Quick Hits

• A claim for damages based on termination-related fault may arise only if the employer’s serious breach of contract would have justified extraordinary termination without notice.
• An employer may be liable for misconduct among coworkers only if the employee acted as the employer’s vicarious agent, for example as a supervisor with authority to issue instructions, or if the conduct had a close factual connection to assigned job duties.
• Furthermore, the misconduct must have actually been the cause of the employee’s decision to resign.
• An employee’s extraordinary termination without notice must be received by the employer within two weeks after the employee becomes aware of the facts relevant to the termination.

The Case

The employee had been working shifts at a nursing home since 1987, most recently in the laundry department. In the summer of 2022, she and a coworker discovered a listening device there that had been hidden by a third coworker (Ms. B). Ms. B admitted to the incident and received a written warning. The employer changed the shift schedule in the laundry department so that the colleagues would no longer work together. In addition, the employer introduced a handover log for shift changes to prevent direct contact between the two. As a further measure, the employer commissioned an external mediator to resolve the conflict. However, the mediator’s attempt at mediation failed. As a result, the employee became permanently unable to work and, on March 11, 2024, resigned with immediate effect on grounds attributable to the employer, citing a medical certificate. On February 27, 2024, the plaintiff’s family physician certified that she suffered from a chronic adjustment disorder resulting from a workplace conflict, which prevented her from continuing to work for her employer. Subsequently, the plaintiff demanded approximately EUR 20,800 in damages and EUR 5,000 in compensation for pain and suffering from the employer. The Stralsund Labor Court dismissed the claim at first instance.

No Termination-Related Fault in Light of Adequate Crisis Management

The LAG upheld the dismissal of the complaint in its entirety. A claim for damages (pursuant to Section 628(2) of the German Civil Code (Bürgerliches Gesetzbuch (BGB)) requires misconduct on the part of the employer that would have justified an extraordinary termination without notice. This was lacking in the present case. The secret eavesdropping by the coworker could not be attributed to the employer. The coworker neither had authority to issue instructions to the plaintiff nor acted in connection with her job duties. Furthermore, the court found that the employer’s crisis management measures—separating shifts, maintaining a handover log, and engaging an external mediator—were sufficient to satisfy the employer’s duty of care toward its employees, even if the mediation ultimately proved unsuccessful. The court also clarified that the employer was not obligated to discharge the colleague who had eavesdropped: In principle, it is up to the employer to decide how to respond to conflicts, as long as the measures chosen are appropriate for resolving the conflict. In this case, the employer could reasonably assume this to be the case. Since the employer could not therefore be accused of any misconduct of its own, the claim for compensation for pain and suffering due to the mental illness was also unsuccessful.

Takeaways

Employers are obligated to protect their employees from health hazards (including psychological ones), bullying, discrimination, and other violations of personal rights. However, a claim for damages does not arise from every conflict among colleagues. In particular, employers are not directly liable for the conduct of employees who commit legal violations against other employees that are unrelated to business operations and outside their assigned duties. Rather, what is decisive is how an employer responds to breaches of duty that come to its attention. In practice, liability risks usually arise from an inadequate or delayed response.

The LAG’s decision illustrates that employer liability for coworker misconduct depends on attribution of the misconduct or on the employer’s own response after learning of the incident. In this case, the court considered the employer’s measures—shift separation, a handover log, and mediation—sufficient, and it did not require discharging the coworker who had secretly monitored the plaintiff.

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

Daniela Schumann is a senior associate in the Berlin office of Ogletree Deakins.

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

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Quick Hits

• Near-daily comments of a humiliating nature can satisfy the “severe or pervasive” standard for harassment.
• Second-hand harassment directed at a coworker of the same protected class can contribute to a plaintiff’s hostile work environment claim.
• Employers may want to ensure their investigations into harassment allegations are thorough and follow established procedures; missing files, uninterviewed witnesses, and testimony discrepancies can raise genuine disputes of material fact about the adequacy of an employer’s response.

Factual Background

The employee, a Black woman and naturalized U.S. citizen born in Ghana, worked as a registered nurse at the hospital. She was subject to a ninety-day probationary period after hire. The employee alleged that, almost from the beginning of her employment, Hispanic nurses in her unit discriminated against her and another Black nurse, including mocking African food and accents, making unflattering comments about Black employees, and expressing preferences for Filipino workers. The harassment allegedly occurred on nearly every shift.

The employee reported the conduct to her supervisors, who conducted an investigation she considered unsatisfactory. When her supervisors offered her a transfer to a different department, she declined. After her continued complaints, her supervisors allegedly retaliated by issuing informal “coachings,” formal disciplinary actions, and extending her probationary period, citing time management and patient care issues.

The employee was subsequently involved in a car accident. After an extended medical leave, the employee engaged in back-and-forth communications with the hospital about returning to work. After a delay in the hospital’s response, she mailed a letter advising of her “forced resignation,” citing discrimination, harassment, and retaliation.

The employee subsequently filed suit, asserting various claims, including hostile work environment harassment based on race under Title VII and Section 1981. The federal district court granted summary judgment for the hospital on all claims, and this appeal followed.

Legal Framework

To establish a hostile work environment claim under Title VII and Section 1981, a plaintiff must show that (1) she belongs to a protected group; (2) she was subjected to unwelcome harassment; (3) the harassment was based on her membership in a protected group; (4) the harassment affected a term, condition, or privilege of employment; and (5) the employer knew or should have known of the harassment and failed to take prompt remedial action.

