Quick Hits

• California employers face steep penalties for failing to provide compliant rest breaks, including additional pay, potential wage statement violations, waiting time penalties, and attorneys’ fees.
• The high penalties reflect the consensus among the legislature, courts, and labor commissioner that rest breaks are essential for employee health, safety, and productivity, benefiting both employees and employers.
• Employers may want to ensure they adopt clear policies, ensure breaks are duty-free, accurately calculate premiums, document compliance, eliminate discouraging practices, train managers, and conduct audits to manage litigation risks.

Why are the penalties so high? Some may claim that it just reflects a strong plaintiffs’ lobby in Sacramento. But for California employers that need to train their managers to ensure rest break compliance, a more comprehensive explanation is needed: Penalties are high because the consensus among the legislature, the courts, and the labor commissioner is that rest breaks are a win-win for California employers—a boon to employee health and safety and an essential element for improving employee productivity and efficiency. For employers, the law’s bite reflects this understanding of California law: short, regular pauses make people safer and more efficient. A Tenth Circuit Court of Appeals’ decision from the 1950s, Mitchell v. Greinetz, vividly illustrates this understanding of the benefits of breaks.

The Loom Room That Proved the Point

In Mitchell, a weaving shop ran “primitive hand-operated looms,” a demanding setup requiring constant attention and precise coordination—work that the court described as “intricate and fatiguing” and, after a few hours, “monotonous and tiring.” The employer initially operated an eight-hour day, but noticed that employees went home exhausted and returned still fatigued, a cycle that led to illness and breakdowns—bad for the employees and bad for the business.

The Productivity Jolt From Coffee Breaks

Against the backdrop of the World War II labor shortage, the employer had historically staffed the weaving operation with young men, but “when the war effort took nearly all young men,” the employer was forced to look elsewhere for labor. Older men could not handle the physical demands and coordination required by the “primitive” looms, and the employer ultimately hired women because they possessed the necessary coordination and skill for the work. The court expressly tied this replacement to the wartime shortage of young men, situating the shop-floor transformation squarely within the exigencies of the early 1940s.

After conferring with the workforce, the company adopted two fifteen-minute rest breaks—midmorning and midafternoon—so employees could step away from the looms and relax with a soft drink or a cup of coffee. In practice, employees stayed on the same floor during breaks, aided by a table and equipment for making tea or coffee—essentially a forerunner to the modern breakroom espresso bar. The employer soon noticed that those short pauses enhanced performance. He testified that the breaks and shorter hours transformed four of the poorest performers into the best in the shop within weeks; without the breaks, he would have needed another shift to maintain production. The employer also observed that the female employees produced more in six-and-a-half hours than the young men had in eight before they were drafted into military service.

The Legal Bottom Line

The court concluded that the five- to twenty-minute “coffee breaks” promoted efficiency and thus had to be counted as hours worked. The short rest periods were not mere perks, as they drove measurable gains in output. On these facts, the Tenth Circuit reversed the trial court and held that the rest breaks were compensable under the Fair Labor Standards Act.

While the break time was beneficial to employees, it was considered equally—if not more—beneficial to the employer, who made the breaks mandatory once their advantages became clear. The court’s holding reflected what many states had begun to codify: short rest breaks are an accepted part of employment and are treated as work time, because they increase efficiency. This decision also reflects the consensus of California courts and the labor commissioner that scheduled pauses are integral to productive work and must be paid as time worked. That is why steep penalties are imposed in California when an employer fails to provide compliant rest break opportunities.

Key Takeaways

Because California’s legislature, courts, and the labor commissioner agree that paid, duty-free rest breaks are not only compassionate but also operationally smart, California employers must ensure that they provide compliant breaks and document their compliance to manage litigation risks. The following steps can help employers remain compliant with California’s rest break requirements:

Adopting clear and detailed written policies: Consider presenting policies that mirror the wage orders and case law; expressly authorize duty‑free, paid breaks; prohibit on‑call or interrupted breaks; address timing “insofar as practicable”; and include sample rest break schedules.

Making breaks truly duty‑free: Prohibiting work during breaks, refraining from interruptions, and removing any on‑call, radio, or device‑monitoring requirements during breaks can help employees enjoy their breaks.

Calculating and truing‑up premiums correctly: Consider ensuring that pay for missed‑break premiums is made at the “regular rate of pay,” including nondiscretionary bonuses, commissions, differentials, piece‑rate earnings, etc.; and implementing timely payment and periodic true‑ups for monthly/quarterly/annual earnings.

Tracking document provision and exceptions: Employers may want to determine methods to capture contemporaneous attestations that compliant breaks were authorized and permitted, and use exception–based workflows that prompt automatic premium payments when compliance fails.

Eliminating discouraging practices: Employers may want to ensure that their productivity metrics, schedules, handheld/dispatch systems, and staffing models account for rest time.

Training managers and enforcing neutrality: Employers may want to remind managers that they should not encourage employees to skip or delay breaks, and that employees should not be required to be reachable or work during breaks.

Responding and auditing: Employers may want to ensure that when violations occur, they pay the premium and record it accurately on wage statements. They may also want to regularly use internal audits to identify patterns, ensure regular‑rate true‑ups, remediate root causes, and preserve evidence of good‑faith compliance.

