Compliance blogs as additional information becomes available.

This article and more information on how the Trump administration’s actions impact employers can be found on Ogletree Deakins’ Administration Resource Hub.

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Quick Hits

• The executive order directs the secretaries of state, labor, and homeland security to consider whether an employer conducted layoffs within the prior year or plans future layoffs affecting similarly situated U.S. workers when adjudicating H-1B-related filings.
• Employers could see additional scrutiny at multiple points in the H-1B process, including DOL Labor Condition Application (LCA) review, U.S. Citizenship and Immigration Services (USCIS) petition adjudication, consular visa issuance, and admission at the border.
• Additional agency action may be needed to determine how the directive will be applied in practice.

Background

The H-1B program permits U.S. employers to temporarily employ foreign nationals in specialty occupations. An employer generally must obtain a certified labor condition application (LCA) from the U.S. Department of Labor before filing Form I-129, Petition for a Nonimmigrant Worker, with U.S. Citizenship and Immigration Services (USCIS).

The State Department may become involved in visa processing when the worker is abroad, and U.S. Customs and Border Protection may review the worker’s admissibility at the port of entry. Existing LCA attestations address wages, working conditions, strikes or lockouts, notice, and related employer obligations.

Certain H-1B-dependent employers and willful violators also face additional recruitment and nondisplacement obligations for covered nonexempt H-1B workers. Those nondisplacement rules generally focus on certain layoffs during the ninety-day period before and after the filing of an H-1B petition supported by the LCA.

Key Provisions of the Executive Order

The executive order, “Enhancing Program Integrity and Interagency Coordination in the Administration of the H-1B Nonimmigrant Visa Program,” does not, on its face, amend the Immigration and Nationality Act (INA) or the H-1B regulations. Instead, it directs the agencies to incorporate layoff and labor-market information into H-1B administration to the extent consistent with existing law and authorizes implementing rules, policies, operational guidance, or other guidance.

First, the secretaries of state, labor, and homeland security must consider whether a sponsoring employer directly or indirectly engaged in layoffs during the prior year or plans future layoffs that negatively affect similarly situated U.S. workers. The directive applies when the agencies adjudicate H-1B-related LCAs, petitions, visas, and entries.

Second, DOL, DHS, and the State Department must consult with the U.S. Department of Commerce, the U.S. Department of Education, and the U.S. Small Business Administration to obtain wage, employment, academic, industrial, and other economic information relevant to the administration of the H-1B program.

Third, within thirty days, the DOL’s Wage and Hour Division must begin reviewing data related to previously submitted LCAs to determine whether additional enforcement action is warranted under existing H-1B provisions.

Impact on Employers

The executive order may lead to closer agency review of H-1B filings when a sponsoring employer has recently conducted, or is planning, a reduction in force involving positions similar to sponsored H-1B roles. Employers may need to address the relationship between workforce reductions and sponsored positions across the relevant filing record.

The directive is broader than the existing statutory nondisplacement rules because it reaches layoffs during the prior year and planned future layoffs, rather than focusing only on the existing ninety-day window. It also may apply to all H-1B employers, not only H-1B-dependent employers and willful violators. Employers could face scrutiny at multiple points, including DOL LCA review, USCIS petition adjudication, consular processing, and admission at the border.

For H-1B-dependent employers and willful violators, the executive order may renew attention to existing recruitment and nondisplacement requirements, including inquiries involving secondary employers in third-party placements.

The phrase “similarly situated” may draw on existing regulatory concepts addressing “essentially equivalent” jobs, which compare responsibilities, required qualifications, and area of employment. Consulting, staffing, outsourcing, and other third-party placement models may face particular scrutiny because those arrangements can raise displacement questions at client worksites.

Next Steps

The executive order leaves significant implementation details to forthcoming agency guidance, which will determine how DOL, DHS, and the State Department incorporate layoff-related information into H-1B adjudications. Information on how the directive will apply in practice is not yet known.

Ogletree Deakins’ Immigration Practice Group will continue to monitor developments and will provide updates on the Immigration and Reductions in Force blogs as additional information becomes available.

For additional insight into the critical immigration issues facing employers today, please join our Virtual Immigration Insights Symposium on Wednesday, October 7, 2026, from noon to 2:30 p.m. ET. Register here.

This article and more information on how the Trump administration’s actions impact employers can be found on Ogletree Deakins’ Administration Resource Hub.

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Quick Hits

• The Second Circuit amended its July 2026 decision, clarifying that the decision was not meant to establish that a heightened motive requirement exists for failure-to-accommodate cases.
• The court clarified that employees need not prove discriminatory animus against religion to substantiate their claims, but they must show that the denial was motivated by a desire to avoid the accommodation.

