In Decloedt v. Radnet Management, Inc., the California Second Appellate District affirmed the denial of an employer’s motion to compel arbitration, concluding that the plaintiff-respondent’s allegations of severe or pervasive sexual orientation harassment by a coworker fell squarely within the EFAA’s exemption from the Federal Arbitration Act (FAA).

Quick Hits

• In Decloedt v. Radnet Management, Inc., the California Court of Appeal, Second Appellate District, held that harassment on the basis of sexual orientation is a form of sexual harassment under FEHA and thus falls within the ambit of sexual harassment under the EFAA.
• The court relied on the Supreme Court of the United States’ reasoning in Bostock v. Clayton County, 590 U.S. 644 (2020), concluding that because discrimination based on sexual orientation necessarily entails discrimination based on sex, the same logic applies to harassment claims.
• The decision means that allegations of sexual orientation harassment may trigger the EFAA, rendering pre-dispute arbitration agreements unenforceable.

Background

In October 2024, Trevor Decloedt filed a complaint in state court against his former employers, his former supervisor, and a former coworker, alleging eleven California state law causes of action, including hostile work environment and sexual harassment discrimination under FEHA and harassment because of his sexual orientation.

Specifically, he alleged that beginning in early 2022, a coworker had subjected him to repeated derogatory comments about his sexual orientation, including telling him, “You shouldn’t be gay; it’s not okay; it’s sinning.” He further alleged that the coworker had exhibited aggressive behavior, threatening to kill him and pulling his hair on multiple occasions, culminating in a physical attack in November 2022 that caused him to flee to the bathroom for safety. Decloedt alleged that he reported these incidents to his supervisor and HR, but no corrective action was taken.

In December 2024, the defendants in the case moved to compel arbitration pursuant to an agreement Decloedt had signed at the outset of his employment. The trial court denied the motion, finding that the sexual harassment claim triggered the EFAA. The defendants appealed.

The Court of Appeal’s Analysis

The defendants’ appeal raised two principal arguments: (1) harassment based on sexual orientation is not a form of sexual harassment under FEHA, and (2) even if it were, the plaintiff-respondent (Decloedt) had failed to allege facts showing that the harassment was sufficiently severe or pervasive. The Court of Appeal rejected both arguments, affirming the trial court’s denial of the defendants’ motion to compel arbitration.

Sexual Orientation Harassment as Sexual Harassment

With regard to the defendants’ first argument, the court observed that FEHA prohibits an employer from harassing an employee “because of … sex … [or] sexual orientation.” Relying on Bostock v. Clayton County, Georgia, the court reasoned that “discrimination based on homosexuality or transgender status necessarily entails discrimination based on sex,” and that this logic “applies with equal force when determining whether an employer who has harassed an employee because of his or her homosexuality has engaged in harassment because of the employee’s sex.”

The court also rejected the defendants’ statutory structure argument. The defendants pointed to FEHA’s section 12940, subdivision (j)(4)(C), which provides that harassment “because of sex includes sexual harassment, gender harassment, and harassment based on pregnancy, childbirth, or related medical conditions,” arguing that the omission of “sexual orientation” from that list demonstrated it was a distinct category.

The court disagreed, holding that the word “includes” is “generally used as a word of enlargement and not of limitation,” and that by listing certain characteristics, the legislature had merely removed doubt about those categories without excluding others “inextricably intertwined with an employee’s sex.”

Severe or Pervasive Standard

Assuming for the sake of argument that the federal plausibility standard under Rule 12(b)(6) applied, the court found that Decloedt had sufficiently alleged severe or pervasive harassment. According to the court, his complaint could reasonably be read as alleging that over the course of several months, his former coworker had repeatedly chastised him because of his sexual orientation, had frequently expressed anger through death threats and hair-pulling, and on one occasion had attacked him with such force that he was forced to flee for his safety. Because the alleged conduct caused the employee to contemplate suicide, the court concluded it was sufficiently severe or pervasive to support a sexual harassment claim.

Key Takeaways

The court’s decision in Decloedt significantly expands the categories of harassment that can trigger the EFAA in California. Prior published California appellate decisions addressing the EFAA involved cases where the existence of sexual harassment was either undisputed or addressed only in passing. Decloedt is the first to squarely hold, as a matter of law, that sexual orientation harassment is sexual harassment under FEHA.

Employers in California should be aware that employees alleging harassment based on sexual orientation, in addition to those alleging more traditional forms of sexual harassment, may now invoke the EFAA to avoid arbitration of their cases. Employers may wish to review their anti-harassment policies and training programs to ensure they address sexual orientation harassment and consider the litigation risk posed by the EFAA’s broad exemption when evaluating the enforceability of their arbitration agreements.

Ogletree Deakins’ California offices, Appellate Practice Group, and Arbitration and Alternative Dispute Resolution Practice Group will continue to monitor developments and will provide updates on the Arbitration and Alternative Dispute Resolution and California blogs as additional information becomes available.

Follow and Subscribe
LinkedIn | Instagram | Webinars | Podcasts

Quick Hits

• New York City’s final rules for the amended ESSTA align with new requirements that employers provide an additional thirty-two hours of unpaid protected time off immediately upon hire and at the beginning of each calendar year.
• The final rules clarify that “protected time off” includes both paid and unpaid time for various circumstances, such as caring for a disabled household member or attending legal proceedings related to benefits.
• Employers must maintain detailed records of protected time off usage and ensure compliance with state and federal wage laws, including documentation of both paid and unpaid time.

The final rules, published via a Notice of Adoption, follow a public comment period on proposed rules released on January 22, 2026. The rules amend Subchapter B of chapter 7 of Title 6 of the Rules of the City of New York, implementing the statutory amendments to Administrative Code Section 20-912 adopted under Local Law No. 145 of 2025. That law, which took effect on February 22, 2026, requires employers to make an additional thirty-two hours of unpaid protected time off immediately available upon hire and on the first day of each calendar year.

The final rules largely track the January proposed rules but include several notable clarifications responsive to stakeholder comments. They formalize the regulatory label “Protected Time Off,” define it to have the same meaning as “safe/sick time” under Administrative Code Section 20-912, and fold in the additional authorized uses and the immediately available hours requirement established by Local Law 145.

Here is an explanation of the key provisions.