Ogletree Deakins’ California offices and California Class Action and PAGA Practice Group will continue to monitor developments and will provide updates on the California, Class Action, and Wage and Hour blogs as additional information becomes available.

In addition, the Ogletree Deakins Client Portal covers developments in California employment laws, including California Onboarding and California Workplace Posters. Premium subscribers have access to details about California laws and downloadable templates. All client-users have access to updates. For more information on the Client Portal or a Client Portal subscription, please reach out to clientportal@ogletree.com.

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Quick Hits

• Under the new California “Workplace Know Your Rights Act,” employers must provide a stand-alone written notice to employees by February 1, 2026, detailing workers’ compensation, immigration-related protections, union organizing rights, and other key legal rights.
• The California labor commissioner has provided a template notice in English and Spanish, with plans to offer additional translations in several other languages soon.
• Employers must distribute the notice to current employees by February 1, 2026, and annually thereafter, using methods like personal service, email, or text message, and must also provide it to new hires upon employment and to collective bargaining representatives annually.

What does the template notice say?

The new law, codified at California Labor Code sections 1550-1559, requires employers to provide a “stand-alone written notice” addressing workers’ compensation, protections against unfair immigration-related practices, the right to notice of federal immigration inspections, the right to organize a union in the workplace, constitutional rights when interacting with law enforcement at the workplace, and rights related to designating an emergency contact to be notified if the employee is arrested or detained while at work. The law also requires that the notice include a list of any new legal developments that the labor commissioner deems “material and necessary.”

The Labor Commissioner’s Office states that it intends to post an updated template notice annually.

When and how should employers send the notice?

Employers must provide the notice:

• to current employees, on or before February 1, 2026, and then annually, in a manner normally used to communicate employment-related information, such as by personal service, email, or text message, if it can reasonably be anticipated to be received by the employee within one business day of sending;
• to new employees, upon hire; and
• to an employee’s exclusive collective bargaining representative, annually, by electronic or regular mail.

Language requirements

Employers must provide the notice in the language the employer normally uses to communicate employment-related information to an employee and which the employee understands, if the template notice is available in that language on the labor commissioner’s website. Otherwise, the notice may be provided in English. The labor commissioner has already provided the template notice in English and Spanish, and states that it will soon provide the template notice in Chinese, Hindi, Korean, Punjabi, Tagalog, Urdu, and Vietnamese.

Next Steps

Employers may want to determine the best distribution method; timely provide the notice; and keep compliance records for three years, including the date that each notice is provided or sent.

Ogletree Deakins’ California offices will continue to monitor developments and will post updates on the California, Immigration, and Traditional Labor Relations blogs as additional information becomes available.

In addition, the Ogletree Deakins Client Portal covers developments in California employment laws, including California Onboarding (where the Workplace Know Your Rights Act requirements are included in the update field and under the Miscellaneous tab) and California Workplace Posters. Premium subscribers have access to details about California laws and downloadable templates. All client-users have access to updates. For more information on the Client Portal or a Client Portal subscription, please reach out to clientportal@ogletree.com.

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Quick Hits

• Several new state laws that took effect January 1, 2026, significantly impact employer compliance in areas such as wage and hour regulations, leave administration, and workplace notices, requiring multistate employers to update policies and procedures accordingly.
• Notable changes include California’s expansion of leave protections for crime victims and the introduction of the mini-WARN Act, Illinois’s new human rights protections for artificial intelligence, and Pennsylvania’s CROWN Act.

California

Crime Victim Leave and Paid Sick Leave—Assembly Bill (AB) 406

On October 1, 2025, Governor Gavin Newsom signed AB 406, expanding leave protection for employees who are victims of violence or when their family members are victims to seek legal, medical, mental health, or safety planning services. The law requires employers with twenty-five or more employees to provide leave for covered activities subject to reasonable notice and certification. It does not mandate paid leave, but employees may use available paid sick leave or other accrued paid time off (PTO). The law also expands the covered reasons for using paid sick leave to include leave to appear as a witness and for jury duty. The law took effect on January 1, 2026.

Family and Medical Leave—Senate Bill (SB) 590

Governor Newsom signed SB 590 on October 13, 2025. The law expands eligibility for paid family and medical leave to individuals who take time off work to care for a seriously ill “designated person,” meaning “any care recipient related by blood or whose association with the individual is the equivalent of a family relationship.”

Mini-WARN Act—SB 617

SB 617, signed on October 1, 2025, expands the notice content requirements under the California Worker Adjustment and Retraining Notification (Cal-WARN) Act to require employers to include additional information in their notices of mass layoffs, terminations, or relocations. Under the law, employers must disclose whether they plan to coordinate services, such as a rapid response orientation, through the local workforce development board or another entity, and include specific contact information and descriptions of available services.

Required Employer Postings—SB 294

Governor Newsom signed SB 294, the “Workplace Know Your Rights Act,” on October 12, 2025, to require employers “provide a stand-alone written notice” to each employee addressing independent contractor misclassification protections, heat illness prevention, workers’ compensation, paid sick days, protections against unfair immigration-related practices, the right to notice of federal immigration inspections, the right to organize a union in the workplace, and constitutional rights when interacting with law enforcement at the workplace. Employers have until February 1, 2026, to make the posting, but the Labor Commission has released a template notice that complies with the law.