The harassment must be “sufficiently severe or pervasive to alter the conditions of employment and create an abusive working environment.” Courts evaluate the totality of the circumstances, including the frequency of the conduct, its severity, whether it is physically threatening or humiliating versus merely offensive, and whether it unreasonably interferes with work performance.

To avoid liability, the employer’s response must be “reasonably calculated to end the harassment.” Prompt remedial action requires more than going through the motions of an investigation. Rather, the employer must demonstrate that its response was adequate to protect the complainant.

The Court’s Analysis

The Fifth Circuit reversed the district court’s grant of summary judgment on the hostile work environment claims, finding that genuine disputes of material fact existed regarding both the severity of the harassment and the adequacy of the employer’s response. In so finding, the court made the following key points:

Frequency of the harassment supported a finding of pervasiveness. The employee testified that the discriminatory comments occurred on almost every shift. The court noted that this frequency, combined with the cumulative effect of the conduct, would be sufficient for a reasonable jury to find that the harassment was pervasive enough to alter the conditions of employment.

The comments were potentially humiliating, not merely offensive. Mocking a person’s food, accent, and racial characteristics in a professional workplace could be humiliating.

Second-hand harassment was relevant. The court also relied on testimony from another Black nurse who experienced similar harassment from the same group of coworkers. This second-hand evidence contributed to the hostile work environment analysis because it demonstrated a broader pattern of discriminatory behavior in the unit.

The employer’s investigation raised genuine disputes about adequacy. The court identified multiple red flags in the hospital’s investigation: discrepancies in testimony about who was interviewed, missing investigation files and notes despite testimony that such a file existed, failure to interview at least one Black employee who could corroborate the complaints, exclusion of corroborating statements from the investigation summary, departure from usual investigative practices, and a supervisor’s admission that “cliques were not going anywhere.” These gaps, viewed in the light most favorable to the employee, created a triable issue about whether the employer took prompt remedial action reasonably calculated to end the harassment.

Lessons for Employers

This decision offers valuable guidance for employers facing harassment complaints:

• Maintaining complete investigation records. The court highlighted the absence of an investigation file as a significant problem for the hospital. Employers may wish to create and retain written records of every step in a harassment investigation, including witness interview notes, findings, and remedial measures taken. A complete paper trail may be essential for demonstrating that the employer’s response was adequate.
• Interviewing all relevant witnesses, especially those who can corroborate. Employers may want to ensure that investigators speak to all employees who may have relevant information, including those who share the complainant’s protected characteristics and could confirm or deny the alleged conduct. Skipping potential corroborating witnesses can undermine the credibility of an investigation.
• Following established investigation procedures consistently. The court noted departures from the hospital’s usual investigative practices as evidence of an inadequate response. Employers may wish to develop clear, written investigation protocols and apply them uniformly to every complaint.

Ogletree Deakins’ Workplace Violence Prevention Practice Group will continue to monitor developments and will provide updates on the Employment Law, Healthcare, State Developments, and Workplace Violence Prevention blogs as additional information becomes available.

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Quick Hits

• The New Jersey Supreme Court ruled that the 2023 Opposition Amendment, which permitted the state attorney general to more easily effectuate NJFCA lawsuits based on public disclosures, applied retroactively to pending cases.
• The court held that the Opposition Amendment was a procedural change that applied retroactively because it altered only how the state attorney general could overcome the NJFCA’s “public disclosure bar” (a doctrine that precludes actions by private persons based on publicly disclosed “allegations or transactions”) without affecting the defendants’ conduct.
• The decision revived a qui tam relator’s lawsuit regarding interest rates set by financial firms, highlighting an expanded capability for relators to bring claims even with secondhand information.

In a precedential ruling, the New Jersey Supreme Court held that the Opposition Amendment applied retroactively to a pending NJFCA case because it “did not alter any vested rights of the parties or the substance or scope of the NJFCA.” The amendment altered only the procedure by which the state’s attorney general could oppose dismissal of qui tam relator lawsuits that would otherwise have been blocked by the public disclosure bar, the court found.  

The ruling revived a qui tam relator’s lawsuit originally filed eight years before the 2023 NJFCA Opposition Amendment, challenging the setting of interest rates on government bonds by private financial institutions contracted as remarketing agents.

The Public Disclosure Bar and the 2023 Opposition Amendment

Until 2023, the NJFCA had barred relators who were not the original source of the information underlying their claims from bringing suits based on publicly disclosed allegations or transactions—a doctrine known as the “public disclosure bar.” The bar operated as an affirmative defense that defendants could raise to block NJFCA suits.

However, in 2023, the New Jersey Legislature amended the NJFCA to permit New Jersey’s attorney general to file a notice of opposition to the application of the public disclosure bar without needing to intervene in and take over a relator-initiated lawsuit. The legislature specified that the amendment was to “take effect immediately.”

The Opposition Amendment Is Procedural

The New Jersey Supreme Court distinguished between substantive and procedural statutes, finding that courts have “consistently held” that procedural statutes apply to all proceedings, including both pending proceedings and proceedings related to claims not yet filed. Citing the Supreme Court of the United States’ 1994 holding in Landgraf v. USI Film Products, the New Jersey high court stated that “remedial and procedural statutes can have retroactive effect” because they do not retroactively change a party’s substantive rights. They “do not impair rights a party possessed when [the party] acted, increase a party’s liability for past conduct, or impose new duties with respect to transactions already completed.”