Expanded Protected Time Off

The final rules clarify that “protected time off” has the same meaning as “safe/sick time” under the amended ESSTA, which expanded the circumstances under which employees may take protected time off, and encompasses both paid time off and the new bank of unpaid time off. The expanded protected time off circumstances, as amended by Local Law 145, include:

• caring for a child or for a member of an employee’s household with a disability;
• attending legal proceedings related to benefits for an individual under an employee’s care;
• the closure of an employee’s place of business or a child’s school or place of care due to a public disaster;
• government directives to avoid travel or stay indoors during a public disaster;
• seeking legal services or assistance if an employee or a family member is a victim of workplace violence; and
• other reasons that would qualify for safe/sick time under the ESSTA.

Protected Time Off Availability

Further, the final rules clarify that employers must provide “a minimum of 32 hours” of “unpaid protected time off” that is “immediately available for use on the first day of employment and the first day of each new calendar year,” and that the employer must specify this in a written policy. If employers provide “both paid and unpaid protected time off, the employer shall provide paid protected time off to cover the employee’s absence, unless the employee requests to draw from the bank of unpaid protected time off instead.”

The final rules addressed some commenters’ concerns about paid and unpaid time by including language clarifying that employers “may fulfill its obligation to provide 32 unpaid immediately available hours by providing some or all of this time as an equivalent amount of paid protected time off.” (Emphasis added.) The final rules also add language not included in the proposed rules that employers “should pay employees for this immediately available protected time off when necessary to comply with other legal obligations” under state and federal law or meet the criteria for an overtime exemption, such as the Fair Labor Standards Act (FLSA) salary basis test.

The final rules also clarify that when an employee separates and is rehired within the same calendar year, the employer must reinstate the unused portion of the thirty-two immediately available hours in addition to reinstating accrued time off.

Paid Prenatal Leave

The final rules confirm that covered employers must allow employees to use up to twenty hours of paid prenatal leave during any fifty-two-week period for healthcare services received during or related to pregnancy, “in addition to” protected time off. Employers may not require the use or exhaustion of other leave before paid prenatal leave, or vice versa, and may not require disclosure of the medical condition or nature of services as a condition of providing the leave.

Recordkeeping

The final rules clarify that employers must maintain contemporaneous, accurate records, including employee identifying information; weekly hours worked (unless the employee is exempt and regularly works forty hours per week or more); each use of protected time off or paid prenatal leave; and the amount paid. In addition to this general record keeping requirement, for each individual pay period, records must track the amount of protected time off accrued; the amount of protected time off used during the pay period (differentiating between paid and unpaid protected time off); the employee’s total balance of protected time off; the amount of protected time off available for use by the employee (differentiating between paid and unpaid protected time off); the amount of paid prenatal leave used during the pay period; and the employee’s total balance of paid prenatal leave. 

The final rules also add clarification that when employers use “an electronic system to issue pay statements and other documentation” related to protected time off or paid prenatal leave, they must allow employees who separate from the employer to have access to that system for six months or “alternatively, provide the employee with a written statement containing” required information.

Updated Penalties

The final rules provide that the finding of an official or unofficial policy or practice of failing to provide protected time off or paid prenatal leave constitutes a violation for each affected employee and is subject to enhanced penalties.

Evidence may include failure to maintain or distribute policies, unlawful barriers (such as replacement-worker requirements or unreasonable notice/documentation demands for absences of three or fewer days), waiting periods, blackout days, absence-control policies penalizing protected absences, or failure to pay or accrue at the required rate.

Relief for protected time off violations includes application of hours to the employee’s paid prenatal leave balance or protected time off balance, and a $500 payment per employee per calendar year. For violations of paid prenatal leave, relief includes twenty hours of leave and a $500 payment per employee per year.

Next Steps

The ESSTA statutory amendments (Local Law 145 of 2025) have been effective since February 22, 2026, meaning employers are already obligated to comply with the expanded leave requirements. The final rules provide an additional regulatory framework and compliance guidance that DCWP will apply in enforcement. The final rules are set to take effect July 23, 2026.

Considering the robust enforcement of the Earned Safe and Sick Time Act (now also known as the “Protected Time Off (PTO) Law”), employers in New York City, or those with employees there, may want to review and revise their leave policies, pay statement systems, and recordkeeping practices to align with both the statute and the final rules. They may also wish to consider training for supervisors and human resources professionals on the new immediately available hours, the paid/unpaid priority rules, and the updated penalty structure.

Ogletree Deakins’ New York office and Leaves of Absence/Reasonable Accommodation Practice Group will continue to monitor developments and will provide updates on the Leaves of Absence and New York blogs as additional information becomes available.

In addition, the Ogletree Deakins Client Portal covers legal developments in state and major locality paid sick leave laws, including New York City’s Earned Safe and Sick Time Act requirements. Premium-level subscribers have access to comprehensive updated law summaries and policies; Snapshots and Updates are complimentary for all registered client users. For more information on the Client Portal or a Client Portal subscription, please email clientportal@ogletree.com.

Follow and Subscribe
LinkedIn | Instagram | Webinars | Podcasts

Quick Hits

• USCIS announced that both the 65,000 regular H-1B cap allocation and the 20,000 master’s cap allocation have been met.
• USCIS will continue to accept and process cap-exempt H-1B petitions, including extension, amendment, and change of employer petitions, as well as change of status petitions filed by cap-exempt petitioners.

Each year, USCIS is authorized to grant 65,000 new H-1B visas under the congressionally mandated regular cap and an additional 20,000 under the advanced degree exemption. The FY 2027 H-1B cap petition filing window ran from April 1, 2026, to June 30, 2026.

As USCIS has received enough petitions to meet the congressionally mandated cap, it will not conduct additional rounds of H-1B cap registration selections. USCIS similarly did not conduct any additional selection rounds in FY 2026. USCIS has not released data related to the FY 2027 cap registration selection rate.

The FY 2027 H-1B cap was marked by a number of changes from prior years. This H-1B lottery was the first conducted under the new weighted selection process, which assigned additional cap lottery entries to beneficiaries based on their salary and the corresponding Occupational Employment and Wage Statistics (OEWS) wage level. Additionally, a new Form I-129, Petition for Nonimmigrant Worker, which requires additional disclosures regarding the terms and conditions of employment, was implemented in conjunction with the weighted selection rule.

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

Follow and Subscribe
LinkedIn | Instagram | Webinars | Podcasts

---

Quick Hits

• The DOL’s 2026 agency rule list includes eight WHD proposed rules covering tipped employees, young workers, independent contractor classification, and joint employer status, combining both newly announced and previously proposed measures.
• Among the newly announced items, the WHD is considering revised tip regulations that may align with the IRS’s recent “No Tax on Tips” rules, along with updated hour restrictions for workers aged fourteen and fifteen.
• The previously announced items would replace the 2024 independent contractor rule with a version resembling the 2021 rule and would restore 2021 style joint employer guidance, while employers are reminded that more protective state wage and hour laws still take precedence over these federal rules.