Stay or Pay Clauses—AB 692

Governor Newsom signed AB 692 on October 13, 2025, banning employers from inserting into employment contracts clauses that require workers to repay the employer, training provider, or debt collector for training costs after employment ends, often referred to as “stay or pay” clauses. The law does not apply to retention bonuses and certain loans if specific conditions are met.

Additional updates on new California laws can be found here.

Colorado

Paid Family and Medical Leave—SB 25-144

On May 30, 2025, Governor Jared Polis signed legislation expanding the state’s Family and Medical Leave Insurance (FAMLI) program to provide up to twelve weeks of paid leave for parents with a child in a neonatal intensive care unit (NICU). It took effect on January 1, 2026. In addition, the legislation reduces FAMLI premiums for 2026 from 0.9 percent of an employee’s wages to 0.88 percent for 2026 with premiums from 2027 and on to be set annually.

Connecticut

Family and Medical Leave Benefit Increase

Effective January 1, 2026, due to the increase in the state’s minimum wage for 2026, the maximum weekly paid family and medical leave benefit amount available under the Connecticut Paid Leave program increases to $1,016.40, which is capped at sixty times the state minimum wage rate. The employee contribution rate for 2026 remains at 0.5 percent, unchanged from the 2025 rate.

Paid Sick Leave—Public Act (PA) No. 24-8

Under amendments to Connecticut’s paid sick leave program in PA 24-8, enacted in 2024, paid sick leave requirements cover smaller employers. As of January 1, 2026, employers with eleven or more employees (a decrease from at least twenty-five employees) are required to accrue paid sick leave.

Delaware

Family and Medical Leave—HB 128

Beginning on January 1, 2026, employees may take up to twelve weeks of paid leave per year to care for a new child, or six weeks of paid leave per year to address a serious health condition or care for a family member with a serious medical condition, under the Healthy Delaware Families Act. The state’s paid family and medical leave (PFML) law has also been amended to prohibit employers from requiring an employee to use accrued paid time off (PTO) before accessing PFML benefits, among other changes.

Illinois

Artificial Intelligence and Human Rights—HB 3773

On August 9, 2024, Governor JB Pritzker signed HB 3773 into law, amending the Illinois Human Rights Act (IHRA) to make it a civil rights violation to use artificial intelligence in ways that result in unlawful discrimination in employment decisions, including hiring, promotions, and discipline, even if such discrimination is unintentional. The law also addresses the use of zip codes as a proxy for protected classes, recognizing the potential for such practices to lead to discriminatory outcomes. The law took effect on January 1, 2026. In late 2025, the Illinois Human Rights Department shared draft (non-final) rules clarifying the notice and recordkeeping requirements for employers regarding the use of AI in making employment decisions.

Employee-Provided Devices Use—HB 1278

Effective January 1, 2026, the Illinois Victims’ Economic Security and Safety Act prohibits employers from discharging, refusing to hire, or discriminating or retaliating against employees because they used employer-issued electronic equipment to record a crime of violence, including domestic violence and sexual violence, committed against them, a member of their family, or their household member. The law also prohibits employers from depriving an employee of a device because the employee used it to record such incidents and requires employers to provide an employee or, a family member if the employee is incapacitated, access to any photographs or recordings of such incidents from an employer-issued device.

Wage Garnishments—SB 1738

Effective January 1, 2026, SB 1738, which Governor Pritzker signed on August 1, 2025, entitles a debtor-employee to a $1,000 automatic exemption where a consumer debt judgment has been entered against the debtor-employee, applying to judgments entered on or after January 1, 2020.

Medical Donation Leave— HB 1616 

Effective January 1, 2026, the Illinois Employee Blood and Organ Donation Leave Act is amended to allow part-time employees to take leave for organ donation. Previously, Illinois law only provided organ donation leave time to full-time employees.

Paid Lactation Breaks—SB 212

On August 1, 2025, Illinois amended the Nursing Mothers in the Workplace Act to make it clear that breaks for employees to express breast milk for a nursing infant be paid at the employee’s regular rate of pay and employees cannot be required to use paid leave. The amendments take effect January 1, 2026.

Additional updates on new Illinois laws can be found here.

Massachusetts

Family and Medical Leave

The Massachusetts Department of Family and Medical Leave (DFML) announced on October 1, 2025, that the maximum paid family and medical leave (PFML) weekly benefit amount increases to $1,230.39 in 2026, representing a $60 increase from 2025. The employer and employee contribution rates for 2026 remain unchanged from those in 2025. The 2026 DFML workplace poster template can be found on the department’s website.

Minnesota

Family and Medical Leave

On January 1, 2026, the Minnesota Paid Leave law took effect, providing qualified employees up to twelve weeks of paid medical leave or paid family leave. Employees who need both in a single benefit year may qualify for up to twenty weeks. Employers had until December 1, 2025, to notify employees about their rights and benefits under the new law.

Meal and Rest Breaks—Senate File (SF) 17 / House File (HF) 15

Starting January 1, 2026, employers in Minnesota must provide employees working six or more consecutive hours with a thirty-minute unpaid meal break and a fifteen-minute paid rest break. In September 2025, the Minnesota Department of Labor and Industry published guidance on the upcoming changes to meal and rest breaks.