The case, Bergin v. New York State Unified Court System, involved an officer of the New York Unified Court System (UCS) who had requested a religious exemption from UCS’s COVID-19 vaccination requirement. UCS denied the request after the employee initially failed to answer supplemental questions and refused to reconsider. The employee was later placed on administrative leave and then discharged.

In its July 15, 2026, decision, the Second Circuit found that the employee failed to bring a prima facie case for failure to accommodate under Title VII of the Civil Rights Act of 1964 and remanded the case back to the district court for reconsideration. The court held that to state a prima facie case, an employee must allege: (1) the need for an accommodation of a religious practice, (2) “the employer’s desire to avoid” the accommodation “was a motivating factor,” and (3) “an adverse employment decision.”

The Second Circuit’s amended opinion adds a footnote clarifying that it does “not suggest that a new, heightened discriminatory motive requirement exists in failure-to-accommodate cases.”

“That is to say, an employee asserting a failure-to-accommodate claim need not show that an employer’s denial of an accommodation was motivated by discriminatory animus against religion,” the Second Circuit stated in the footnote. (Emphasis in original)

The initial ruling relied on the 2015 Supreme Court of the United States decision in EEOC v. Abercrombie & Fitch Stores, Inc. That case held that an employee need not inform an employer of a need for a religious accommodation to assert a Title VII failure-to-accommodate claim, but must show that the employer was motivated by the need for a religious exemption when making an adverse employment decision. The Second Circuit found that Abercrombie overturned its prior rule requiring employees to inform their employer of their need for an accommodation and clarified that what a plaintiff must plead and, ultimately prove, is “that the employer was motivated in part by the desire to avoid offering a religious accommodation.”

“But, consistent with Abercrombie, the employee does have to show that the denial was ‘because’ of the employee’s religion as opposed to, say, the employee’s failure to timely provide sufficient information,” the new footnote stated.

The amended decision also added another footnote clarifying that, in this case, the employee’s discharge alone “constitutes a cognizable adverse employment action.” The court thus “did not need to and did not decide whether the failure to accommodate itself constitutes an adverse employment action.”

Key Takeaways

The Second Circuit’s amendments to its initial opinion are significant. The Second Circuit clarified that it did not adopt a “heightened” motive requirement that would require employees to allege “animus” against a religious practice. Still, the ruling provides employers with authority to defend against claims for denial of a requested religious accommodation. It makes clear that when an employee fails to establish a prima facie case under Abercrombie, their claims could be dismissed prior to an employer having to establish an undue hardship.

Ogletree Deakins’ Leaves of Absence/Reasonable Accommodation Practice Group will continue to monitor developments and will post updates on the Connecticut, COVID-19/Coronavirus, Employment Law, Leaves of Absence, New York, State Developments, and Vermont blogs as additional information becomes available.

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Congress Returns, House Leaves, Midterm Elections Loom. Members of the U.S. Senate and U.S. House of Representatives returned to Washington, D.C., this week after staggered August breaks (the House returned briefly two weeks ago) and convened their respective chambers contemporaneously for the first time since mid-July 2026. The return was short-lived. In the House, Speaker Mike Johnson quickly canceled any remaining votes for the week—as well as for the next two weeks in which the House was scheduled to be in session—and the House adjourned until after Election Day (November 3, 2026). The Senate is currently scheduled to remain in Washington, D.C., for the final two weeks of September.

Federal Court Pauses Effective Date of ‘Duration of Status’ Rule. On September 14, 2026, the U.S. District Court for the District of Massachusetts issued a ruling staying the effective date of the U.S. Department of Homeland Security’s (DHS) Immigration and Customs Enforcement (ICE) rule, “Establishing a Fixed Time Period of Admission and an Extension of Stay Procedure for Nonimmigrant Academic Students, Exchange Visitors, and Representatives of Foreign Information Media.” The rule—slated to have taken effect on September 15, 2026—establishes a strict “period of stay” requirement that limits nonimmigrant students and exchange visitors to four-year stays. (The prior “duration of status” framework allowed such individuals to stay in the United States for the course of their studies or authorized programs.)

The court found that the rule was arbitrary and capricious under the Administrative Procedure Act, reasoning that ICE had not (1) conducted a reasoned cost/benefit analysis; (2) meaningfully considered alternatives; (3) responded to significant public comments; or (4) demonstrated a rational connection between the final rule and its purported objectives.