The 2023 Opposition Amendment was procedural, the court held, because it merely changed the mechanism by which the attorney general could prevent application of the public disclosure bar, requiring only the filing of a simple notice of opposition instead of full intervention. The court noted that the amendment “had no impact on defendants’ alleged underlying conduct and affected only a procedural aspect of the NJFCA,” “did not alter liability for past conduct”; did not “change any defined terms of the statute or requirements for filing a complaint,” and “did not alter any vested rights of the parties or the substance or scope of the NJFCA.”

The Amendment Applies to Pending Cases

The defendants pointed out that, as part of the 2023 amendments to the NJFCA, the legislature amended the definition of an “original source” of information capable of serving as the basis for an underlying NJFCA suit. They argued that since the New Jersey Appellate Division had previously held that the new definition of “original source” did not apply retroactively, courts must apply the pre-amended version of NJFCA to all suits filed prior to the Opposition Amendment’s effective date. Either way, they argued, the Opposition Amendment was actually substantive.

Rejecting this argument, the New Jersey high court stated that “in assessing multiple amendments to a statute, courts must examine each provision separately and should not assume that different provisions were intended to have the same applicability to pending cases.” The “original source” amendment was substantive, the court held, because it lowered the evidentiary standard for NJFCA suits, allowing more suits by relators with secondhand information.

The same could not be said for the Opposition Amendment, the court wrote, which “did not change any defined terms, substantive elements, or attach any new rights or legal consequences to pre-amendment conduct.” The attorney general “always had the ability” to oppose the public disclosure bar, meaning that the parties could not reasonably have expected at the time of the alleged conduct or during the litigation that public disclosure would completely bar NJFCA claims.

Key Takeaways

The New Jersey Supreme Court’s ruling potentially increases businesses’ exposure to qui tam lawsuits. The decision indicates that the public disclosure bar is a less reliable defense against NJFCA liability, as the attorney general now needs only to file a notice of opposition rather than intervene in a false claims suit. This reduces the burden on the State of New Jersey for keeping qui tam actions alive.

Moreover, the case sets a precedent in New Jersey that amendments to state law amending the procedural rights of parties may be applied retroactively to litigation pending at the time of the amendments’ effective dates. That means businesses involved in long-running litigation may need to be aware of mid-case legislative changes that could alter the landscape of their pending cases.

Ogletree Deakins’ Morristown office will continue to monitor developments and will provide updates on the Ethics/Whistleblower, Government Contracting and Compliance, and New Jersey blogs as additional information becomes available.

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Quick Hits

• The ArbG Berlin found that a nonbinary person’s employment application was not genuinely aimed at obtaining the position and therefore dismissed the subsequent compensation claim as an abuse of rights.
• Whether a disadvantage had occurred remained open because the court dismissed the claim on the basis of abuse of rights.
• Protection of nonbinary persons against discrimination remains unaffected.

The Case—Binary Job Posting and Rejection With an Incorrect Salutation

The claimant’s registered gender marker is “diverse,” and they applied for a position as a “Consultant for Procurement Law and Public Procurement.” During the application process, the claimant asked to be addressed in a gender-neutral way. The employer rejected the application by email in February 2026 and addressed the claimant as “Mr.” The claimant based the claim for compensation under the AGG on two alleged indications of discrimination: the purely binary wording of the job posting and the incorrect salutation in the rejection.

The Decision—No Claim Due to an Abusive Application

The court dismissed the claim without ultimately deciding whether a disadvantage had occurred. IThe court dismissed the claim without ultimately deciding whether a disadvantage had occurred. Instead, the ArbG held that the compensation claim was abusive because, in the court’s view, the application was not intended to obtain the position but solely to create a claim for compensation. The Berlin Labor Court cited several circumstances that weighed against a genuine interest in the position:

• the close timing between the rejection and the pursuit of the claim;
• a lack of expertise in procurement law, which was required for the position; and
• simultaneous enrollment at two universities.

On balance, the court found that the indications against a genuine interest in the position outweighed any indications of genuine interest. The claimant may file an appeal with the Regional Labor Court (Landesarbeitsgericht) Berlin-Brandenburg and, according to media reports, has already announced plans to do so.

Takeaways—Take Discrimination Protection Seriously, Limit the Risk of Abuse

Discrimination protection naturally applies in the application process as well. Employers may want to draft job postings in gender-sensitive terms, and the addition “(m/f/d)” or “(m/f/x)” is essential here. They may also want to design their procedures to be free from discrimination and to take care, when addressing applicants, to correctly reflect each applicant’s sex or gender identity.

The court nevertheless drew a clear line where, in its assessment, an application is not aimed at employment but solely at obtaining compensation. According to the court, a systematic assertion of claims aimed only at compensation can constitute an abuse of rights and fail for that reason alone.

The ruling leaves protection for nonbinary persons and other affected applicants intact, while rejecting claims that the court views as abusive.

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.

Julia Kulmegies is an associate in Ogletree Deakins’ Berlin office

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

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Quick Hits

• The Texas Department of Public Safety published a proposed amendment to its identity-document rule (37 TAC §15.24) on June 11, 2026, to align Texas with the federal REAL ID Act of 2005.
• Texas currently accepts a foreign passport with a U.S. visa—valid or expired—together with a qualifying Form I-94.
• Under REAL ID alignment, the applicant would be required to present a valid, unexpired visa, so an expired visa stamp would no longer satisfy this requirement even when the person remains in valid status.
• If the Texas proposal is adopted, affected workers may need to present an unexpired Employment Authorization Document (EAD) instead, and some nonimmigrant categories do not routinely receive one.