Paid Sick Leave—SF17 / HF15

SF17 / HF15 further amended the Minnesota Earned Sick and Safe Time (ESST) to allow employers to set reasonable notice requirements for unforeseeable leave and to require documentation for leave taken for two consecutive workdays.

Montana

Restrictive Covenants—HB 620

Effective January 1, 2026, Montana’s HB 620 expands the ban on noncompetes in healthcare to licensed physicians of all specialties.

Nevada

Workplace Safety Wildfire Smoke—SB 260

On June 10, 2025, Governor Joe Lombardo signed SB 260, expanding workplace safety protections. Employers with ten or more employees (with certain industry exceptions) need to monitor air quality and reduce their employees’ exposure to wildfire smoke. Certain provisions of the bill apply only to employers whose employees perform “critical tasks outdoors.”

New Hampshire

Family and Medical Leave—HB 2

Effective January 1, 2026, covered New Hampshire employers are required to provide leave for an employee’s own medical appointments for childbirth, an employee’s postpartum care, and an infant’s pediatric medical appointments.

Military Leave—HB 225

HB 225, signed into law in July 2025, requires employers with fifty or more employees at a single location in New Hampshire to provide job protections for the spouses of military service members who have been involuntarily mobilized for military service beginning January 1, 2026. The law expands on the protections provided by the Uniformed Services Employment and Reemployment Rights Act (USERRA), which provides job protections for service members themselves.

New York

Family and Medical

New York’s Paid Family Leave (PFL) program has announced updates for 2026, including increases in the maximum weekly PFL benefit amount and the employee contribution rate, effective January 1, 2026.

New York City Paid Sick Leave— Int. No. 0780-2024

In October 2025, New York City enacted amendments to the city’s Earned Safe and Sick Time Act (ESSTA) to expand covered reasons to take earned safe and sick time and add a separate bank of thirty-two hours of unpaid earned safe and sick time in addition to the forty or fifty-six hours already provided under the ESSTA. The law took effect on February 22, 2026.

Oregon

Medical Debt Reporting—SB 0605

On June 17, 2025, Governor Tina Kotek signed SB 0605 into law, banning the reporting of medical debt owed by Oregon residents to consumer reporting agencies. The law took effect on January 1, 2026.

Blood Donation Leave—SB 1108

SB 1108, signed on May 28, 2025, expands Oregon’s paid sick leave law to allow employees to take paid leave to donate blood as part of a voluntary donation program approved or accredited by the American Association of Blood Banks or the American Red Cross. The law took effect January 1, 2026.

Unemployment Benefits During Labor Disputes—SB 916

Oregon eliminated the labor dispute disqualification from the state’s unemployment insurance. Beginning January 4, 2026, striking and locked-out workers may qualify for unemployment benefits for up to ten weeks.

Hiring Notices—SB 906

After signing a bill in mid-2025 that restricted age-based inquiries during hiring, Governor Kotek also signed into law a bill that amends Oregon’s current state payroll law. The bill, which took effect on January 1, 2026, requires employers to disclose information about payroll practices to new employees upon their hire.

Pennsylvania

CROWN Act—HB 439

Governor Josh Shapiro signed the Creating a Respectful and Open World for Natural Hair (CROWN) Act into law on November 25, 2025, prohibiting discrimination based on employees’ hairstyles associated with race. The law broadens the definition of “race” under the Pennsylvania Human Relations Act to include traits such as hair texture and protective hairstyles. The law makes Pennsylvania the twenty-eighth state to prohibit race-based hair discrimination. The law goes into effect on January 24, 2026.

Rhode Island

Paid Family and Medical Leave—HB 6066

HB 6066 amends Rhode Island’s Temporary Caregiver Insurance (TCI) program to add employees’ siblings as covered family members, effective January 1, 2026, Additionally, TCI leave benefits for 2026 increases from seven to eight weeks per year.

Medical Donation Leave—SB 0829 A

Effective January 1, 2026, Rhode Island’s Temporary Caregiver Insurance program covers leave for bone marrow donation and organ donation.

Wage Notice Upon Hire—S 0070 A

Effective January 1, 2026, S 0070 A requires Rhode Island employers to provide employees upon hire a written notice containing the employee’s wage rate, the length of the pay periods, paydays, and certain other wage- and employment-related information.

Washington

Crime Victim Leave—SB 5101

Effective January 1, 2026, Washington SB 5101 amended the state’s Domestic Violence Leave Law, which already applies to employees who are victims of domestic violence, sexual assault, and stalking, to provide leave and safety accommodations to employees who are victims of hate crimes or have a family member who is a victim of a hate crime.

Family and Medical Leave—HB 1213

Signed on May 17, 2025, HB 1213 amends the PFML law, expanding the job protection provisions. The amendments take effect on January 1, 2026.

Additionally, on October 29, 2025, Washington’s Employment Security Department announced an increase in the paid family and medical leave (PFML) premium rate for 2026. The maximum weekly PFML benefit amount is also set to increase in 2026.

Benefits During Labor Disputes—SB 5041

Under Washington’s SB 5041, striking and locked-out workers may qualify for unemployment benefits, if they are otherwise eligible. Washington is limiting benefits of up to six weeks.

Workplace Safety Isolated Employees—HB 1524

Washington is also expanding its safety standards for “isolated” employees as of January 1, 2026. The new standards apply to hotels, motels, retail, security guard entities, and property services contractors. The updates expand the definition of “isolated employee” and adds training, recordkeeping, and other requirements such as panic buttons.