According to the court, “[I]n support of its own position, [ICE] offered almost entirely conclusory statements, non sequiturs, and statements of ‘belief’ without supporting reasoning.” Regarding relief, the court noted that vacatur of the rule might “ultimately prove to be appropriate” but ultimately chose “the more cautious approach of postponing the effective date of the Final Rule.” Further, to prevent “chaos and confusion that a party-specific order would inevitably generate,” the court held that its injunction applied nationwide. At least for now, the rule is not in effect, and the “duration of status” framework remains in place. Ashley K. Kerr has additional details.

Immigration Regulatory Proposals Advance. This week, two new rules impacting employment-based immigration took significant steps forward in the rulemaking process:

• The Office of Information and Regulatory Affairs (OIRA) completed its review of DHS/ICE’s proposal to implement a fee component for foreign national students’ participation in the Optional Practical Training program. Many expect the fee to be approximately $100,000, consistent with the administration’s efforts to attach this amount to H-1B visa petitions. Now that OIRA has completed its review, DHS/ICE is expected to publish the proposal imminently.

• A bit further behind in the regulatory process is the U.S. Department of Labor’s proposal to make changes to the permanent labor certification process (PERM) program, which was just sent to OIRA for review this week. According to the abstract in the most recent Regulatory Agenda, “the Department will seek to modernize the standards and procedures by which the Department receives and reviews employers’ applications for permanent labor certification by improving the minimum standards for recruiting qualified U.S. workers, strengthening safeguards for U.S. workers impacted by layoffs, and enhancing employer compliance with program requirements related to non-discriminatory recruitment and hiring practices.” The OIRA review process can take weeks, and once it is complete, the DOL will release the proposal for public comment.

Bill Would Create Premium Processing for PERM Applications. Speaking of PERM, Representatives Glenn Grothman (R-WI) and Lou Correa (D-CA) have introduced H.R. 10051, the “PERM Backlog Reduction Act of 2026.” The bill would create an optional premium processing program to provide for completion of the DOL’s Permanent Employment Certification Form—which is required for permanent employment-based immigration petitions—within thirty days, for a fee of $1,200. The process is similar to premium processing by U.S. Citizenship and Immigration Services (USCIS). The bill is unlikely to move in the current Congress, but it could be worth watching in 2027. While the administration generally hasn’t been amenable to policies that ease immigration, giving the DOL the authority to collect fees could be enticing and may sway Republicans.

Eschbach Tapped for EEOC GC Role. President Trump has nominated Catherine Eschbach to serve as general counsel (GC) of the U.S. Equal Employment Opportunity Commission. Eschbach currently serves as the Commission’s principal deputy general counsel, a position she has held since September 2025. Prior to her time at the EEOC, Eschbach served as director of the Office of Federal Contract Compliance Programs during the early stages of President Trump’s second term. If confirmed, Eschbach is likely to further the administration’s enforcement priorities with respect to alleged DEI-related race and sex discrimination, anti-American national origin discrimination, and religious discrimination, as well as the enforcement of single-sex spaces in the workplace.

Vice President Spiro Agnew. Former U.S. vice president Spiro Agnew died thirty years ago yesterday, on September 17, 1996. Born and raised in Baltimore, Maryland, Agnew became an attorney specializing in labor law and rose through the local Republican political ranks to serve as Baltimore County executive from 1962 to 1966 and as Maryland governor from 1967 to 1969. Agnew resigned as governor when Richard M. Nixon tapped him to serve as his running mate and eventual vice president. (Ironically, in the 1968 presidential election, which Nixon and Agnew won, the ticket lost Maryland with its ten electoral votes.)

Nixon and Agnew were overwhelmingly reelected in November 1972, but Agnew’s time in office would be short-lived. That year, the U.S. Attorney’s Office for the District of Maryland opened an investigation into alleged kickback schemes involving Baltimore County politicians and local construction firms. The investigation revealed that Agnew had received kickbacks on public contracts awarded to a Maryland construction company and that the bribes persisted during his time as Baltimore County executive, Maryland governor, and even as U.S. vice president. On October 10, 1973, Agnew pled “no contest” to one count of tax evasion and resigned as vice president on the same day. Agnew was the second vice president to resign from office (there have been only two to have done so—John C. Calhoun resigned as President Andrew Jackson’s vice president in 1832 to serve as U.S. senator from South Carolina), and Agnew became the only former vice president with a criminal record.

Quick Hits

• Workplace drug tests show a growing use of marijuana and cocaine in recent years.
• Among all drugs, the rate of positive urine tests has remained roughly the same, more than 4 percent, for more than a decade.
• About 19 percent of workers tested positive for drug use based on hair samples in 2025.

