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 Originally enacted as a temporary provision under the Tax Cuts and Jobs Act (TCJA) of 2017, the credit was made permanent and expanded by the budget reconciliation bill signed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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Quick Hits

• The average UK employment tribunal claim now takes nearly sixty weeks from receipt to disposal, with some hearings listed for 2029.
• Explosion of AI useage is likely a key factor.
• Even though hearings may be delayed for a year or more, employers may want to gather and preserve key documents and other evidence up front.

The AI Effect

Many commentators in the United Kingdom cite the recent widespread use of artificial intelligence (AI) as a key reason for the escalation in claims. AI can give employees confidence to pursue claims believing that they effectively have a free lawyer, with an encyclopedic knowledge of employment law at their side. In reality AI-generated complaints and claims tend to provide false hope to employees due to AI’s natural bias towards the user, and the fact it has only been fed one side’s version of events, which may omit key facts favourable to the employer. We explore this further in our article, “In an AI World, Is It Time to Impose World Limits on Employee Complaints?’.

Government initiatives are being considered to increase judicial capacity through:

• increasing sitting day allocations;
• operating virtual, remote hearings;
• recruitment of new employment judges; and
• investing in case management.

The delays often mean disappointment for an employee who may go from feeling pleased with how an AI-generated lengthy complaint probing internal grievances and appeals has put the employer on the back foot, to then discovering the subsequent employment tribunal claim has been listed for 2029, effectively pressing the pause button on the dispute for a couple of years and taking the wind out of the employee’s sails. The increased delays are creating challenges for employers too in terms of resources and costs being diverted to lengthy case management.

Delays can also be challenging when preparing a case. Employers may want to gather and preserve key documents and other evidence up front even if it may be a year or more before they need to be disclosed. This includes identifying key employees who may give evidence for the employer and obtaining their draft statements whilst facts are fresh in the memory and mindful that the key employee may have left by the time of the hearing.

Ogletree Deakins’ Artificial Intelligence and Innovation Practice Group and London office will continue to monitor developments and will provide updates on the Artificial Intelligence and Innovation and United Kingdom blogs as additional information becomes available.

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Quick Hits

• On 8 September 2026, the Court of Appeal held that TUPE Regulation 4(2)(a) must be read in light of the EU Acquired Rights Directive, whose purpose is to protect and ensure the continuity of employee rights upon a change of employer.
• TUPE is legislation that exists to benefit employees. It does not enable third parties to pursue transferees (in this case, Active Young People Limited) for the transferors’ (in this case, Huntercombe (No. 12) Limited) pre-transfer liabilities.

In ABC v Huntercombe (No.12) Limited and Others, the Court of Appeal considered whether non-employee third parties who had claims against the transferor, Huntercombe (No. 12) Limited, could benefit from the principle of transferred liability so that they could claim against the transferee, Active Young People Limited.

It held that the transferor’s vicarious liability to a third party for the tortious acts of its employees does not transfer to the transferee under Regulation 4(2)(a) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). The court dismissed an appeal by a former psychiatric patient (ABC) of Huntercombe Manor Hospital, who argued that the hospital’s vicarious liability for alleged abuse by its employees had transferred from Huntercombe to the transferee (Active Young People Limited), following a TUPE transfer of the hospital business in March 2021.

Background

ABC claimed that during a four-month stay at Huntercombe Manor Hospital between 2018and 2019, she was subjected to mental and verbal abuse by members of staff and was restrained on more than 200 occasions. Following a relevant transfer for the purposes of TUPE in March 2021, Huntercombe entered liquidation. ABC subsequently discovered that Huntercombe’s public liability insurance carried a £250,000-per-claim deductible, which in practice would exhaust most, if not all, of her claim for damages. Faced with Huntercombe’s insolvency and no realistic prospect of recovery from the insurer, ABC raised an argument, described by the Court of Appeal as “opportunistic,” that the liability had transferred to the transferee, Active Young People Limited (AYPL) under TUPE Regulation 4(2)(a).

Legal Framework

The TUPE 2006 Regulations stem from the EU Acquired Rights Directive (2001/23), whose preamble states that it is necessary to “provide for the protection of employees in the event of a change of employer, in particular to ensure that their rights are safeguarded.” Regulation 4(2)(a) states that upon a relevant transfer, “all the transferor’s rights, powers, duties and liabilities under or in connection with [a transferring contract of employment] shall be transferred … to the transferee.” The question in ABC v Huntercombe was whether that phrase extended to include an employer’s vicarious liability to a third party.