Workplace Violence Prevention—HB 1162

HB 1162 makes minor changes to the process healthcare employers must follow in developing and updating their workplace violence prevention plans. The law was enacted on May 17, 2025, and took effect on January 1, 2026.

Prevailing Wage Construction Projects—HB 2136

Through HB 2136, a law signed by former Governor Jay Inslee, which delayed the effective date to January 1, 2026, Washington ramped up enforcement of employers that fail to comply with the state’s prevailing wage law on public construction projects.

Next Steps

Multistate employers may want to note the many new laws that took effect January 1, 2026, and may want to review and update policies, handbooks, job postings, payroll systems, and onboarding documentation to align with the following developments.

For more information, please join us for our upcoming webinar, “2026 Multistate Compliance Playbook: What’s Changing and How to Prepare” which will take place on Wednesday, January 7, 2026, from 2:00 p.m. to 3:00 p.m. EST. The speakers, Lucas J. Asper, Dee Anna D. Hays, and Anne Elizabeth Ayeni, will discuss the wave of new state and local requirements poised to reshape employer obligations in 2026. Register here.

Ogletree Deakins’ Multistate Advice and Counseling Practice Group will continue to monitor developments and will provide updates on the Background Checks, Cybersecurity and Privacy, Drug Testing, Employment Law, Healthcare, Leaves of Absence, Multistate Compliance, Pay Equity, Reductions in Force, State Developments, Technology, Unfair Competition and Trade Secrets, Wage and Hour, Workplace Safety and Health, and Workplace Violence Prevention blogs.

In addition, the Ogletree Deakins Client Portal tracks developments and provides real-time updates on state employment laws. (Full law summaries and template policies are available for Premium-level subscribers; Snapshots and Updates are available for all registered client-users.) For more information on the Client Portal or a Client Portal subscription, please reach out to clientportal@ogletree.com.

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Quick Hits

• Registered mail is not prima facie evidence of receipt of a letter, the Hamburg Regional Labor Court recently ruled.
• After renewed illness, employers must enable employees to undergo a workplace integration management program.

The Case—Reintegration of an Employee on Long-term Sick Leave

The dispute concerned the validity of a dismissal due to illness. The employer had sent the frequently ill employee an invitation to participate in the employer’s new workplace integration management program (bEM) by registered mail. The employee alleged that he had not received the letter.

The Decision—Dismissal Due to Illness Invalid Despite Negative Health Prognosis

The Hamburg Labor Court ruled in the first instance that the dismissal was invalid because the employer could not prove that the employee had received the bEM invitation. Without formal invitation, the employee was cut off from the opportunity to participate in the bEM, meaning that the employer’s negative prognosis for the future was open to challenge. Ordinary dismissal was therefore not the mildest measure.

The Hamburg LAG confirmed the ruling. Although a negative health prognosis and a significant operational impairment could be established, the employment termination was disproportionate if the employee had not received a new bEM invitation.

This was also the case here. The employer was unable to demonstrate or prove that a renewed bEM procedure would not have prevented the employee’s incapacity to work to continue.

Simply presenting the delivery and return receipt was not sufficient to provide prima facie evidence that the employee had received the bEM invitation. The following standard delivery procedure at “Deutsche Post” was decisive:

1. the postal employee scans the letter,
2. signs on the input field of his scanner, and
3. then puts the letter in the mailbox.

According to the court, there is no typical sequence of events that could constitute prima facie evidence. It is possible that the mail carrier is holding several letters at the same time and/or is distracted during delivery. In this context, it is not typical to drop a letter into the right mailbox immediately after scanning it.

The LAG therefore rejected prima facie evidence. The ordinary termination was invalid.

Key Takeaways

Termination due to illness depends not only on the negative health prognosis and the significant operational impairment, but also on whether the employer has invited the employee to participate in a bEM.

When sending important letters, such as termination letters, employers may want to note that the “Deutsche Post” delivery and return receipt is generally not sufficient as prima facie evidence of receipt. Employers may want to deliver the letter in person or have it delivered by a bailiff or courier, which is generally considered reliable proof of receipt in court.

Karl Melzer is an associate in Ogletree Deakins’ Berlin office.

Pauline von Stechow, a law clerk in Ogletree Deakins’ Berlin office, contributed to this article.

Ogletree Deakins’ Berlin and Munich offices and Cross-Border Practice Group 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

• The Higher Regional Court of Frankfurt am Main (Oberlandesgericht – OLG) recently held that termination of a managing director without notice is effective if the director granted inadmissible salary benefits to works council members outside the department.
• The managing director’s claims to bonuses and remuneration are valid until termination takes effect.

The Case

The employee had worked as a managing director of a municipal public transportation company since 2014. Within the multi-member management team, responsibilities were divided by department. The employee was not formally responsible for personnel matters. In the fall of 2021, the city received several reports, some of which were anonymous, of possible irregularities in the personnel department. Specifically, the reports concerned remuneration adjustments, particularly higher pay grades and allowances for works council members, which apparently had no objective basis.