The previously announced items would replace the 2024 independent contractor rule with a version resembling the 2021 rule and would restore 2021 style joint employer guidance, while employers are reminded that more protective state wage and hour laws still take precedence over these federal rules.

The agency rule list is a list of proposed and developing regulations that the DOL plans to issue or review. It includes new standards, updates to existing workplace laws, and guidance. The list is part of the broader Unified Agenda of Federal Regulatory and Deregulatory Actions published by the White House Office of Management and Budget.

The 2026 agency rule list includes eight WHD rules, some of which were already announced and some of which are new:

DOL/WHD	Proposed Rule Stage	Employee or Independent Contractor Status Under the Fair Labor Standards Act, Family and Medical Leave Act, and Migrant and Seasonal Agricultural Worker Protection Act	1235-AA46
DOL/WHD	Proposed Rule Stage	Joint Employer Status Under the Fair Labor Standards Act, Family and Medical Leave Act, and Migrant and Seasonal Agricultural Worker Protection Act	1235-AA48
DOL/WHD	Proposed Rule Stage	Hours of Work Standards for Young Workers Under the Fair Labor Standards Act	1235-AA53
DOL/WHD	Proposed Rule Stage	Tip Regulations Under the Fair Labor Standards Act (FLSA)	1235-AA54
DOL/WHD	Final Rule Stage	Increasing the Minimum Wage for Federal Contractors; Rescission of Regulations	1235-AA49
DOL/WHD	Final Rule Stage	Rescission of Coordinated Enforcement Regulations	1235-AA50
DOL/WHD	Final Rule Stage	Application of the Fair Labor Standards Act to Domestic Service	1235-AA51
DOL/WHD	Final Rule Stage	Statements of General Policy or Interpretation Not Directly Related to Regulations	1235-AA52

WHD’s Notable Newly Announced Proposed Rules

Tip Regulations

With the “Tip Regulations Under the Fair Labor Standards Act,” the DOL is considering a notice of proposed rulemaking to amend regulatory provisions related to tipped employees under the Fair Labor Standards Act (FLSA). This is not surprising given the significant updates in laws affecting tipped employees, including the reinstated 1967 dual-jobs regulation after the Fifth Circuit Court of Appeals’ ruling in Restaurant Law Center v. U.S. Department of Labor.

The administration may also be considering updating who is considered a tipped employee with more practical definitions to reflect the expansion of industries that allow customers to leave tips, and in turn, qualify more jobs that historically may not have been considered “customarily and regularly tipped” employees. Earlier this year, the Internal Revenue Service (IRS) finalized regulations allowing eligible workers in more than seventy qualifying occupations that “customarily and regularly receive tips” to take a deduction for qualified tips pursuant to the “No Tax on Tips” deduction, which was passed as part of the One Big Beautiful Bill Act (OBBB Act). It is possible the rule aims to harmonize the IRS regulations with the department’s rule. Employers should be on the lookout for this rule sometime in August.

Young Workers

The WHD’s initiative related to the proposed rule on “Hours of Work Standards for Young Workers Under the Fair Labor Standards Act” does not contain much detail other than stating the WHD is considering an update to permissible hours of work for fourteen- and fifteen-year-olds. Currently, the permissible work hour parameters for fourteen- and fifteen-year olds are as follows: outside school hours; no more than three hours on a school day, including Fridays; no more than eight hours on a nonschool day; no more than eighteen hours during a week when school is in session; no more than forty hours during a week when school is not in session; and between 7 a.m. and 7 p.m.—except between June 1 and Labor day when the evening hour is extended to 9 p.m. The department indicates we can expect to see the proposed rule in September.

Employers in recent years have been reluctant to hire fourteen- and fifteen-year-olds because of the strict work parameters combined with the fact that the DOL has aggressively pursued violations of child labor laws with severe penalties.

WHD’s Notable Previously Announced Rules

Independent Contractor Classification

The abstract for this agenda item notes that the 2024 independent contractor rule has been subject to legal challenges. The DOL is seeking to rescind the 2024 rule and replace it with a modified version of the 2021 independent contractor rule issued during the first Trump administration. Relatedly, the DOL is seeking to update regulations that would make clear the analysis for determining independent contractor status under the FLSA applies to the Family and Medical Leave Act (FMLA) and Migrant and Seasonal Agricultural Worker Protection Act (MSPA).

Joint Employer Status

The DOL indicated that it is considering a notice of proposed rulemaking to provide interpretive guidance on FLSA joint employer liability commensurate with the 2021 joint employer rule. The department will also amend its regulations to advise that the FLSA joint employer analysis applies to the FMLA and MSPA as well.

Remember the Interplay With State Laws

States that have more protective wage and hour laws or regulations will trump the department’s rules.

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

Catching Up With Congress. Lawmakers returned to Washington, D.C., this week, following the July 4th recess and with the clock ticking down on the 119th Congress. The U.S. House of Representatives is scheduled to remain at work in D.C. through July 23, 2026, while the U.S. Senate is scheduled to stay the course through August 7, 2026. The House will return from Congress’s traditional annual August recess on August 31, 2026—but then promptly leave for a five-day Labor Day recess the week beginning September 7 (returning to action on September 14)—while the Senate is slated to return on September 14, 2026.

What does all this mean? Since Republicans control both chambers of Congress, they will try to use this period to advance a legislative agenda that they believe will improve their chances of success in the midterm elections, which are now only 109 days away. (Election Day is November 3, 2026.) Accordingly, they will try to move a third reconciliation bill (employing the same process they used to pass the One Big Beautiful Bill Act in 2025 and the immigration funding package earlier this year), which could include earmarks for defense spending and farm subsidies, as well as certain election reform elements. Moreover, as discussed below, the agenda will prioritize advancing agency nominees through the Senate confirmation process. The Buzz continues to monitor the status of the Faster Labor Contracts Act, which passed the U.S. House of Representatives in June 2026, and is currently under consideration in the U.S. Senate.