This gap arises because a visa stamp can expire while the holder maintains valid nonimmigrant status. A person who entered on a valid visa, later extended or changed status through U.S. Citizenship and Immigration Services (USCIS), and now holds a current Form I-94 or approval notice, may remain lawfully present even though the visa stamp has lapsed. Texas’s current rule accommodates that situation by accepting an expired visa; the proposed REAL ID alignment would not.

Thus, this is a documentation issue, not a lawful-presence issue. U.S. Customs and Border Protection treats Form I-94 as proof of legal visitor status, so an affected worker can still demonstrate lawful presence. However, the worker may not be able to satisfy the REAL ID foreign-passport document checklist once the visa stamp expires. This situation is most likely to affect employees relocating to Texas after a visa stamp has expired and who have no immediate need to obtain a new one.

Texas Today vs. REAL ID Alignment

Next Steps

Nonimmigrant employees planning to obtain an initial Texas driver’s license or identification card—particularly those moving to Texas—may want to confirm before applying that they hold an acceptable REAL ID document, such as an unexpired EAD or a passport with a valid, unexpired U.S. visa and an approved Form I-94. Because DPS has only proposed this amendment, the current rule remains in effect until adoption, and timing may matter for applicants near the effective date.

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 July 24, 2026, the U.S. Court of Appeals for the First Circuit denied the federal government’s request to pause a Massachusetts district court ruling that struck down the $100,000 H-1B fee.
• The fee, imposed by a September 2025 presidential proclamation, applied to certain new H-1B petitions for beneficiaries who would be approved through consular processing abroad.
• Because the stay was denied, the fee is not currently enforceable while the government’s appeal proceeds.
• Federal courts have reached conflicting conclusions on the fee, leaving open the possibility of further review, potentially up to the U.S. Supreme Court.

Background

On September 19, 2025, President Donald Trump issued a proclamation imposing a one-time $100,000 fee on new H-1B petitions filed on or after September 21, 2025, for beneficiaries who would be approved through consular processing abroad. The administration described the fee as a measure to curb perceived abuse of the H-1B program and to protect U.S. workers, particularly in science, technology, engineering, and mathematics (STEM) occupations.

The proclamation drew challenges in more than one federal court, and those courts have not agreed. In December 2025, a federal district court in Washington, D.C., ruled for the government in a case brought by the U.S. Chamber of Commerce and other business groups, finding the fee within the president’s existing authority over noncitizen entry. That decision is now under review at the U.S. Court of Appeals for the D.C. Circuit.

A separate suit, filed in December 2025 by a coalition of twenty states led by California, was brought in federal district court in Massachusetts. The states argued that the fee undermined the basic function of the H-1B program by making it harder for U.S. employers to fill their labor needs. On June 8, 2026, the Massachusetts court sided with the states and vacated the fee policy in its entirety, reaching the opposite result from the D.C. Circuit. The court concluded that the fee functions as a tax rather than a routine regulatory charge, and that the president’s statutory authority to restrict the entry of noncitizens does not extend to imposing a tax. The court separately found that the agencies’ rollout of the fee did not comply with federal rulemaking requirements.

The government appealed and sought a stay pending appeal. The district court declined to stay its ruling on the merits but granted a brief administrative stay so the U.S. Court of Appeals for the First Circuit could weigh in, which allowed U.S. Citizenship and Immigration Services (USCIS) to continue collecting the fee in the interim. On July 24, 2026, the First Circuit denied the government’s stay request, finding that the government had not shown it was likely to succeed on appeal or that the states would avoid substantial harm if the fee were allowed to resume.

Summary of Ongoing Litigation

Next Steps

As a practical matter, the First Circuit’s denial of the stay means the $100,000 fee is not currently enforceable for new H-1B petitions that would otherwise require consular processing. Employers may begin to see approvals issue on petitions that had previously been held up by the fee requirement, and should expect USCIS and the U.S. Department of State to issue updated guidance reflecting the change, although the timing of that guidance is not yet known.

The July 24 ruling addresses only the stay request and does not resolve the merits of the government’s appeal, which remains pending, along with the possibility of further stay requests or review by the Supreme Court of the United States. Given the conflicting rulings so far, employers may want to retain documentation of any fees previously paid in the event a future ruling reinstates the requirement or establishes a path to refunds.

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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The settlement arrives as the SBA is simultaneously overhauling the eligibility standards for its 8(a) Business Development Program, moving away from race-based presumptions of social disadvantage toward a new, discrimination-based test. Together, these developments underscore why businesses participating in SBA set-aside programs must stay current on evolving eligibility rules and ensure their certifications are well-documented to avoid inadvertent misrepresentations that could expose them to FCA liability.

Quick Hits

• The DOJ announced a $21.3 million False Claims Act (FCA) settlement with two government contractors and their executives who allegedly used service-disabled veteran-owned small businesses (SDVOSBs) as pass-through entities to obtain federal set-aside contracts.
• The settlement illustrates the DOJ’s aggressive enforcement posture against businesses that misrepresent or manipulate SBA eligibility criteria across small business set-aside programs.
• Meanwhile, SBA eligibility criteria are themselves in flux. The SBA continues to redefine who qualifies for set-aside programs, having moved to eliminate the race-based presumption of social disadvantage under the 8(a) Business Development Program in favor of a discrimination-based eligibility test.
• Businesses in SBA set-aside programs should track these evolving standards and keep eligibility documentation current and supportable to avoid inadvertent misrepresentations that could trigger FCA liability.