To investigate the allegations, the city hired an outside law firm to conduct a thorough investigation. The interim report, submitted at the end of February 2022, confirmed the allegations in key areas. Based on this report, the supervisory board decided to terminate the managing director’s employment contract without notice at the beginning of March 2022. The employee was accused of approving higher classifications and allowances for works council members without reason, thereby granting favors that were not permitted. However, the employee denied any wrongdoing and filed a lawsuit against the termination, as well as for the remuneration and bonus agreed upon in his contract.

In the company’s opinion, the managing director, based on his knowledge of the internal communication between the human resources department and the responsible co-managing director, had reason to critically question the salary developments and ensure that the management’s decisions complied with the legal system.

The employee denied any breach of duty. He filed a lawsuit against the termination without notice and demanded payment of the contractually agreed remuneration, in particular outstanding bonuses and his salary until the end of the regular notice period.

Higher Regional Court of Frankfurt am Main’s Decision

Both the Regional Court of Wiesbaden and the Higher Regional Court of Frankfurt am Main dismissed the managing director’s lawsuit, confirming the validity of the extraordinary termination without notice. The supervisory board formally decided on the termination in accordance with the rules, and the statutory period for termination without notice was observed.

The decisive factor for compliance with the two-week notice period is the date on which the employer becomes aware of the circumstances relevant to the termination. According to the court, this did not occur until the investigation report by the external law firm at the end of February 2022. Therefore, the termination announced at the beginning of March 2022 was made in due time. Formal objections were unsuccessful as well: the supervisory board resolution underlying the decision had been passed in accordance with the rules. The invitation and agenda met the requirements of the articles of association, and a plenary meeting was held.

In this case, the Higher Regional Court affirmed the existence of good cause for termination. During the proceedings, the employer presented court decisions showing that several promotions and allowances granted to works council members were inadmissible. The managing director could not refute these arguments, despite his position, which made it expected of him. The court considered it significant that the managing director was involved in communications with the human resources department and subsequently approved the benefits. While the employee was not formally responsible for human resources, a managing director outside the department still has extensive control and monitoring responsibilities, particularly when there are clear signs of negative developments.

However, the promised remuneration, including bonuses, must be paid until the managing director’s employment ends. The employee’s established breaches of duty did not affect his entitlement to bonuses. While such breaches could trigger counterclaims by the company, they do not automatically result in the loss of existing remuneration claims. There was no gross breach of trust in this case. According to the court senate, exclusion on the grounds of breach of trust can only be considered in extremely exceptional cases, which did not apply to this case.

The decision is not final yet.

Key Takeaways

The courts deemed co-signing unfounded salary increases for works council members a serious breach of duty, justifying the extraordinary termination of a managing director outside his own department. Managing directors are responsible for the company as a whole, so they must take responsibility for decisions they are involved in or irregularities that become apparent. Participation in unlawful remuneration decisions without cause can justify termination without notice.

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

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

This article was co-authored by Pauline von Stechow, who is a law clerk in Ogletree Deakins’ Berlin office.

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Quick Hits

• CBP updated the Carrier Liaison Program on December 18, 2025.
• The new list of countries exempt from the six-month passport validity rule has been issued.
• Citizens of these countries need only have a passport valid for their intended period of stay in the United States.

Understanding the Six-Month Passport Validity Rule

The six-month passport validity rule requires visitors traveling to the United States to possess passports that are valid for at least six months beyond their intended period of stay. This rule is crucial for maintaining orderly and secure international travel, as it prevents situations where a visitor’s passport expires while they are still in the United States, which could complicate their ability to return to their home country. By ensuring that travelers have sufficient time to address any unforeseen circumstances that might delay their departure, this rule helps to avoid complications arising from an expired passport, thereby facilitating smoother travel and entry processes.

Carrier Liaison Program Update

Countries that are provided exemptions from the six-month passport validity rule are included on the CLP list issued by CBP through a detailed process that involves several considerations. The United States often enters into bilateral agreements or reciprocal arrangements with certain countries, based on mutual trust and cooperation in immigration and border security matters. These agreements often recognize the efficiency and reliability of the exempt countries’ passport issuance and renewal systems, which can handle passport validity issues without the need for a six-month buffer.

CBP also evaluates the risk of overstaying or violating immigration laws by citizens of the countries under consideration, and countries with a low risk of such issues are more likely to receive exemptions. Historical travel practices and long-standing precedents between the United States and the exempt countries are also taken into account.

Once these factors are considered, CBP updates the list of exempt countries under the CLP. This list is published online and communicated to airlines and transportation companies to ensure passengers from these countries are aware of the exemption and only need a passport valid for the duration of their stay in the United States. It is made available through official channels, such as the CBP website and relevant bulletins, to keep carriers and travelers informed of the current exemptions.

Carrier Liaison Program Country List Update

The updated list of countries whose citizens are exempt from the six-month passport validity rule is as follows:

Source: U.S. Customs and Border Protection, December 18, 2025, Publication Number 5303-1225

Practical Impact

Airline and transportation companies must ensure that their passengers are aware of these requirements to avoid any travel disruptions. Travelers from the listed countries can plan their trips to the United States with the assurance that their passports need only be valid for the duration of their intended stay.

Ogletree Deakins’ Immigration Practice Group will continue to monitor developments and will post updates on the Immigration blog as additional information becomes available.