The rate of positive marijuana tests was 4.4 percent in urine testing and 11.1 percent in oral fluid testing in 2025, according to Quest Diagnostics. Hair test positivity for marijuana jumped from 9.5 percent in 2021 to 15.1 percent in 2025.

Likewise, cocaine positivity in hair tests increased from 2.7 percent in 2021 to 4.0 percent in 2025. Hair test positivity for the illicit class of methamphetamine increased from 2.1 percent in 2021 to 2.5 percent in 2025. Conversely, the rate of positive fentanyl tests dropped from 0.55 percent in 2024 to 0.28 percent in 2025.

The rate of positive drug tests was higher in certain industries, such as healthcare (5.8 percent), retail (5.4 percent), and professional and technical services (5.3 percent), but lower in manufacturing (4.2 percent) and transportation and warehousing (4.2 percent), according to Quest Diagnostics.

Federal and State Laws

In April 2026, the U.S. Department of Justice (DOJ) issued an order that reclassified certain marijuana and marijuana-containing products to Schedule III controlled substances. However, it did not legalize marijuana at the federal level.

Meanwhile, forty states and Washington, D.C., have legalized medical marijuana, while twenty-four states and Washington, D.C., have legalized recreational marijuana use for adults. Many states regulate when and how employers may conduct drug tests. Some states have laws protecting employees’ off-duty marijuana use or any off-duty conduct that is legal in the state. The wide variation in state laws may make compliance difficult for multistate employers.

Key Takeaways

These trends in drug test results may reflect a number of societal changes, including wider legalization of cannabis use, a notable decrease in younger adults drinking alcohol, and fewer employers conducting drug testing in certain industries in recent years.

None of the federal or state laws require employers to allow drug use or impairment while at work or during work hours.

With the upward trend in marijuana use, employers may see an uptick in the number of employees requesting a disability accommodation for off-duty medical marijuana use to treat a medical condition, such as chronic pain, nausea, muscle spasms, insomnia, anxiety, or post-traumatic stress disorder. Employers may wish to train managers on how to handle suspected drug use or impairment while on duty and how to respond to requests for disability accommodations.

Ogletree Deakins’ Drug Testing Practice Group will continue to monitor developments and will post updates on the Drug Testing, Healthcare, Multistate Compliance, Retail, and Trucking & Logistics blogs as additional information becomes available.

In addition, the Ogletree Deakins Client Portal provides subscribers with timely updates on drug/alcohol testing and marijuana testing under state and federal law. Premium-level subscribers have access to comprehensive law summaries and policies. Snapshots and Updates are complimentary for all registered client users. For more information on the Client Portal or a Client Portal subscription, please email clientportal@ogletree.com.

Allison E. McDevitt is an associate in Ogletree Deakins’ Indianapolis office.

Michael S. O’Malley is an associate in Ogletree Deakins’ Stamford office.

This article was co-authored by Leah J. Shepherd, who is a writer in Ogletree Deakins’ Washington, D.C., office.

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Quick Hits

• The IRS and the Treasury Department issued guidance that addresses the employer tax credit for paid family and medical leave, which Congress made permanent and expended under the Working Families Tax Cuts Act (WFTC), a part of the comprehensive omnibus budget reconciliation bill of 2025.
• The employer’s leave policy must permit at least two weeks of paid family and medical leave to qualify for the tax credit.
• The WFTC introduced a new option for calculating the employer’s tax credit by the amount of premiums paid for paid leave insurance.

Employers that provide paid family and medical leave to their employees may be eligible for a tax credit. Section 45S of the Internal Revenue Code provides a general business credit for employers that maintain a written paid leave policy that meets certain statutory requirements. Originally enacted as a temporary provision under the Tax Cuts and Jobs Act (TCJA) of 2017, the credit was made permanent and expanded by the budget reconciliation bill signed into law on July 4, 2025. With important changes taking effect in 2026, now is the time for employers to understand how this credit works, whether they qualify, and what steps to take to claim the credit.

Background

The U.S. Congress created the Section 45S credit as part of the TCJA in 2017 to incentivize employers to offer paid leave benefits to lower-compensated employees voluntarily. Originally temporary, the credit was extended twice before the WFTC made it permanent. There is no employer size threshold. Employers of all sizes may qualify, regardless of whether they are subject to the federal Family and Medical Leave Act (FMLA).