In more somber news, after the untimely passing of Senator Lindsey Graham (R-SC) on July 11, 2026, South Carolina Governor Henry McMaster appointed the late senator’s younger sister, Darline Graham Nordone, to serve out the remainder of his term, which will expire on January 3, 2027. Nordone is the first woman to represent South Carolina in the U.S. Senate. While spouses have stepped in to replace senators who have died in office, Nordone is the first sibling to do so. With Senator Nordone now sworn in, Senate Republicans continue to maintain their 53–47 majority.

The Buzz remembers Senator Graham for his staunch opposition to National Labor Relations Board policies related to micro-units and ambush elections. Graham was also a member of the Senate’s “Gang of Eight,” who drafted and championed the comprehensive immigration reform bill, the “Border Security, Economic Opportunity, and Immigration Modernization Act” (S. 744), which passed the Senate in 2013 by a vote of 68–32, but later died in the House.

DHS/ICE Finalizes Rule Limiting Foreign Student Visa Stays. Today, July 17, 2026, the U.S. Department of Homeland Security’s (DHS) Immigration and Customs Enforcement (ICE) published a final rule, “Establishing a Fixed Time Period of Admission and an Extension of Stay Procedure for Nonimmigrant Academic Students, Exchange Visitors, and Representatives of Foreign Information Media,” in the Federal Register. Like the proposed rule issued in August 2025, the final rule eliminates the current “duration of status” framework, which permits nonimmigrant students or exchange visitors to be admitted to the United States for the course of their studies or authorized programs.

In its place, the final rule installs a “period of stay” requirement that limits the admission and extension periods for nonimmigrant students and exchange visitors to the length of their specific programs, not to exceed a four-year period. The rule permits nonimmigrants to apply for an extension of stay beyond the fixed period, but it also places limitations on nonimmigrant students’ abilities to transfer schools or change their “educational objectives.” According to the rule’s preamble, the rule is necessary because the increased number of foreign nationals living in the United States on these visas, coupled with existing regulatory requirements, “has undermined DHS’s ability to effectively enforce compliance with the statutory inadmissibility grounds related to unlawful presence and has created incentives for fraud and abuse.” The final rule will take effect on September 15, 2026.

Tina H. Ho, Kara K. Lancaster, Brittani B. Holland, Nicole M. Antonio, and Larkin Dykstra have the details.

NLRB Nominees Advance. On July 15, 2026, the Senate Committee on Health, Education, Labor and Pensions (HELP) voted to advance the nominations of James R. Macy and David M. Prouty to the National Labor Relations Board (NLRB). Macy currently heads the U.S. Department of Labor’s Office of Workers’ Compensation Programs, while Prouty serves as a member of the NLRB and has been nominated for another five-year term on the Board. As the Buzz has previously discussed, if confirmed, Macy would provide a third affirmative vote, joining Republican members, James Murphy (the Board’s chair) and Scott Mayer, to overturn Biden-era Board precedent. The nominations of Macy and Prouty await a full vote on the floor of the U.S. Senate.

Nominations, of course, are not guaranteed to lead to Senate confirmations. Further, the Senate’s legislative calendar might not yield speedy confirmation votes and could even lead to disruptions at the Board. As noted above, the Senate is currently scheduled to be in session through August 7, 2026, at which time it is expected to recess until September 14, 2026. It is quite possible that the Senate could adjourn for its August recess without confirming Macy or Prouty. In this scenario, the Board would lose its quorum when Prouty’s term expires on August 27, 2026. A loss of quorum—even temporarily—would delay any potential rollbacks of existing law and likely increase the case backlog that the Board has had great success in decreasing.

It’s That Time Again. On July 14, 2026, by a vote of 308–117, the House of Representatives passed the Sunshine Protection Act of 2025 (H.R. 139), which was included as a provision in the Motor Vehicle Modernization Act. The bill would make daylight saving time permanent throughout the United States. We’ve seen this before. A previous version of the bill passed the Senate in March 2022. And as the Buzz noted back then, the nation had previously experimented with instituting year-round daylight saving time.

In 1973, President Richard M. Nixon signed into law the Emergency Daylight Saving Time Energy Conservation Act, instantiating the concept of daylight saving time permanence. The Emergency Daylight Saving Time Energy Conservation Act implemented the time change on a two-year pilot basis, but the results proved so unpopular that Congress voted to repeal the law just eight months into the experiment. (The House voted in favor of repeal by an overwhelming 381–16 margin.)

The Sunshine Protection Act now heads to the Senate, where Senator Tom Cotton (R-AR) has vowed to block it, having declared in a 2025 speech on the Senate floor that he would “always oppose any effort to adopt Daylight Savings Time year-round.”

Quick Hits

• On July 17, 2026, DHS issued a final rule that eliminates the “duration of status” framework and imposes fixed admission periods of up to four years for F-1 and J-1 nonimmigrants and up to 240 days for I nonimmigrants.
• F, J, and I nonimmigrants who need to remain beyond their authorized admission period must file extension of stay applications with USCIS, submit biometrics, and demonstrate continued eligibility.
• Employers of F-1 workers on OPT or STEM OPT and J-1 exchange visitors should monitor I-94 expiration dates and ensure timely extension filings to avoid unlawful presence consequences.

The final rule, which will take effect on September 15, 2026, requires these nonimmigrants to apply for extensions of stay directly with U.S. Citizenship and Immigration Services (USCIS) if they need to remain in the United States beyond their authorized period of admission.

Background

Under the prior framework, F, J, and most I nonimmigrants were admitted to the United States for an unspecified period of time during which they were complying with the terms and conditions of their nonimmigrant classification. Unlike most other nonimmigrant classifications, which require admission until a specific departure date, the duration of status framework did not require these nonimmigrants to have a fixed end date on their stay, as evidenced by the “D/S” notation made on the Form I-94 (Arrival/Departure Record).

DHS states that the duration of status framework, combined with significant growth in the F, J, and I populations, poses challenges to the department’s ability to monitor and oversee these nonimmigrants. Under this framework, these nonimmigrants were not required to have direct interaction with DHS except in limited instances such as applying for or extending Optional Practical Training (OPT) or reinstatement after a status violation. DHS cited concerns regarding fraud and abuse, “pay-to-stay” schemes, nonimmigrants remaining in active status for extended periods, and the inability to effectively enforce unlawful presence provisions against individuals admitted for the duration of their status.

On August 28, 2025, DHS published a notice of proposed rulemaking (NPRM) outlining the fixed admission framework, along with other changes to the exiting regulatory scheme for F-1, J-1, and I nonimmigrants. The prior Trump administration published a similar proposed rule on September 25, 2020, which received more than 32,000 comments during the public comment period before being rescinded by the Biden administration in 2021. The current NPRM authorized a thirty-day public comment period, which closed on September 29, 2025.