The DOJ’s Set-Aside Fraud Enforcement

On June 9, 2026, the DOJ announced that two government contractors, along with two of their executives, had agreed to pay $21.3 million to resolve FCA allegations that they had used purported SDVOSBs and other small businesses as pass-through entities to improperly obtain federal set-aside contracts. The settlement resolved a qui tam action, United States ex rel. Welch, et al. v. American First Contracting Inc., et al., No. 5:23-cv-0525 (N.D.N.Y.); the two whistleblowers will receive approximately $3.67 million as their relators’ share under 31 U.S.C. Section 3730(d). According to the settlement agreement, the companies identified opportunities, prepared and priced bids, and controlled contract execution and finances, while the purported SDVOSBs served as prime contractors in name only, receiving a fixed percentage of the contract value regardless of work performed. The arrangements took the form of teaming agreements, joint ventures, and mentor-protege relationships. At least one SDVOSB owner raised compliance concerns, but the defendants made no material changes in response, and neither company independently qualified as a “small business concern” under SBA regulations.

In a press release announcing the settlement, Assistant Attorney General Brett A. Shumate stated that the DOJ would “hold accountable those who fraudulently obtain, or assist others in fraudulently obtaining, these set-aside contracts.” The case reflects the DOJ’s enforcement focus on SBA set-aside programs and indicates the DOJ’s view that misrepresenting or manipulating SBA eligibility criteria, whether for SDVOSB, 8(a), HUBZone, Women-Owned Small Business, or other set-aside categories, is an enforcement priority. The $21.3 million settlement, including $4 million and $225,000, respectively, in individual liability from the two executives, is notable for its scale and confirms that the DOJ will pursue substantial recoveries in set-aside fraud cases. The whistleblowers/relators’ $3.67 million share (17.25 percent of the recovery) underscores the financial incentive for insiders and competitors to file qui tam actions.

Notably, although the original qui tam complaint was filed against both the large and the pass-through small businesses, the government intervened only against the larger entities and settled only with them—which could signal an intensified enforcement focus on the companies at the top of pass-through arrangements.

While this settlement specifically involved SDVOSB status, the SBA is simultaneously redefining eligibility for other set-aside programs, particularly the 8(a) Business Development Program. As we discussed in our February 5, 2026, article, “New SBA 8(a) Guidance Signals Shift in Interpretation of Who Is ‘Socially and Economically Disadvantaged,’” the SBA moved in January 2026 to a strictly race-neutral, fact-specific standard for establishing social disadvantage, eliminating reliance on group-based presumptions. As we discussed in more detail in our June 17, 2026, article, “SBA’s Proposed 8(a) Rule Flips the Script: DEI Programs Could Now Be Evidence of Social Disadvantage,” the SBA has since proposed to formalize that shift by amending 13 C.F.R. Section 124.103. The proposed rule, published in the Federal Register on June 11, 2026, would replace the existing tests for social disadvantage under Section 8(a) of the Small Business Act (15 U.S.C. Section 637(a)(5)) with a new, sole eligibility standard that would:

• formally remove the rebuttable presumption of social disadvantage for members of certain racial and ethnic groups;
• require a showing that a governmental or private entity discriminated against, or favored a group to the exclusion of, the applicant’s group, causing “material harm” (broadly defined as loss of access to or diminished opportunities related to economic advancement);
• allow applicants to self-certify group membership and material harm, without requiring proof that the discrimination directly affected entry into or advancement in business; and
• treat unlawful DEI programs, affirmative action policies, and race-based quotas or set-asides as qualifying evidence, potentially including corporate DEI program materials.

The proposed rule would also eliminate the prior non-presumptive test and the process for adding groups to the presumption list. The comment period closed on July 13, 2026, with 132 comments submitted.

The SBA has not approved a new 8(a) application since August 2025, and active firms have fallen below 3,000, so the rule primarily affects the pipeline of new applicants, though current participants should expect heightened oversight as well.

Evolving Eligibility Rules May Increase FCA Risk

This settlement and the SBA’s evolving 8(a) eligibility framework are two sides of the same coin for businesses operating in federal small business contracting.

The DOJ is actively using the FCA to enforce compliance with SBA set-aside categories. Whether the program at issue is SDVOSB, 8(a), or another socioeconomic classification, the DOJ is likely to pursue substantial recoveries against businesses that misrepresent their qualifying status, and qui tam whistleblowers have a strong financial incentive to bring these cases. At the same time, the SBA is fundamentally changing the rules that define who qualifies.

The elimination of the race-based presumption and the adoption of a discrimination-based test mean businesses can no longer rely on legacy assumptions about eligibility, and documentation adequate under the prior “social disadvantage narrative” approach may not satisfy the new standard. This combination of aggressive enforcement and shifting rules increases the risk of inadvertent misrepresentation. Certifying eligibility based on outdated criteria or legacy structures that no longer satisfy current requirements may be viewed as a false statement to the government, and under the FCA’s “knowing” standard, even a failure to keep pace with evolving rules can support liability.