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Quick Hits

• Colorado lawmakers amended the FAMLI program to provide an additional twelve weeks of paid leave for employees to care for a child in neonatal intensive care.
• The premium payments for FAMLI will decrease to 0.88 percent of a worker’s wages in 2026.
• These changes will take effect on January 1, 2026.

Under Colorado’s FAMLI program, employers started paying premiums in 2023, and employees were eligible for FAMLI leave in 2024. Employees can take up to twelve weeks of paid FAMLI leave per year, with an additional four weeks for employees with a serious health condition related to pregnancy complications or childbirth complications.

On May 30, 2025, Colorado enacted Senate Bill 25-144, which takes effect on January 1, 2026. This law amended the FAMLI program by:

• expanding FAMLI to allow eligible employees to take up to twelve weeks of paid FAMLI leave to care for a neonatal intensive care unit (NICU) patient; and
• reducing the FAMLI premium from 0.9 percent of an employee’s wages to 0.88 percent for 2026. For 2027 and each year thereafter, the state’s FAMLI director will set the premium rate annually. 

Neonatal care coverage is in addition to other leave that may be available under FAMLI. However, neonatal care leave is limited to twelve weeks of leave per infant.

Employers may deduct 50 percent of the required premium from employees’ wages. Employers with fewer than ten employees may deduct 50 percent of the required premium from the employees’ wages and are not required to make a matching contribution. Employers must submit premiums to the state FAMLI Division on a quarterly basis.

The state average weekly wage for the purposes of FAMLI benefits is $1,534.94. The current maximum weekly benefit amount is 90 percent of the state average weekly wage, which equals $1,381.45. Any part of the worker’s average weekly wage less than 50 percent of the state average weekly wage ($767.47) must be replaced at a rate of 90 percent. The rest of the worker’s average weekly wage must be replaced at a rate of 50 percent, up to the maximum benefit.

All private sector Colorado employers that employ at least one employee in Colorado or that paid wages of $1,500 during one quarter in the preceding year must participate in the FAMLI program by providing paid family and medical leave. FAMLI permits employers to provide approved private plans that offer all the same rights, protections, and benefits provided to employees by the FAMLI Act.

Next Steps

The new rules will apply to premium payments and leave requests that occur after January 1, 2026. Employers may wish to coordinate with their third-party payroll vendor to ensure that the correct amount is deducted from each employee’s wages. Employers can use the My FAMLI+ Employer portal to submit quarterly premiums.

Ogletree Deakins will continue to monitor developments and will provide updates on the Colorado, Healthcare, and Leaves of Absence blogs as new information becomes available.

In addition, the Ogletree Deakins Client Portal also covers developments in Leave laws and Colorado laws, including Colorado Family and Medical leave. Premium and Advanced subscribers have access to policy templates, including a recently updated Colorado Paid Family and Medical Insurance (FAMLI) Handbook Policy template. All client-users have access to updates. For more information on the Client Portal or a Client Portal subscription, please reach out to clientportal@ogletree.com.

David L. Zwisler is a shareholder in Ogletree Deakins’ Denver 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 One Big Beautiful Bill Act (OBBB Act), which was enacted in 2025, eliminated taxes on tips and overtime through 2028, prompting the IRS to issue guidance that underscores the importance of employer compliance with tip laws.
• Employers taking a tip credit under the FLSA must provide specific notice to employees about their direct wage, tip credit amount, and tip retention rules, with failure to comply potentially resulting in invalidated tip credits and liquidated damages.

The Fair Labor Standards Act (FLSA) requires employers that take a tip credit (i.e., pay eligible employees subminimum wage and rely on tips to meet minimum wage) to provide specific tip credit notice to employees. Notice must include:

1. the amount of the direct (or cash) wage the employer is paying a tipped employee, which must be at least $2.13 per hour;
2. the additional amount claimed by the employer as a tip credit, which cannot exceed $5.12 (the difference between the minimum required direct (or cash) wage of $2.13 and the current minimum wage of $7.25);
3. that the tip credit claimed by the employer cannot exceed the amount of tips actually received by the tipped employee;
4. that all tips received by the tipped employee are to be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and
5. that the tip credit will not apply to any tipped employee unless the employee has been informed of these tip credit provisions.

Failure to comply with these notice requirements can result in significant exposure for employers, including invalidating the tip credit and being subject to liquidated damages. Employers may also need to comply with more rigorous state law notice requirements.

If a tip credit is taken, eligible participants in a tip pool are limited to employees in occupations in which they customarily and regularly receive tips, such as waiters, bellhops, counter personnel (who serve customers), bussers, and service bartenders. If no tip credit is taken, employers can include back of house employees in the tip pool. Some state laws, however, restrict eligible participants even when all employees are paid full minimum wage. Under no circumstances can an employer ever permit supervisors or managers to receive distributions from a tip pool or tip share, and the company can never keep tips.

Ogletree Deakins’ Hospitality Industry Group and Wage and Hour Practice Group will continue to monitor developments and will post updates on the Hospitality and Wage and Hour blogs as additional information becomes available.

Further information on minimum wage rates and requirements can be found in the Ogletree Deakins Client Portal, including minimum wage and minimum wage tip credit law summaries. (Full law summaries are available for Premium-level subscribers; Snapshots and Updates are available for all registered client-users.) For more information on the Client Portal or a Client Portal subscription, please reach out to clientportal@ogletree.com.