The Court’s Ruling

The High Court had earlier rejected ABC’s argument, holding that, for liability to transfer, the connection between the transferor’s liability and the contract of employment must be direct, in the sense of being a liability owed to an employee. Vicarious liability to a third party did not satisfy that test of “directness.” ABC was granted permission to appeal to the Court of Appeal. The Court of Appeal unanimously dismissed the appeal on the basis that only employee liabilities transfer to the transferee.

The ruling now carries practical significance. The Court of Appeal was mindful that more than fifty claims of a similar nature against the same parties will be considered at a case management conference this autumn and delivered its judgment with that timetable in view.

Key Takeaways

The purpose of TUPE is to safeguard employees’ rights in the event of a transfer; its purpose is not to transfer third-party claims to transferees. Irrespective of TUPE, the claims in the case all arose from pre-transfer events, so AYPL could not be held responsible.

ABC v Huntercombe (No.12) Limited and Others sets a timely precedent, as more than fifty claims of a similar nature against the same parties are to be considered at a case management conference this autumn.

Ogletree Deakins’ London office and Global Reorganizations Practice Group will continue to monitor developments and will provide updates on the Cross-Border and Global Reorganizations blogs as additional information becomes available.

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Quick Hits

• The Tenth Circuit is reviewing an antitrust class action that alleges the NCAA’s Five-Year Eligibility Rule imposes unreasonable restraints on 2022-enrolled college athletes in violation of Section 1 of the Sherman Antitrust Act.
• A federal district court found that the NCAA likely holds monopsony power, potentially suppressing competition for athlete services and harming overall compensation for athletes.
• The NCAA argues that the college athletes failed to meet their burden for a preliminary injunction and did not properly consider the Five-Year Rule’s procompetitive benefits.

The NCAA’s Five-Year Rule, adopted in June 2026, allows athletes to play five seasons within a student-athlete’s five-year period of full-time enrollment. As written, the rule does not grant five years of eligibility to athletes who enrolled in 2022.

A class of 2022 college athletes filed a challenge seeking an additional year of eligibility, alleging that the rule violates Section 1 of the Sherman Antitrust Act by imposing unreasonable restraints on college athletes who enrolled in 2022.

A federal district court issued a preliminary injunction, blocking enforcement of the rule. The district court found that the NCAA and its member universities likely exercised “monopsony” power, treating the NCAA and member universities as a single buyer of labor. The court also found that the rule, as applied to 2022 enrollees, likely suppresses competition for athletes’ services.

The NCAA appealed the case, and last month, the Tenth Circuit stayed the district court’s preliminary injunction. The athlete challengers have moved for expedited appellate briefing with the NCAA football and other fall sports seasons already in full swing.

The NCAA argued in an appellate brief that “the district court accepted an illogical market definition and stretched Plaintiffs’ limited evidence far beyond what it actually established. The district court then compounded its error by disregarding the NCAA’s legitimate procompetitive interests and ordering relief that does not protect those aims.”

The case is the latest in a flurry of antitrust challenges to NCAA eligibility rules and transfer restrictions. The NCAA is pushing the U.S. Congress to pass the Protect College Sports Act (S.4668) to regulate college sports; that bill is currently under consideration in the U.S. Senate.

Anticompetitive Effects on Athlete Compensation

The district court sided with the plaintiff class, who invoked antitrust liability under a “monopsony” theory, which in this case involves allegations of wage restrictions imposed by market-controlling buyers (i.e., the NCAA and member institutions) on labor supplied by many sellers (i.e., Division I athletes who enrolled in 2022).

The district court ruling treated the NCAA and its member universities as a single buyer, or a coordinated group of buyers, in a defined labor market for the services of Division I college athletes. Failure to extend five years of eligibility to this class of plaintiffs likely has anticompetitive effects on “overall wages,” the district court found. The district court held that Section 1 of the Sherman Act—which prohibits illegal restraints of trade—permits claims that challenge market abuse on the buyer side. The district court further noted that the Wisne plaintiffs’ Section 1 challenge is to the NCAA’s alleged anticompetitive monopsony.