What This Means for Businesses

Businesses should consider the following compliance steps in light of this settlement and the SBA’s ongoing regulatory changes:

• Audit ownership and control arrangements. Evaluate whether the certified small business in any teaming, joint venture, or mentor-protege structure genuinely owns, controls, and performs a commensurate share of the work.
• Monitor evolving 8(a) and other socioeconomic eligibility standards. Track the SBA’s final rulemaking on 13 C.F.R. Section 124.103, since the 8(a) presumption is being eliminated in favor of a discrimination-based test.
• Keep documentation current. Ensure eligibility documentation, whether addressing social disadvantage under 8(a), veteran ownership and control under SDVOSB rules, or size standards under 13 C.F.R. Part 121, reflects requirements as they exist today, not legacy standards.
• Take whistleblower risk and internal red flags seriously. The relators in this case received a $3.67 million share, and ignoring credible compliance concerns, as occurred here, can support a finding of “deliberate ignorance” or “reckless disregard” under the FCA.

Looking Ahead

The convergence of aggressive FCA enforcement and shifting SBA eligibility rules demands continuous attention. This settlement signals that the DOJ will pursue substantial recoveries against businesses that misrepresent their eligibility, and the evolving 8(a) standard means the definition of “eligible” is itself a moving target.

Ogletree Deakins’ Diversity, Equity, and Inclusion Compliance, Government Contracting and Compliance, and Workforce Analytics and Compliance practice groups will continue to monitor developments and will provide updates on the Construction, Diversity, Equity, and Inclusion Compliance, Ethics/Whistleblower, Government Contracting and Compliance, and Workforce Analytics and Compliance blogs as additional information becomes available.

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

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Quick Hits

• On June 30, 2026, New Jersey Governor Sherrill signed legislation that bans the sale of sensitive consumer data by nearly all individuals and entities, with limited exceptions for HIPAA-covered entities and Gramm-Leach-Bliley-covered financial institutions.
• Violators of the sensitive data sale ban face civil penalties of $50,000 for each record sold, offered for sale, or licensed.
• Data brokers and data collectors must register with the New Jersey Division of Consumer Affairs and pay fees ranging from $5,000 to $1,500,000 based on consumer volume, with registration expected to open from April to June 2027 and penalties of $2,500 per day for noncompliance.

Prohibiting the Sale of ‘Sensitive Data’

A5328 is one of the most expansive bans in the country regarding the sale of sensitive data, and may lead to unintended consequences with legitimate uses of sensitive data caught up in the broad prohibition language and the significant penalties. A5328 bans the sale of “sensitive data,” which is defined as personal data that reveals information about an individual’s:

“… racial or ethnic origin; religious beliefs; mental or physical health condition, treatment, or diagnosis; financial information, which shall include a consumer’s account number, account log-in, financial account, or credit or debit card number, in combination with any required security code, access code, or password that would permit access to a consumer’s financial account; sex life or sexual orientation; citizenship or immigration status; status as transgender or non-binary; genetic or biometric data that may be processed for the purpose of uniquely identifying an individual; personal data collected from a known child; or precise geolocation data.”

Not limited to data brokers and data collectors alone, A5328 further modifies a portion of the New Jersey Data Protection Act, N.J.S.A. § 56:8-166.12, stating that individuals or entities may “not sell sensitive data, which shall apply to all individuals or legal entities regardless of the number of consumers whose data the individual or entity controls or processes.” Violators are subject to steep civil penalties of $50,000 “for each record sold, offered for sale, or licensed.”

A5328 maintains certain exceptions for the use of sensitive data. Among these exceptions, it does not limit the collection of protected health information by entities covered under the Health Insurance Portability and Accountability Act (HIPAA) and financial institutions and affiliates covered under the Gramm-Leach-Bliley Act.

Data Broker and Data Collector Registration

A5328 also creates a public registry for two specific groups:

• “data brokers,” who “knowingly collect[] or purchase[] the personal data of a consumer with whom the person or legal entity does not have a direct relationship and sell[] or license[] that data to a third party”; and
• “data collectors,” who “knowingly: (1) collect the personal data of a consumer with whom the data collector has a direct relationship; and (2) sell or license such personal data to a data broker.”

The statute maintains carve-outs for what constitutes a data broker or data collector, specifically shielding persons or entities that collect or purchase personal data to, among other things, (1) maintain a “third-party e-commerce or application platform”; (2) provide “411 directory assistance or directory information services”; and (3) provide “publicly available information related to an individual’s business or profession or related to providing financial or real estate services.”

To engage in the collection or purchase of New Jersey consumers’ data, data brokers and data collectors will be required to provide the New Jersey Division of Consumer Affairs with:

• the broker’s or collector’s name, physical address, email address, and website address;
• information on whether consumers can “opt out” of the broker’s or collector’s data collection practices, the type of opt-out permitted, and whether the opt-out is limited to “certain activities”;
• whether the broker or collector uses a “credentialing process” for its data purchasers, aimed at ensuring data privacy and security;
• a history of any “data breaches and other cybersecurity events” that have affected the broker or collector, and the number of individuals affected by those events; and
• the data collection practices, databases, sales activities, and opt-out methods applicable to data from those under the age of eighteen.

Any data broker or data collector registering with the Division of Consumer Affairs will also be required to pay a fee based upon the number of consumers whose data the broker or collector sells or licenses, ranging from $5,000 (for fewer than 100,000 consumers) to $1,500,000 (for more than 4.5 million consumers). Finally, those who fail either to register or to provide any of the information required by A5328 face a penalty of $2,500 per day.

Although A5328 has been signed into law, data brokers and data collectors are not required to register or pay any fees until the registry has been formally launched. According to a July 10, 2026, post by the Division of Consumer Affairs, the registry is expected to debut in Spring 2027, with registration running from April to June 2027. In advance of this date, the Division of Consumer Affairs intends to issue additional information regarding registration.