Fixed Admission Periods and Extension of Stay Requirements

The final rule replaces the existing duration of status framework with fixed admission periods. Nonimmigrants in these categories who need to remain in the United States beyond their authorized period of admission must apply for an extension of stay via a Form I-539  with USCIS or apply for readmission to the United States at a port of entry.

F-1 Academic Students

Under the final rule, F-1 students will be admitted for up to the length of their program as specified on Form I-20, not to exceed four years, or the end date of the approved employment authorization on the student’s OPT or STEM OPT Employment Authorization Document (EAD), whichever is earlier. F-1 students will also be granted a thirty-day grace period before the program start date to accommodate arrival and a thirty-day grace period following the program end date to accommodate departure. This represents a reduction from the prior sixty-day departure grace period. The thirty-day arrival and departure periods do not count toward the four-year maximum.

F-1 students who cannot complete their programs within the initial admission period must file an extension of stay application with USCIS before their period of stay or depart the United States and apply for readmission at a port of entry. Applicants must submit an updated Form I-20, required biometrics, evidence of sufficient funds, and applicable fees. If an applicant’s extension of status application is denied, there is no grace period, and the individual must depart the United States immediately.

For F-1 students, acceptable reasons for requesting additional time to complete a program include: (1) compelling academic reasons; (2) a documented illness or medical condition; or (3) exceptional circumstances beyond the student’s control. A pattern of academic probation, suspension, or repeated inability or unwillingness to complete coursework is not an acceptable reason for extension.

J-1 Exchange Visitors

J-1 exchange visitors will be admitted for up to the duration of their exchange visitor program as indicated on Form DS-2019, not to exceed four years. J-1 exchange visitors will also receive a thirty-day grace period to cover arrival and departure. Exchange visitor programs with durations exceeding four years, such as those for professors and research scholars or physicians, must now file an extension of stay application with USCIS before the four-year maximum expires or depart the United States and apply for readmission at a port of entry. Applicants must submit an updated Form DS-2019, required biometrics, and applicable fees.

I Foreign Media Representatives

I nonimmigrants will be admitted for a period necessary to complete their activities or assignments consistent with the I classification, not to exceed 240 days. I nonimmigrants presenting passports from the People’s Republic of China (PRC), excluding Hong Kong special administrative region (SAR) and Macau SAR passport holders, will be admitted for a period not to exceed ninety days.

I nonimmigrants must file extension applications with USCIS to remain beyond their initial 240-day or ninety-day admission period. Each extension may be issued for up to 240 days, or ninety days for PRC passport holders.

Automatic Extension of Employment Authorization

The final rule introduces specific considerations for work-authorized nonimmigrants in F-1, J-1, and I status.

F-1 Students

F-1 students with on-campus employment and off-campus employment authorization due to severe economic hardship will receive an automatic extension of employment authorization for up to 240 days while the extension of stay application is pending.

CPT employment authorization is automatically extended up to 240 days or until the end date authorized by the DSO on Form I-20, whichever is earlier, while a timely filed extension application is pending. However, if the extension application is filed during the thirty-day grace period, the student may continue studying but may not continue or begin practical training or other employment until the extension of stay application is approved. The existing 180-day automatic extension for timely filed STEM OPT extensions and the cap-gap provisions for F-1 students who are beneficiaries of cap-subject H-1B petitions remain unchanged.

Post-Completion OPT and STEM OPT

Unless exempted under the transition provisions, an F-1 student recommended for post-completion OPT must apply for both an extension of stay and employment authorization. The student may not engage in post-completion OPT employment until the application for OPT work authorization is granted. F-1 students filing for STEM OPT remain eligible for the 180-day automatic extension of their post-completion OPT EAD while their STEM OPT application is pending, so long as the extension application was timely filed before the expiration of their OPT work authorization.

J-1 Exchange Visitors

J-1 exchange visitors in categories employment authorized incident to status with a timely filed extension of stay application may continue working for up to 240 days under automatic extension provisions. J-2 spouses are not granted the 240-day automatic extension, and must have a valid EAD and period of admission to work in the United States.

I Foreign Media Representatives

An I nonimmigrant whose extension application is pending may continue working for up to 240 days under automatic extension provisions. If the application remains pending after 240 days and the I nonimmigrant has timely filed a subsequent extension of stay application, the applicant may remain in the United States but must cease working until the initial application is approved.

Unlawful Presence

Under the final rule, F, J, and I nonimmigrants who remain in the United States beyond their fixed admission period as noted on their Form I-94 without timely filing an extension of stay application will generally begin to accrue “unlawful presence,” which may result in future inadmissibility upon departing the United States. This is a significant change from the prior D/S framework, under which unlawful presence did not begin to accrue until the day after USCIS formally found a status violation or the day after an immigration judge ordered the foreign national removed.

F-1 School Transfers and Program Changes

Under the final rule, DHS imposes new restrictions on F-1 students’ ability to transfer schools or change academic programs, including a prohibition on graduate-level program changes and a rule restricting program changes to progression toward a higher educational level.

School Transfer and Program Change Limitations

Under the final rule, F-1 students seeking to transfer schools or change their academic program objective generally must complete the first academic year at the school where they are initially authorized to enroll. Unless the Student and Exchange Visitor Program (SEVP) expressly authorizes an exception, F-1 students will not be authorized to transfer schools or change their program objective during their first academic year.

F-1 students enrolled at the graduate level are barred from changing programs at any point during their program of study. This restriction continues through completion of the degree and is not limited to the first year of the academic program.

Academic Progression Requirement

An F-1 student who completes a program of study at one educational level may begin a new program only at a higher educational level while maintaining F-1 status. F-1 students will be authorized to begin a new program at the same or lower educational level. In practice, F-1 students will not be authorized to enroll in subsequent master’s degree programs after earning their initial master’s degree.

Considerations for J-1 Exchange Visitors

These restrictions are specific to F-1 students. J-1 exchange visitors seeking to change programs remain subject to oversight by U.S. State Department-designated responsible officers (ROs) rather than USCIS. DHS may delay or suspend implementation of these provisions, by notice from SEVP, if the Student and Exchange Visitor Information System (SEVIS) is unable to implement the necessary changes in time. Designated school officials (DSOs) may wish to begin flagging requests involving first-year transfers and program or major changes now, in anticipation of these requirements taking effect.