Though a 2024 settlement agreement that was approved by the court in House v. NCAA allows schools to share revenue directly with college athletes (while capping revenue sharing by the schools themselves), the district court in Wisne recognized that college athletes may now earn unlimited compensation for use of their names, images, and likenesses (NIL) from other sources.

Thus, the district court reasoned that the NCAA should not be permitted to “categorically argue” that there will be no impact on overall wages if the 2022 athletes are barred from continuing to compete. In monopsony terms, artificially restricting the supply of experienced athletes could depress the total compensation available to the labor force as a whole.

NCAA’s Procompetitive Justifications

When the NCAA opposed the injunction at the district-court level, it argued that the Five-Year Rule, as written, has procompetitive benefits because it ensures that a class of Division I college athletes exits each year, thereby opening opportunities for high school graduates. The rule also purportedly preserves the uniqueness of Division I sports and protects the “reliance interests” of athletes who planned around roster spots opening up for the 2026 season.

However, the district court rejected that reasoning, emphasizing a principle central to monopsony analysis: “antitrust law does not endorse—or sustain—this understanding of markets or market output, i.e., that reducing laborers in a market is somehow procompetitive.” In other words, suppressing the available labor pool does not result in a competitive benefit, because it instead causes exactly the harm that antitrust law aims to prevent when buyers coordinate their conduct, the district court found.

Further, the district court criticized the NCAA’s attempt to characterize its reliance-interest argument as “equitable” in nature rather than as a true “procompetitive” rationale required under antitrust law. Relying on the Supreme Court of the United States’ decision in NCAA v. Alston, the district court stated that whether “a restraint has an equitable or social benefit for a class of individuals, such as incoming Division I student-athletes, bears little relevance to an antitrust inquiry” (emphasis in original). From a monopsony perspective, the district court suggested, the fact that some workers may benefit from restricted competition does not justify buyer-side coordination that harms the labor market overall.

The district court also found that even had the NCAA demonstrated legitimate procompetitive benefits, the plaintiffs would still prevail because they had “shown there are substantially less restrictive means for realizing any purported rationale.” This is because the NCAA’s own bylaws already provide for eligibility waivers, the district court noted, undermining any claim that the all-or-nothing approach was necessary.

Key Takeaways for Employers

The Tenth Circuit’s forthcoming decision could extend the line of post-Alston case law by rigorously applying antitrust scrutiny to any labor-market restraint imposed through collective buyer action—whether by a sports association or any other group of competing employers (including employers affiliated through some industry association or that may utilize certain shared vendors). The district court’s explicit use of monopsony analysis is significant, signaling that organizations acting collectively to set eligibility or participation rules for their workforce may face a similar framework traditionally applied to price-fixing among sellers of a product.

Significantly, the case highlights how labor-eligibility rules can be treated as commercial restraints even when framed as eligibility standards, credentialing requirements, or membership conditions. Organizations that set or rely on such rules may want to consider that arguments based on protecting incumbents or creating orderly turnover could be viewed skeptically under the antitrust laws.

The district court ruling suggested that reducing the labor pool is the harm that monopsony law addresses, not a justification for it. Further, when an organization provides exceptions or waivers to a hard rule, the district court’s ruling highlights how a court may view those same mechanisms as less restrictive alternatives that could undermine the claimed necessity of the restriction in the first place.

Ogletree Deakins’ Higher Education Practice Group and Unfair Competition and Trade Secrets Practice Group will continue to monitor developments and will provide updates on the Higher Education, Sports and Entertainment, and Unfair Competition and Trade Secrets blogs as additional information becomes available.

A version of this article was previously published by the American Bar Association Litigation Section: Corporate Counsel.

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Quick Hits

• The German government plans to introduce an additional category of self-employment under social security law.
• To qualify for New Self-Employment status, at least two of four legally defined criteria would have to be met, while the right to issue instructions and integration into the client’s operations would no longer be considered and an overall assessment would no longer apply.
• New Self-Employed individuals would be subject to mandatory pension insurance, with the client responsible for registration and contribution payments.