Ogletree Deakins’ Cybersecurity and Privacy Practice Group and Morristown office will continue to monitor developments and will post updates on the Cybersecurity and Privacy and New Jersey blogs as additional information becomes available.

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Quick Hits

• Colorado now prohibits employers from retaining original versions of employee government identification documents for longer than ten hours.
• There is an express carveout for employers making and retaining copies of government identification documents.
• Employers must notify employees of the new prohibitions on retaining government identification documents when employment eligibility is verified, even if the employer does not require or retain original identification documents.
• Violations of the new law result in civil liability with a private cause of action, and criminal liability as a “bias-motivated crime.”

New Prohibitions

House Bill (HB) 26-1283, which amended Colo. Rev. Stat. § 8-2-124.5, significantly restricted employers’ ability to demand, confiscate, retain, or require the surrender of employee or applicant government ID documents including passports, drivers’ licenses, and other photoidentification cards. Employers may request and retain an employee’s or applicant’s government ID documents for the purposes of employment eligibility verification but may retain the documents for only ten hours. The law also expressly permits employers to make copies of employee or applicant government ID documents, which may be retained as an employment record. Employers may request and retain government ID documents as required by law and as required to comply with signed judicial warrants.

This new law covers all individuals in Colorado, including migrant and seasonal workers.

Required Notice and Acknowledgement

Whenever the employer verifies an individual’s employment eligibility, the employer must provide a notice to the individual that is in writing, in English, or in the individual’s primary language if the employer knows the individual’s primary language is not English and is acknowledged by the individual. The acknowledged notice must be retained as part of the individual’s employment records. The new law does not require that employees receive a physical copy of the notice, so electronic versions may be permissible. Further, the new law does not indicate the notice is only required if the employer verifies the individual’s employment using an original ID document; rather, it appears the notice is required any time employment eligibility is verified through any means.

Expanded Liability

HB26-1283 also amended Colo. Rev. Stat. §§ 818-5-903.5 and 18-9-121 to impose new civil and criminal liabilities on entities that violate the new law. Now, if an employer confiscates or possesses an individual’s government ID documents, that individual may request the immediate return of the government ID documents and may bring a civil lawsuit for any damages caused by the confiscation. In addition, employers face new criminal liability. If an employer confiscates an individual’s government ID documents, or provides or threatens to provide those documents to federal immigration authorities except when required by law, that employer will have committed a class 1 misdemeanor and a “bias-motivated crime.”

Looking Forward

• Employee and applicant employment eligibility verification processes must include a notice and individual acknowledgement. There is no state-standardized notice at this time.
• Both employers and their employees now face possible civil and criminal liability for retaining government ID documents beyond the statutory maximum time, and for providing those documents to federal immigration authorities if not required by law.

Ogletree Deakins’ Denver office will continue to monitor developments and will post updates on the Colorado and Immigration blogs as additional information becomes available.

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Quick Hits

• The WHD issued two companion opinion letters, FLSA2026-9 and FLSA2026-10, that together explain how it analyzes whether commute and pre-commute time is compensable under the FLSA.
• The unifying test is the “primary beneficiary” analysis—time predominantly for the employer’s benefit is work, time predominantly for the employee’s benefit is not—applied to the totality of the circumstances.
• FLSA2026-9 recognizes the ordinary commute as a third category of noncompensable time that can occur during the continuous workday, alongside bona fide meal breaks and off-duty time
• FLSA2026-10 holds that merely receiving assignments is incidental to commuting and not compensable, but calling clients and coordinating other workers is integral, indispensable work that starts the workday—and can strip a subsequent drive of its “ordinary” character when the employer dictates timing and requires substantial work before or during travel.

The letters, FLSA2026-9 and FLSA2026-10, are timely for employers managing hybrid and remote work arrangements, as well as those with field-based or dispatch workers who start their day at home.

The letters are also notable for their depth, tracing the “hours worked” concept through the FLSA’s early history, ranging from the Portal-to-Portal Act and the 1996 Employee Commuting Flexibility Act (ECFA) to seminal Supreme Court of the United States case law. The result is a consolidated statement of the WHD’s current thinking, which rests on three doctrines that may be applicable when employers are assessing their own practices:

• Primary-Beneficiary Test: Is the time spent predominantly for the employer’s benefit or the employee’s?
• Continuous Workday Doctrine: Once the first principal activity begins, time is generally compensable until the last principal activity ends.
• Portal-to-Portal Act: This statute excludes ordinary commuting and preliminary/postliminary activities from compensable time, but only before or after the workday. Activities “integral and indispensable” to the employee’s principal work are compensable.

FLSA2026-9: Midday Commuting in a Split Home-and-Office Workday

Background

The requester employs a large nonexempt, office-based workforce and wanted to let employees split a single workday between home and the office. The concern: the midday drive might be compensable “travel from job site to job site during the workday” under 29 C.F.R. § 785.38. The employer posed three scenarios: (1) an employee shifts her commute to off-peak hours—working at home early morning and late afternoon—to cut her drive time; (2) an employee volunteers to do extra early-morning work at home before driving in; and (3) an employee catches the last available bus home and finishes assigned work there. In each scenario, the employee was fully relieved of duties during the travel.

The DOL’s Analysis and Conclusion

The WHD began with the settled rule that an ordinary home-to-work commute is a “normal incident of employment” that primarily benefits the employee and has never been treated as work. Critically, the WHD explained ordinary commuting was understood not to be “work” even before the Portal-to-Portal Act existed, so its exclusion does not depend on that statute. From that premise, the WHD drew its key conclusion: an otherwise-ordinary commute does not become compensable simply because it happens in the middle of the workday. The ordinary commute is thus a third category of noncompensable time that can occur during the continuous workday, alongside meal breaks and off-duty periods.