Transition Provisions

F and J nonimmigrants who are properly maintaining status on the effective date of the final rule (scheduled for September 15, 2026) and who were previously admitted for D/S will be authorized to remain in the United States until the program end date on their Form I-20 or DS-2019 that is valid on that date, not to exceed four years from the effective date, plus an additional sixty days for F nonimmigrants and thirty days for J nonimmigrants to depart the United States. F and J nonimmigrants who need additional time to complete their programs beyond this transition period must request an extension of stay.

F-1 students with an I-94 record indicating D/S who are present in the United States on the effective datand timely file Form I-765 for post-completion OPT or STEM OPT on or before March 18, 2027, are not required to file a separate EOS application on Form I-539 for the requested OPT or STEM OPT period.

I nonimmigrants present in the United States on the effective date of the final rule who were admitted for D/S will be authorized to remain for a period necessary to complete their activities, not to exceed 240 days from that date, or ninety days from that date for PRC passport holders, other than Hong Kong SAR and Macau SAR passport holders.

The transition provisions do not apply to F, J, or I nonimmigrants who are outside the United States when the final rule takes effect, or to any nonimmigrants present in the United States in violation of their status. Individuals outside the United States who seek admission after the effective date will be admitted under the new fixed admission framework.

Employer Considerations

Employers sponsoring or employing foreign nationals in J-1 status and F-1 status, including those on OPT and STEM OPT, should be aware that these individuals will now have fixed admission end dates reflected on their Form I-94. Employees in these statuses will need to monitor their I-94 admission periods and timely file extension applications when needed to maintain their nonimmigrant status and work authorization.

Employers may want to continue to monitor OPT and STEM OPT EAD expiration dates, as well as ensure internal I-9 compliance teams are aware of the 240-day automatic extension available to certain F-1 students while an extension of stay application is pending. In addition, there could be delays in F-1 student graduates receiving their initial grant of OPT required to start employment.

Employers of I nonimmigrant foreign media representatives may track admission periods and plan for timely extension of stay filings. Given the shorter maximum admission period of 240 days for I nonimmigrants, employers in the media industry may want to establish internal tracking systems to ensure extensions are filed before the initial admission period expires.

Next Steps

The final rule takes effect sixty days from the date of publication. Employers and immigration practitioners may wish to begin reviewing their F-1, J-1, and I nonimmigrant populations to identify individuals who may need to file extension of stay applications under the new framework. Educational institutions may choose to coordinate with designated school officials (DSOs) and Responsible Officers (ROs) to update internal processes for recommending program extensions and advising students and exchange visitors on the new filing requirements.

Given the potential for litigation challenges, employers may want to monitor developments regarding any legal challenges to the final rule that could delay or alter its implementation.

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

For additional insights, Ogletree Deakins’ will host a complimentary webinar on Wednesday, July 22, 2026, “The End of Duration of Status: Navigating DHS’s Fixed Admission Period Rule.” Register here.

To learn more about this development and other critical immigration issues facing employers today, please join our Virtual Immigration Insights Symposium on Wednesday, October 7, 2026, from noon to 2:30 p.m. ET. Register here.

Follow and Subscribe
LinkedIn | Instagram | Webinars | Podcasts

Quick Hits

• New York State lawmakers have passed a bill that would ban the enforcement of class action waivers in some circumstances and other waivers of workers’ rights under the Human Rights Law.
• The bill includes exceptions for bona fide settlements, post-employment agreements, and collective bargaining agreements, while also considering federal preemption under the Federal Arbitration Act.
• The bill has not yet been signed by the governor.

On May 13, 2026, the New York State Legislature passed Senate Bill S4424-A, titled the “Anti-Waiver of Employment Rights Act.” The bill could have significant implications for employers, but it has yet to be delivered to Governor Kathy Hochul for signature, leaving open the possibility that it will be amended via chapter amendments or pulled before delivery.

Overview of the Bill

S4424-A would amend both the New York Labor Law (by adding § 219-e) and the Executive Law (by adding § 302) to declare void any express or implied contractual provision that waives or limits an employee’s substantive or procedural rights, remedies, or claims under those statutes. The legislature’s stated intent is to codify what it considers having always been the law—that rights under the Labor Law and Human Rights Law are “mandatory and non-waivable through private agreement.”

The bill specifically targets employer practices such as requiring employees to sign agreements that contractually shorten statutes of limitations for bringing claims under the Labor Law or Human Rights Law, or that waive other statutory rights and procedural enforcement mechanisms.

Impact on Class Action Waivers

The bill could potentially have a direct and significant impact on class action waivers in the employment context, at least for employees who are not covered by the Federal Arbitration Act (FAA). The legislature expressly declares that “it is the policy of this state that workers be permitted to enforce these rights collectively, including through article 9 of the civil practice law and rules,” which governs class actions.

The bill’s findings further state that following some “erroneous” court decisions, some employers have required employees to waive “procedural mechanisms to enforce those rights collectively, such as article 9 of the civil practice law and rules,” and that such waivers “have always been and continue to be against public policy.”

Because the bill, as currently written, would void any contractual provision waiving an employee’s “substantive or procedural rights, remedies, or claim” under the Labor Law or Human Rights Law, class action waivers in employment agreements relating to those statutes could be rendered unenforceable in New York for some employees.

Key Exceptions

The bill would carve out three notable exceptions:

• Bona fide settlements: Waivers that are mutually agreed to and included in the settlement of “any good faith bona fide dispute not raised or initiated by the employer” would be allowed.
• Post-employment agreements: Mutually agreed waivers included in agreements entered into upon or following the termination of employment would be permitted.
• Collective bargaining agreements: The bill would not apply to “dispute resolution processes contained in the terms of a collective bargaining agreement” (CBA), or where a waiver in a CBA is “expressly authorized by the statute establishing the substantive or procedural right, privilege, or remedy.”

Additionally, the bill contains a federal preemption savings clause, stating that the provisions shall not apply where their application would be preempted by federal law. This is a significant qualification, as the Supreme Court of the United States has held that the FAA preempts state laws that single out arbitration agreements—including those containing class action waivers—for disfavored treatment.

However, the FAA does not cover all employees. Notably, interstate transportation workers are excluded from the FAA and could, therefore, be subject to this proposed law. That means that class action waivers with New York interstate transportation workers could be subject to this proposed law.

Key Takeaways

The bill, if enacted, would have implications for some New York employers that have included class action waivers in employment arbitration agreements, as well as New York employers that use agreements that shorten limitations periods, include claim-release language, or include other procedural-right waivers.