Background: Status Determination

Under current German social security case law, the classification of a working relationship as dependent employment or self-employment is based on an overall assessment of all circumstances of the individual case. Various criteria are considered, including the compensation model, the extent to which the individual uses his or her own infrastructure, liability arrangements, the right to issue instructions (Weisungsgebundenheit), and integration into the client’s work organization. In practice, the latter two criteria are typically decisive.

The determining factor is not the contractual arrangement but rather the actual performance of the working relationship. This frequently creates uncertainty in practice, particularly in long-term engagements. If dependent employment is determined retroactively, the client may face significant back payments of social security contributions and late payment surcharges.

Content of the Draft Bill

The German government intends to create greater legal certainty for all parties involved. The ministerial draft (Referentenentwurf) (as of March 26, 2026) proposes an additional form of self-employment (“New Self-Employment”) in Section 7 (5) of Book Four of the German Social Code (Sozialgesetzbuch Viertes Buch (SGB IV)). This new category would not replace the existing criteria for classification but would exist alongside them as a new form of self-employment.

To establish New Self-Employment status, at least two of the following four criteria (which would be codified by statute) would have to be met. The contractor would:

1. bear the risk of loss and have the opportunity for profit,
2. not work predominantly for only one client,
3. incur expenses typical of an entrepreneur, and
4. actively market his or her own services.

In addition, the parties would be required to submit a joint declaration, observe a six-month waiting period (in cases of prior employment with the client), and register the engagement after work begins. In exchange for this classification, New Self-Employed individuals would be required to make statutory pension insurance contributions.

The existing law on status classification would remain in effect alongside the new provisions. The draft bill also provides that employment law status determinations would not be affected by the reform.

Takeaways

The proposed New Self-Employment category is intended to provide legal certainty. Whether it will achieve this goal remains to be seen. While the error-prone overall assessment would no longer apply, legal uncertainty may persist because the new statutory classification criteria would also require interpretation.

As a result, companies engaging independent contractors may want to continue analyzing their contractual arrangements early and take appropriate measures to avoid potential employment law and social security law disputes.

Ogletree Deakins’ Berlin and Munich offices will continue to monitor developments regarding (Pseudo-)Self-Employment among freelancers and status determination and will post updates on the Cross-Border and Germany blogs as additional information becomes available.

Karl Melzer is an associate in Ogletree Deakins’ Berlin office and advises companies on status determination matters, with a particular focus on freelancers and new work.

Lela Salman, a law clerk in Ogletree Deakins’ Berlin office, contributed to this article.

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Quick Hits

• On September 14, 2026, Cal/OSHA released a discussion draft of a proposed rule that would require covered hospitals to screen individuals and their personal items at all unrestricted entrances, not just the specific entrances identified in AB 2975, with an exception for the ambulance entrance.
• Screening personnel would need at least eight hours of initial training covering an expanded curriculum, annual refresher training, and additional training when specified equipment, work practices, or hazards change. Trained personnel other than healthcare providers would need to operate and monitor screening devices whenever covered entrances are accessible to the public.
• AB 2975 requires the Occupational Safety and Health Standards Board to amend the standards by March 1, 2027, and requires a hospital compliance effective date no more than ninety days after adoption.

The draft would implement Assembly Bill (AB) No. 2975 and establish detailed requirements for hospital weapons screening, including screening at all unrestricted entrances, personnel training, and procedures for responding to detected weapons. Cal/OSHA is accepting comments through October 12, 2026.

The proposed amendments would add a weapons detection screening policy requirement to Title 8, Section 3342, California’s existing healthcare workplace violence prevention regulation. Proposed subsection (i) would apply to general acute care hospitals, acute psychiatric hospitals, and special hospitals.

Weapons Detection at All Unrestricted Entrances

AB 2975 identifies three screening locations: the hospital’s main public entrance, the emergency department entrance, and the labor and delivery entrance when separately accessible to the public. The discussion draft would go further, requiring a written policy providing for automatic screening of a person’s body and personal items at all unrestricted entrances, including those three locations.

The draft defines an “unrestricted entrance” as an entrance open to any individual without locks or access-control systems. It expressly excludes the ambulance entrance from proposed subsection (i).

For employers, this broader language could affect both equipment costs and staffing needs.

Screening Equipment and Limited Exceptions

The draft identifies several screening technologies, including walk-through metal detectors, x-ray and computed tomography screening systems, millimeter-wave screening systems, artificial intelligence-assisted weapons detection systems, and magnetic anomaly detection systems.