Applying this analysis to the three scenarios, the WHD found each commute ordinary and noncompensable. A midday commute need not reduce total drive time or be paired with a personal errand to remain “ordinary”—it is enough that the timing is genuinely voluntary and primarily benefits the employee. Performing compensable work at home before or after the drive does not, by itself, convert the commute into work time. The at-home work is paid, but the surrounding travel is not, so long as the employee retains the freedom and flexibility of a normal commute. Though the employer need not pay for the travel, it must still record all hours actually worked, wherever performed.

FLSA2026-10: Pre-Shift Calls, Company Vehicles, and When a Commute Becomes Work

Background

A field service engineer who installs and services magnetic resonance imaging (MRI) systems, with no fixed office, drives an employer-provided vehicle from home to client sites. Between 7:00 a.m. and 8:00 a.m. he receives several pages with service requests, then calls clients to schedule appointments—and sometimes calls other engineers to cover or assist—before driving to his first job. His paid shift runs from 8:00 a.m. to 5:00 p.m. He asked whether the FLSA requires pay for receiving the pages, making the calls, and driving to the first appointment, in two scenarios: one where he completes the calls at home and leaves at 8:00 a.m., and one where he must leave earlier and makes calls in the vehicle en route.

The DOL’s Analysis and Conclusion

The WHD drew a careful line between receiving assignments and acting on them. Under the ECFA, use of an employer-provided vehicle—and activities incidental to that use—are not principal activities, so merely receiving pages is incidental to the commute and not compensable. Calling clients to schedule appointments and coordinating with other engineers, by contrast, is required by and primarily benefits the employer. Because this work is integral and indispensable to the engineer’s principal duties, it is compensable.

Because the client calls are a principal activity, they start the continuous workday. But is the ensuing drive to the first site still an “ordinary” commute? The Portal-to-Portal Act addresses only preliminary and postliminary activities—once the workday begins, the statute offers no guidance on what counts as compensable work. Drawing on its companion letter, the WHD said the drive is not ordinary—not where the employer requires the engineer to spend most of the pre-drive hour on calls, dictates the timing and manner of travel, and requires principal work immediately on arrival. Under those facts, the employee lacks the freedom that characterizes a normal commute, so the drive is predominantly for the employer’s benefit and is compensable. The WHD contrasted this with situations where employees have a long, flexible window to complete at-home administrative tasks—there, the commute remains ordinary.

The WHD’s bottom line: receiving pages is not compensable, but calling clients and scheduling appointments is. When the employee completes the calls at home and then drives, the drive is compensable. When he leaves early and calls en route, the workday begins with the first call—the pre-call portion of the drive is an ordinary (noncompensable) commute, while the remainder is compensable. Where at-home work time is variable and hard to measure, the parties may use a reasonable agreement under 29 C.F.R. § 785.23.

The Big Picture: Clarity in a Still Fact-Intensive Inquiry

Together, these letters do not change the law substantively, but they do provide a clearer analytical scaffold for a question that has long been ambiguous and intensely fact-driven:

• A named exception to the continuous workday: ordinary commute. Before these letters, courts had sometimes described the ordinary commute’s noncompensability as flowing from the Portal-to-Portal Act. Because that statute applies only to activities before or after the workday, that framing implied a mid-workday commute might be compensable if it occurred after the first principal work activity. FLSA2026-9 rejects that implication and names the ordinary commute as a standalone third category of noncompensable time.
• Vehicle ownership and timing are not decisive. The letters make explicit that whose vehicle is used, and when in the day an activity occurs, are secondary. An employer vehicle neither makes an ordinary commute compensable nor shields otherwise compensable travel; a commute in the middle of the day is analyzed no differently than one at the start or end. Both questions collapse into the primary-beneficiary test.
• The inquiry remains fact-intensive by design. These letters do not eliminate case-by-case judgment. Both rest on the totality of the circumstances, and FLSA2026-10 pointedly declines to say how few calls or how little employer control would tip a drive into compensable time. The line between an “ordinary” commute and compensable travel still turns on degree (i.e., how much the employer controls timing and manner of travel, how much integral work is required before or during it, and how much freedom the employee retains).

These opinion letters supply a reliable framework—anchored in the primary-beneficiary test and the “integral and indispensable” standard—for analyzing new fact patterns. They meaningfully expand flexibility for hybrid and split-day work. But they also confirm that classifying travel time will remain a fact-specific exercise, and employers bear the burden of getting the analysis right.

Action Items for Employers

In light of the guidance, employers may wish to consider the following:

• Reviewing hybrid and split-day arrangements to confirm that midday commutes are genuinely voluntary, primarily for the employee’s benefit, and free of actual work during the travel.
• Auditing pre-shift practices for field and dispatch employees—distinguish noncompensable receipt of routes, pages, or assignments from compensable scheduling, calling, and coordination work. Employers may also want to assess how much the employer controls the timing and manner of travel; heavy control paired with required work can render a drive compensable.
• Confirming that timekeeping systems capture all hours actually worked (at home and in the field) regardless of location. Where at-home work time is variable and hard to measure, consider using a reasonable agreement under 29 C.F.R. § 785.23.
• Accounting for state wage-and-hour laws, which may treat travel and commute time more expansively than the FLSA.

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

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