However, the bill has not yet been delivered to the governor, and it remains unclear whether she will sign it or whether an agreement will be reached on potential chapter amendments. The bill, along with other key bills impacting employers, is likely to be delivered in batches toward the end of the year. Thus, employers need not take immediate action, though there may still be an opportunity to influence the final form of the legislation, should it be signed. Employers should keep informed about upcoming developments.

Ogletree Deakins’ New York offices and Arbitration and Alternative Dispute Resolution Practice Group will continue to monitor developments and will provide updates on the Arbitration and Alternative Dispute Resolution, Class Action, Employment Law, and New York blogs as additional information becomes available.

Follow and Subscribe
LinkedIn | Instagram | Webinars | Podcasts

Quick Hits

• The Third Circuit affirmed the dismissal of race discrimination and retaliation claims, ruling the employee failed to establish a prima facie case or overcome the employer’s legitimate business reasons for the elimination of his position. 
• The court found no evidence of discriminatory animus, noting the employee was not replaced in a discriminatory manner during a company reorganization.
• Claims of “constructive demotion” were rejected, as the employee did not demonstrate that the working conditions of his position were so intolerable that he had no choice but to seek the transfer.
• The ruling reinforces that legitimate performance concerns and organizational changes may serve as evidence to defeat discrimination claims. 

In a unanimous, precedential opinion, a panel for the Third Circuit affirmed a district court’s grant of summary judgment for the employer, which dismissed the employee’s claims of race discrimination, retaliation, and hostile work environment brought under Title VII of the Civil Rights Act of 1964, Section 1981, and the New Jersey Law Against Discrimination (NJLAD).

Going further than the district court, the Third Circuit panel found that the employee had failed to even make out a prima facie case of discrimination. The court found the employee had not presented evidence beyond allegations of being replaced by a white male employee that a jury could find racial discrimination, including that he was effectively demoted. The court further found that, despite his position being eliminated as part of a company reorganization shortly after he filed a discrimination charge with the U.S. Equal Employment Opportunity Commission (EEOC), there was no evidence of retaliatory motive.

Lack of Evidence of Racial Discrimination

The Third Circuit said the only fact the employee raised that could support an inference of discrimination was that he was allegedly “replaced” by a white man, who had taken over his duties. However, the court noted that it was “undisputed” that the employee’s position was eliminated as part of a company reorganization and that he was technically not replaced. “What’s more, just as being replaced by someone outside the plaintiff’s protected class is not necessary to raise an inference of discriminatory animus, it is also not sufficient on its own to do so,” the Third Circuit said.

Further, the court noted the employee had failed to show how the same manager who hired him for the new internal position, doing so over a white female candidate, “was racially motivated in firing him so soon after.” The court explained that when the individual who hires an employee and the individual who shortly thereafter terminates that employee’s employment is the “same person,” that is “strong evidence” that discrimination was not a determining factor.

‘Constructive Demotion’ Claim Not Viable

The Third Circuit rejected the contention that the employee was effectively demoted by being pushed to transfer to a position on a different team with the same pay and benefits. While noting that the Third Circuit has “not recognized constructive demotion as a viable claim,” the court said that, even if such a claim was recognized, the employee had failed to show the situation was “so unpleasant or difficult that a reasonable person would have felt compelled” to take the new position.

The court noted that the manager had given the employee positive performance reviews and “generous bonuses.” And while the manager had expressed “his scruples about the BLM political movement,” it was understood that he did not think that black people’s lives do not matter, and he had been supportive of employees vocalizing political views and experiences.

Race and Retaliation Not a Motivating Factor

With respect to the employee’s termination of employment, the Third Circuit found that the employer’s “reorganization and [the employee’s] unsatisfactory job performance each constitute legitimate reasons for termination,” and the employee had not shown how those reasons were pretexts for racial discrimination or retaliation.

While acknowledging that the short timeline between the employee’s EEOC charge and the termination of his employment is suggestive of discrimination at the prima facie stage, the court said that “the employer’s ‘legitimate reason to take an adverse employment action dispels an inference of retaliation based on temporal proximity’ alone.”

As the employee did not point to any other evidence of a “retaliatory motive,” the court found that he did not present enough evidence that would “convince the factfinder both that the employer’s proffered explanation was false, and that retaliation was the real reason for the adverse employment action.” (Citation omitted.) Specifically, the employee failed to show how criticism of his work performance was part of “a broader pattern of antagonism that raises an inference of retaliatory animus.”

Key Takeaways

This decision is a solid precedent for employers defending discrimination and retaliation claims grounded in reorganizations and documented performance concerns:

• Constructive demotion: At least in the Third Circuit, claims of “constructive demotion” are not recognized, and an employee who voluntarily takes a new position may have a higher burden to show that the transfer was discriminatory.
• Documented performance critiques: The decision suggests that the documented evidence of criticism of the employee’s work performance, including corroborating reports from multiple colleagues, is strong evidence rebutting a retaliatory motive.
• Same actor: When the same decision-maker hires and fires an employee within a short period, courts will treat that as strong evidence against a discriminatory motive. 
• Political speech is not racial animus: The decision suggests that a supervisor’s disagreement with a social or political movement, without more, does not create actionable evidence of race discrimination.
• Temporal proximity has limits: The close timing between protected activity and an adverse action may get a plaintiff past the prima facie stage but will not, standing alone, defeat a well-supported legitimate business justification at the pretext stage.

Ogletree Deakins’ Morristown office will continue to monitor developments and will provide updates on the Diversity, Equity, and Inclusion Compliance, Employment Law, and State Developments blogs as additional information becomes available.

Follow and Subscribe
LinkedIn | Instagram | Webinars | Podcasts

Quick Hits

• Employers with employees in Minnesota must designate and communicate their chosen accrual year for ESST or it defaults to the calendar year.
• Eligibility is based on a “good faith” determination that an employee will work at least eighty hours per year in Minnesota.
• Employees—not employers—control whether ESST is used.
• ESST used for a nonqualifying purpose is not protected and may be subject to discipline in accordance with the employer’s policies.
• Minnesota Paid Leave is excluded from ESST requirements.

These updates are essential to maintaining compliance and managing ESST effectively. Below is a detailed breakdown of what the new administrative rules say and what it means for employers.

Accrual Year

Employers must designate and clearly communicate the accrual year to each employee. If no accrual year is defined, it defaults to the calendar year.

Any changes to the accrual year must be:

• communicated in writing before the change takes effect, consistent with Minnesota’s Wage Theft Law; and
• structured so as to not to negatively impact an employee’s ability to accrue ESST.