Consistent with AB 2975, handheld metal detector wands generally could supplement other weapons detection devices but could not serve as the sole screening equipment. The draft would preserve exceptions for qualifying small and rural hospitals; entrances with existing spacing limitations where other equipment would violate Title 24 standards; and hospitals exclusively providing extended hospital care to patients with complex medical and rehabilitative needs, including certain long-term care hospitals or inpatient rehabilitation facilities.

These exceptions concern the restriction on using handheld wands alone; they would not exempt qualifying hospitals from the screening policy requirements generally.

Personnel Assignments and Screening Coverage

Hospitals would need to assign appropriately trained personnel, other than health care providers, to implement the screening policy and monitor and operate devices at each covered entrance whenever it is accessible to the public.

Personnel Education and Training

The draft would retain AB 2975’s minimum of eight hours of training while specifying seventeen training topics. These include weapons and threat recognition, equipment operation and limitations, safe searches, de-escalation, implicit bias, disability awareness, emergency response, and applicable reporting and recordkeeping requirements. The curriculum would also address sharps and biological hazards encountered during searches and require practical exercises, hands-on equipment operation, and demonstration of competency.

Annual refresher training would be required, along with additional training when new equipment or work practices are introduced or a new or previously unrecognized weapons-screening hazard is identified. Employers would need to ensure that employees successfully completed the applicable training.

Employee and Health Care Provider Screening Exceptions

Hospitals could choose to exclude current hospital employees and hospital health care providers from screening when they enter wearing identification badges displaying their photograph, name, and title. The photograph requirement is an additional condition beyond the name and title language in AB 2975. The exclusion would be discretionary, not automatic.

Alternative Search and Screening Protocols

The written screening policy would need to address alternative searches and screening for patients, family members, or visitors who refuse device screening. Only personnel who completed the applicable training could search personal belongings at unrestricted entrances or confiscate weapons when hospital policy authorizes confiscation.

Response Protocols for Detected Weapons

Hospitals would need protocols addressing how they respond when a dangerous weapon is detected. An individual who triggers a screening device would have to be permitted to leave with the detected object and return without it. Entry could not be denied solely because the individual previously possessed that object.

Public Notification

The draft would require highly visible notices in conspicuous locations near unrestricted entrances where screening devices are used. The notices would advise that weapons screening occurs upon entry but that no person will be refused medical care pursuant to the federal Emergency Medical Treatment and Active Labor Act (EMTALA).

Next Steps

Cal/OSHA has requested comments on the discussion draft by October 12, 2026.

Although the draft does not establish a specific hospital compliance date, AB 2975 requires an effective date no more than ninety days after the amended standard is adopted. March 1, 2027, is the Occupational Safety and Health Standards Board’s adoption deadline, not a hospital compliance deadline or a guarantee of a full ninety-day implementation period.

Hospitals may wish to begin evaluating entrance configurations, equipment options, staffing models, and training programs while the proposal remains under development. They may also consider how a screening policy would integrate with existing workplace violence prevention plans and incident-response procedures. The discussion draft remains subject to change and does not replace employers’ current obligations under Section 3342.

Ogletree Deakins’ California offices and Workplace Violence Prevention Practice Group will continue to monitor developments and provide updates on the California, Healthcare, Workplace Safety and Health, and Workplace Violence Prevention blogs as additional information becomes available.

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A “quiet promotion” typically involves an employee performing higher-level duties, such as leading projects, supervising others, making budget decisions, or handling strategic work, without an official promotion or pay adjustment. The gap can persist for months or even years, becoming normalized with hiring stalls or shifting staffing plans. While stretch roles can be positive when intentionally designed and limited in duration, they may become problematic when an employer derives ongoing work product without commensurate compensation or a timely path to formal advancement for the employee.

Quick Hits

• “Quiet promotion” occurs when an employee takes on higher-level responsibilities without formal promotion or corresponding pay adjustment.
• Misaligned job titles, duties, and pay bands may obscure disparities and complicate pay discrimination analyses. Quiet promotions may also raise concerns regarding disparate treatment or disparate impact, salary transparency, and overtime exposure.
• Employers may be able to reduce risk by defining temporary roles’ scope and maximum duration, documenting expectations and review dates, and reviewing positions’ duties and compensation as higher-level duties continue.
• Regularly updated job descriptions, manager training, proactive pay equity analyses, stronger pay transparency communication, and reclassification can help align actual work, titles, and compensation.