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Quick Hits

• Businesses in the hospitality industry may want to ensure they are complying with state service charge laws, which often encompass both consumer and employment regulations.
• In 2025, several states, including California, Colorado, Florida, and Massachusetts, enacted laws regulating or prohibiting automatic service charges, emphasizing clear disclosure and transparency to protect consumers and employees.

A service charge is not a tip or gratuity, and if the service charge is distributed to employees, it should always be included in an employee’s regular rate of pay for purposes of calculating overtime. While federal law permits an employer to keep all or a portion of the service charge and does not require any specific disclosure language, more states are passing their own laws that impact employers’ use of the service charge. Failure to comply with state service charge laws could result in significant damages and penalties to employers.

Changes in 2025

In 2025, several states enacted legislation that outright prohibited the use of “junk fees” (which can include automatic service charges often used in the hospitality industry) or heavily regulated when and how these automatic fees could be assessed. California, for example, enacted a law in 2024 that prohibited assessing automatic fees on top of a customer’s bill and required including the fees in the total price. The state later provided a carveout for restaurants.

Massachusetts enacted “junk fee” regulations (effective September 2, 2025) requiring all mandatory fees, including service charges, to be clearly disclosed in the first advertised price to consumers. Under this new law, automatic fees must be included in the total price displayed to consumers. The law also requires disclosure of the nature, purpose, and amount of the automatic fees included in the total price.

Under Colorado’s 2025 “Protections Against Deceptive Pricing Practices” law (signed into law April 2025 and effective January 1, 2026), restaurants and other businesses must clearly and conspicuously disclose the existence, amount, and purpose of any mandatory service charge. They must also explain how the service charge is distributed.

In 2025, Florida enacted Chapter 2025‑113, codified at Fla. Stat. § 509.214, which imposed strict disclosure rules on “operations charges” (including automatic gratuities and service charges) used by public food service establishments. The law does not ban such charges outright, but it requires clear pre- and post-transaction disclosure (menus, websites, mobile apps, receipts) and applies across restaurants, banquet facilities, hotel outlets, and online ordering channels. The statute takes effect July 1, 2026.

Looking Ahead

Several states already have service charge laws that are more restrictive than federal law (New York law, for example, presumes an automatic fee is a tip, meaning it is owed entirely to the employee, unless there is proper compliant disclosure), and more states are trending toward employee and consumer protection on this front. It is prudent for employers to stay up to date with state laws in this area to avoid liability. Some employers may even opt to use overly transparent disclosure language when they assess automatic service charges, even in states where such language is not required.

Ogletree Deakins’ Hospitality Industry Group and Wage and Hour Practice Group will continue to monitor developments and will provide updates on the Hospitality, Multistate Compliance, State Developments, and Wage and Hour blogs as additional information becomes available.

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Quick Hits

• Under the UK Employment Rights Act, employers may introduce equality action plans on a voluntary basis in April 2026.
• From 1 January 2027, changes to gender pay gap reporting requirements for employers with 250 or more employees will make equality action plans mandatory.
• Plans must include measures to address gender pay gaps and details of the support offered to employees during menopause.

Employers are not currently obligated to publish action plans aimed at tackling the gender pay gap. As noted in the act’s explanatory notes, only half of all employers required to report have chosen to voluntarily publish plans. However, the act introduces a new mandatory requirement for larger employers to create and publish gender pay gap action plans. In addition, menopause action plans will be required to support women experiencing menopause in the workplace. Measures can be included in larger gender equality action plans and are not required to be published separately. This follows part of a larger plan to improve workplace equality and transparency. The UK government has also suggested making reporting on ethnicity and disability pay gaps compulsory for larger employers, with further announcements anticipated to be made separately.

If a gender pay gap is found, employers will need to provide evidence-based analysis of why any gap exists. They will need to examine the data and consider the factors that may have resulted in a pay gap, a process that may include auditing recruitment practices, policies, or progression opportunities. Further to this, employers must demonstrate any steps they have taken in the last twelve months to close their gender pay gap, such as staff training or updated policies.

The act will require employers to identify the providers of contract workers. Employers are only required to report on their own employees in their gender pay gap statistics. However, they must also reference the gender pay gaps of any outsourcing providers in their report.

Timeline for Reporting

From 1 January 2027, action plans on the gender pay gap and menopause become mandatory. Employers will need to publish clear, targeted measures and likely integrate them with broader equality strategies.

Further developments across the United Kingdom and the European Union signal a greater shift towards pay equity, with EU member states currently due to transpose the EU Pay Transparency Directive by 7 June 2026. Employers are encouraged to stay informed about the EU Pay Transparency Directive implementation process in their respective jurisdictions. Information and updates on the progress of the directive’s implementation across the European Union can be found using Ogletree Deakins’ Member State Implementation Tracker.

Ogletree Deakins’ London office, Pay Equity Practice Group, and Workforce Analytics and Compliance Practice Group will continue to monitor developments and will provide updates on the Cross-Border, Pay Equity, and Workforce Analytics and Compliance blogs as additional information becomes available.

Daniella McGuigan is a partner in the London office of Ogletree Deakins and co-chair of the firm’s Pay Equity Practice Group.

Lorraine Matthews, a practice assistant in the London office of Ogletree Deakins, contributed to this article.

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