The WFTC introduced several significant changes effective for tax years beginning after December 31, 2025, including a new premium method for calculating the credit, expanded definitions of qualifying employees, revised aggregation rules, and updated treatment of state and local leave mandates.

Who Is an Eligible Employer?

An employer may qualify for the credit if it has a written policy in place that meets three core conditions:

• Minimum leave duration: At least two weeks of annual paid family and medical leave for full-time qualifying employees, with a proportionate amount for part-time employees.
• Minimum rate of payment: A rate of payment of at least 50 percent of the wages normally paid to the employee (excluding overtime and discretionary bonuses).
• Noninterference protections: The policy must include language ensuring the employer will not interfere with employees’ FMLA rights under the policy or retaliate against employees who exercise their FMLA rights.

Who Is a Qualifying Employee?

Beginning in 2026, a qualifying employee must meet three criteria: (1) employed by the employer for at least one year (or at least six months at the employer’s discretion), (2) earned pay that did not exceed $96,000 or 60 percent of the highly compensated employee threshold under federal law in the prior year, and (3) customarily worked at least twenty hours per week.

What Qualifies as Family and Medical Leave?

The credit applies only to leave taken for purposes described in the FMLA, such as the birth or adoption of a child; caring for a spouse, child, or parent with a serious health condition; the employee’s own serious health condition; qualifying military exigencies; or caring for a covered servicemember. The leave may be provided under the FMLA or the employer’s own time off policy. General-purpose vacation, personal, or undifferentiated sick leave does not qualify. Leave under a short-term disability program may qualify if it otherwise meets the requirements.

For tax years beginning after 2025, state or locally mandated leave now counts toward the employer’s eligibility (i.e., meeting the minimum leave requirements). However, it remains excluded from the credit calculation itself. For example, if a state mandates two weeks of paid leave, and the employer provides four weeks total, only the nonmandated two weeks may be used to compute the credit amount.

How Is the Tax Credit Calculated?

• The Wage Method: The credit equals the applicable percentage of the wages paid to qualifying employees while on leave. The applicable percentage starts at 12.5 percent when the policy pays 50 percent of normal wages and increases by 0.25 percentage points for each percentage point above 50 percent, up to a maximum of 25 percent (when the employer pays 100 percent of the employee’s normal wages). For example, an employer paying 75 percent of normal wages has an applicable percentage of 18.75 percent. On $3,000 of leave wages, the credit would be $562.50.
• The Premium Method (new for 2026): The WFTC introduced an alternative calculation. Employers that maintain an insurance policy for paid leave may compute the credit based on the applicable percentage of premiums paid or incurred during the tax year, rather than on actual wages. Per Notice 2026-28, only premiums funding benefits that would qualify under the wage method are eligible. Employers may use both methods in the same year, but may not double-count the same leave.

Wages taken into account per employee cannot exceed the employee’s normal hourly wage rate multiplied by hours of leave taken, and no more than twelve weeks of leave per employee per year may be counted.

Section 280C(a) requires the employer to reduce its wage deduction by the credit amount. Employers may elect not to take the credit and instead preserve the full deduction. Wages used for the Section 45S credit cannot support other payroll-based tax credits.

Next Steps

The IRS and Treasury indicated that proposed regulations are forthcoming. Notice 2026-28 provides interim guidance that employers may rely on until new regulations are issued.

Employers may wish to adopt or update a written paid leave policy. Those without a qualifying policy, or with a policy that falls short of the statutory requirements, may want to draft or amend their policies before leave is taken.

Employers also may wish to evaluate which employees meet the tenure, compensation cap, and twenty-hour-per-week requirements. Consider whether electing the new six-month employment threshold captures additional eligible employees. It is important to carefully maintain records of leave taken, wages paid, and the applicable rate of payment per employee. The credit is claimed through IRS Form 8994.

Employers funding leave through insurance may want to assess whether computing the credit based on premiums, rather than wages paid, offers a simpler or more advantageous approach. In states with paid leave mandates, it is important to carefully distinguish mandatory leave benefits from voluntary leave benefits, as this affects both eligibility and the credit calculation.

Ogletree Deakins’ Employment Tax Practice Group will continue to monitor developments and will post updates on the Employee Benefits and Executive Compensation, Employment Tax,  Leaves of Absence, and Military Workforce blogs as additional information becomes available.

Michael K. Mahoney is a shareholder in Ogletree Deakins’ Morristown office.

Stephen Kenney is an associate in Ogletree Deakins’ Dallas office.

This article was co-authored by Leah J. Shepherd, who is a writer in Ogletree Deakins’ Washington, D.C., office.

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