Pay Discrimination Risks

Federal and state employment laws generally prohibit pay discrimination. The legal framework for pay discrimination analyzes whether employees performing substantially similar work are paid equitably after controlling for legitimate, job-related factors. Quiet promotions may complicate this analysis in two related ways: First, if a company’s job architecture does not accurately reflect current job duties, then two employees with the same title or at the same organizational level may be doing markedly different work. Second, and conversely, two employees doing comparable work may have different titles and pay bands. Without accurate job titles, job duties, and pay alignment, a pay equity analysis will not identify meaningful disparities or reveal gaps that may not be explainable by nondiscriminatory factors, potentially leaving employers at a disadvantage when faced with pay discrimination lawsuits.

Additionally, quiet promotions may trigger the following risks:

• Disparate treatment and disparate impact. If quiet promotions cluster among particular groups of employees—such as women or individuals of a certain race—without timely compensation adjustments, disparities may give rise to claims of intentional discrimination or adverse impact.

• Salary transparency compliance. In jurisdictions with pay transparency laws, employers must disclose pay ranges in postings, and, in some cases, to current employees upon request. Employees’ dawning realization that they may be performing the duties of posted higher-level roles at lower pay ranges may give rise to internal complaints, external scrutiny, or legal claims.

• Classification and overtime exposure. Expanded responsibilities sometimes lead employers to treat an employee as de facto exempt or as if the employee has managerial authority. However, if classification does not meet the applicable exemption tests, uncompensated overtime exposure may follow.

• Documentation gaps. Ideally, pay decisions will be anchored in consistent, job-related factors such as experience, skills, performance, geography, and market data. Quiet promotions often emerge through informal arrangements or are communicated as being temporary, leaving limited documentation to justify compensation rates.

Practical Steps to Reduce Risk

Quiet promotions or “stretch” opportunities are not inherently problematic. However, they are best executed when they are intentional, documented, time-limited, and tied to a clear development or promotion pathway. Employers can mitigate pay discrimination risks by establishing process guardrails that prevent quiet promotions from becoming permanent pay inequities.

First, employers may want to consider defining interim assignments in both scope and duration, setting maximum durations for acting or temporary roles, and requiring reevaluation at predefined checkpoints. Employers should strongly consider documenting these decisions (i.e., expectations, duration, and review dates).

Second, if an interim assignment exceeds its defined duration, an employer may consider realigning job duties and titles. In other words, if an employee is performing a higher-level role successfully beyond the interim window, an employer may initiate formal reclassification and adjust compensation to the applicable range. Conversely, if the business cannot support the higher-level role, the job duties could be narrowed in scope and level of responsibility to align with the employee’s pay band.

Third, relatedly, employers could monitor job architecture and leveling. As job duties evolve and positions change, employers will ideally maintain up-to-date, specific job descriptions outlining the scope and competencies of each role. Managers could also be trained to understand the distinctions between job levels so expanded responsibilities are recognized and flagged for review. Formal promotions and pay adjustments may then occur through a structured and consistent process.

Fourth, employers may want to perform proactive, privileged pay-equity analyses. These analyses can be scheduled to occur on a regular cadence, such as biannually or after major reorganizations. Ideally, these analyses evaluate both base pay and variable compensation, looking beyond job titles and into actual duties.

Fifth, as pay transparency laws continue to proliferate across the country, employers can strengthen pay transparency compliance efforts and bolster employee communication about their compensation philosophies. Employers that provide clear pay ranges, explain how ranges are set, and outline promotion pathways build employee trust and a positive culture. As part of these communication efforts, employers may want to be prepared to explain how interim assignments fit into their job architecture and compensation planning.

Sixth, managers can be trained to recognize when developmental or stretch opportunities are becoming quiet promotions and empowered to request reclassifications when appropriate.

Key Takeaways

Employers need to be nimble to navigate turnover, growth, and evolving economic realities. Quiet promotions may result from that flexibility. At the same time, employers can take steps to ensure that their quiet changes do not lead to loud lawsuits. By setting clear interim rules, aligning titles and pay with actual work, and auditing outcomes regularly, employers can preserve operational agility while meeting their legal obligations.

Ogletree Deakins’ Pay Equity 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, Employment Law, Global Reorganizations, Pay Equity, Reductions in Force, Wage and Hour, and Workforce Analytics and Compliance blogs as additional information becomes available.

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Quick Hits

• A choice-of-law clause stating, “German law applies to the employment relationship,” lacks transparency and is invalid if it does not indicate that mandatory foreign employee protections may still apply.
• For employees who work permanently from a home office abroad, the law of the habitual place of work may govern the validity of a termination of employment.
• The validity of the choice-of-law clause, however, is determined by the law that would apply under the Rome I Regulation if the choice of law were effective, which in this case is German law.

The Case—Termination During Permanent Remote Work in the Netherlands

The employee, a Dutch national, had been employed by a German employer since 2018. The employment contract contained the following clause: “German law applies to the employment relationship.” Beginning in March 2020, the employee worked exclusively from the employee’s home office in the Netherlands, initially because of the pandemic and later on a permanent basis. In January 2023, the employer terminated the employment relationship for operational reasons in two letters, one in English and one in German. At that time, the employee was unable to work due to illness. The employee argued that Dutch law applied and that the termination letters were invalid.

The Decision—Choice-of-Law Clause Fails Transparency Review of Standard Terms and Conditions

The generalized application of German law agreed upon in a standard-form employment contract is invalid because the clause lacks transparency. It gives the impression that German law is the exclusive governing law for the contract and fails to disclose that, under Article 8(1) sentence 2 of the Rome I Regulation, the employee retains the protection of mandatory provisions of the law that would apply absent the choice of law.

Because the choice-of-law clause was invalid, Article 8(2) of the Rome I Regulation applied and pointed to the law of the country in which or from which the employee habitually carried out work. Because the employee had most recently worked permanently from a home office in the Netherlands, Dutch law applied. Under Dutch law, termination while an employee is unable to work due to illness is prohibited. In addition, the employer was required to obtain prior written approval from the competent Dutch authority, the Dutch Employee Insurance Agency (Uitvoeringsinstituut Werknemersverzekeringen (UWV)), for a termination for operational reasons. Both termination notices were therefore invalid.

Prohibition on Termination During Illness and Agency Approval Requirement for Operational Terminations in the Netherlands

Under Dutch law, termination is prohibited while an employee is unable to work due to illness. Under German law, an employee’s inability to work due to illness does not automatically render a termination invalid. Instead, the validity of the termination depends on whether a valid termination reason exists. Unlike German law, a termination for operational reasons also requires the consent of the competent authority. In this case, Dutch law was therefore significantly more favorable to the employee.

The Court’s Guidance—Keeping Employment Contract Terms Current

The BAG noted that a choice-of-law clause may satisfy the transparency requirement if it states that the choice of law does not apply to the extent mandatory provisions of the law that would apply absent the choice of law govern.

The practical effect of such a clarified clause may be limited, because mandatory protections under the law that would apply absent the choice of law may still apply.

It is much more important to ensure that employment contracts are concluded under the law of the place where employees regularly perform their work. If the regular place of work changes during employment, a contractual adjustment can become relevant in light of the law of the new place of work.

Takeaways

The decision shows that a simple choice-of-law clause in favor of German law is not sufficient in cross-border employment relationships and offers no advantages. If the place of work changes during the course of employment, for example in the case of a home office abroad, employers may want to carefully review whether a contractual adjustment tailored to the law of the foreign place of work is appropriate. Where the legal systems of several countries are relevant, it is often difficult to determine which legal system is more favorable to the employee in an individual case. The rules of different countries are often simply incompatible.

Dr. Ulrike Conradi is managing partner in Ogletree Deakins’ Berlin office.

Lela Salman, a law clerk 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

• TPS protection for El Salvador was previously scheduled to end on September 9, 2026, but USCIS has not announced a formal extension, termination, or blanket EAD auto-extension date beyond the current alert.
•  Salvadoran individuals present in the United States retain their TPS protection, including work authorization, pending a further announcement.

On January 17, 2025, the U.S. Department of Homeland Security (DHS) published a Federal Register notice extending El Salvador’s TPS designation for eighteen months, from March 10, 2025, through September 9, 2026. The notice allowed eligible existing Salvadoran TPS beneficiaries to retain TPS through September 9, 2026, if they continued to meet eligibility requirements, and established a re-registration period from January 17 through March 18, 2025. DHS stated that USCIS would issue new employment authorization documents (EADs) with a September 9, 2026, expiration date to eligible beneficiaries who timely re-registered and applied for employment authorization.

USCIS also issued employer-facing guidance for certain Salvadoran TPS beneficiaries whose TPS-based EAD renewal applications remained pending. Qualifying employees could receive a USCIS notice extending an expired TPS-based EAD through September 9, 2026, and could present that notice with the expired EAD as List A documentation for Form I-9 purposes. USCIS instructed employers to use September 9, 2026, as the employment authorization expiration date for Form I-9 and E-Verify purposes.

USCIS’s current alert states that Salvadoran individuals present in the United States under TPS retain protection, including work authorization, pending a further announcement. Substantive updates are expected to be published on the USCIS El Salvador TPS webpage and the USCIS I-9 Central webpage for Form I-9 Related news.

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

• On August 31, 2026, the SEC and the FDA signed an agreement to enhance cooperation on regulatory and enforcement activities.
• The agencies will share information related to FDA-regulated products and companies that sell FDA-regulated products.
• The MOU signals enhanced interest by the SEC related to potential misstatements to investors by companies in the drug and medical device approval process.
• The agreement will remain in place for at least three years.

The SEC and the FDA agreed to expand information-sharing to enhance market oversight and legal compliance in the industries they regulate. Under the agreement, the SEC may use nonpublic information received from the FDA to inform any public company filing review to ensure compliance with the federal securities laws and in connection with any enforcement investigation or civil action within the SEC’s jurisdiction.

The MOU specifically mentioned situations where a company “may have disseminated false or misleading statements to the investing community, such as representations about the status of FDA review, product approvals, clinical trial results, or other matters within the FDA’s regulatory authority that could affect investors’ decisions.”

This is an important development because it shows that the SEC and the FDA will be focused on potential misstatements made in public statements related to new drug and medical device offerings or other issues that may impact both the FDA and the SEC. This development, in conjunction with the FDA previously publishing complete response letters for approved and unapproved drugs and devices, shows the Trump administration’s focus on transparency in this area and the potential for increased enforcement risk. 

Key Takeaways

The MOU raises several takeaways:

• Company hotlines are important sources of information: Many times, robust internal reporting channels catch issues early. In at least one other SEC/FDA matter, internal whistleblowers alerted a company’s board to disclosure issues, and the company was able to take prompt remedial action, resulting in no SEC civil penalty for the company.
• Prompt internal investigations pay off with regulators: A company that conducts a prompt and robust internal investigation and shows a clear and thorough response to an internal tip will be better situated to self-correct and have a defensible position, if regulators or law enforcement become involved.
• Statements related to FDA correspondence, actions, and review timelines: Decisions frequently need to be made regarding what, if, and when to communicate to investors regarding the FDA review process or other interactions with the FDA. With the new MOU in place, any disclosures about the FDA review process likely will receive close attention, so companies will want to ensure they are accurate. Companies may want to especially consider statements that downplay bad news, as the SEC may view them as being materially misleading or reflecting omissions of material information. With the new MOU in place, the SEC likely will be privy to communications from the FDA to the company and will compare it to the public statements and disclosures.
• Proper disclosure controls and training: Companies may wish to consider whether they maintain disclosure controls and procedures designed to ensure that information the company discloses is accurate. Misleading statements can be found in any public statement, such as investor documents, SEC filings, press releases, speeches, website updates, etc. Companies may want to consider training for management and directors related to disclosure controls and procedures because they may be liable for misstatements made by management and directors.

Ogletree Deakins’ Financial Services Industry Group and Healthcare Industry Group will continue to monitor developments and will post updates on the Ethics/Whistleblower and Healthcare 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.

Jane A. Norberg is a shareholder in Ogletree Deakins’ Washington, D.C., office. She is the former Chief of the Office of the Whistleblower and a Senior Officer in the Division of Enforcement at the SEC.

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

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