Hours Worked and Eligibility

Eligibility: An employee is eligible for ESST based on a “good faith” determinationof whether an employee is anticipated to perform work for at least eighty hours per year in Minnesota. “Good faith” means the employer, at a minimum, evaluated the employee’s anticipated work schedule and location of hours in a way that is not knowingly false or in reckless disregard of the truth.

Determining hours worked for exempt employees: For exempt employees, an employer cannot deduct more ESST than the number of hours for which the employee is deemed to work for accrual purposes when they take a full day of ESST.

Indeterminate shift: For employees with indeterminate shifts (i.e., a shift defined by business needs rather than a specific number of hours), employers must calculate ESST deductions using one of three methods:

• the hours worked by the replacement worker (if any),
• the hours worked by the employee in the most recent similar shift of an indeterminate length, or
• the greatest number of hours worked by a similarly situated employee (if any) who worked the shift for which the employee used ESST.

If an employee uses ESST after beginning a shift of indeterminate length, the employer must use one of the above methods and deduct from the employee’s available ESST the amount associated with the selected option minus the hours already worked by the employee during the shift.

Time Credited and Increments of Accrual

Crediting accrual: ESST must be “credited” (i.e., accrued and available for use) by the regular payday following each corresponding pay period, based on all hours worked. ESST is considered “accrued” when the employer credits the time.

Increment of time accrued: Employers are not required to credit employees with less than hour-unit increments of ESST. For example, an employee who works 120 hours will accrue four hours of ESST (120 ÷ 30 = 4) and will not earn another hour until the employee works another thirty hours.

Rehire: For employees rehired within 180 days, the maximum reinstatement of previously accrued ESST is eighty hours, unless the employer agrees to a higher amount or is otherwise required by law.

Accrual and Advancing Methods

If an employer chooses to “advance” ESST to employees, it must be calculated at no less than the standard rate of one hour of ESST per every thirty hours worked. Employers are not required to advance more than forty-eight hours. However, if the advanced amount falls short of what the employee accrued based on hours worked, the employer must make up the difference within fifteen calendar days of the employee’s actual hours surpassing the anticipated amount.

Changes to accrual methods must be communicated in writing, consistent with Minnesota’s Wage Theft law, and cannot take effect until the first day of the next accrual year. Employers that fail to provide timely written notice must maintain the existing accrual method, unless the employee agrees otherwise.

Importantly, the administrative rules clarify that employers that frontload ESST are not required to also provide accrual—it is one or the other.

Employee Use

Employers cannot require employees to use ESST. The right to use—or not use—ESST belongs to the employee. If an employee chooses not to use ESST, the resulting absence is unprotected.

Incentives

If a bonus, reward, or other incentive is tied to a specified goal such as hours worked, products sold, or perfect attendance, and an employee fails to meet that goal due to ESST use, the incentive may be denied—unless the same incentive is paid to employees on any other type of leave.

Reasonable Documentation

Employees who fail to provide reasonable documentation under Minn. Stat. § 181.9947, subd. 3 are not protected under the ESST law. Employers must clearly communicate any documentation requirement and give employees a reasonable amount of time to provide it.

Misuse of ESST

Misuse of ESST—defined as using ESST for a purpose not covered under Minn. Stat. § 181.9447, subd. 1—is not protected under the law and may be subject to employer discipline.

Notwithstanding the timelines provided in Minn. Stat. § 181.9447, subd. 3(a), employers may require reasonable documentation when there is a pattern or clear instance of suspected misuse by the employee, including when:

• an employee repeatedly uses ESST on their scheduled workday immediately before or after a scheduled day off, vacation, or holiday;
• an employee repeatedly uses ESST in increments of less than thirty minutes at the start or end of a scheduled shift;
• an employee uses ESST on a day for which the employer previously denied the employee’s request to take other paid leave; or
• documentation or other evidence conflicts with the employee’s claimed use of ESST.

Requiring reasonable documentation in these circumstances is not retaliation. However, employers cannot deny an employee’s future use of ESST for a qualifying purpose based only on past misuse or suspicion of misuse.

More Generous Sick and Safe Time Policies

Excess paid time off (PTO): Excess PTO and other paid leave is subject to ESST minimum standards only when the leave is being used for a qualifying ESST purpose.

Minnesota Paid Leave: Minnesota Paid Leave is explicitly excluded from ESST requirements. The rules clarify that Minnesota Paid Leave qualifies as an “other salary continuation benefit,” meaning it is not subject to ESST standards even when used for an ESST-covered reason. Without this distinction, employers would have faced the administrative burden of applying ESST requirements to Minnesota Paid Leave—a complication that has now been avoided.

Ogletree Deakins’ Minneapolis office will continue to monitor developments and will post updates on the Leaves of Absence and Minnesota blogs as additional information becomes available.

In addition, the Ogletree Deakins Client Portal covers legal developments in state and major locality paid sick leave laws, including Minnesota’s Earned Sick and Safe Time requirements, as well as state laws requiring notice of wage and hour changes (as in Minnesota’s Wage Theft Law). Premium-level subscribers have access to comprehensive updated law summaries and policies; Snapshots and Updates are complimentary for all registered client users. For more information on the Client Portal or a Client Portal subscription, please email clientportal@ogletree.com.

Follow and Subscribe
LinkedIn | Instagram | Webinars | Podcasts

Quick Hits

• In EEOC v. SkyWest Airlines, Inc., the Fifth Circuit upheld a lower court’s ruling that Title VII plaintiffs do not need to take steps to reduce their damages for emotional distress.
• A Dallas-Fort Worth International Airport parts clerk sued SkyWest Airlines for sexual harassment and retaliation, and a Dallas jury awarded her $2 million in punitive damages and $170,000 for emotional harm, an award later reduced to statutory cap of $300,000.
• The Fifth Circuit upheld the admission of the plaintiff’s text messages to her husband as evidence of her mental and physical state during the harassment.
• The ruling is binding on employers in Louisiana, Mississippi, and Texas, and underscores the importance of prompt, thorough investigations into workplace harassment complaints.

Title VII prohibits workplace discrimination, harassment, and retaliation based on sex and other legally protected characteristics. Sexual harassment creates a legally actionable hostile work environment when the unwelcome conduct is either so severe or so pervasive that a reasonable person would consider the workplace intimidating, abusive, or offensive.

Background on the Case

A parts clerk for SkyWest Airlines at the Dallas-Fort Worth International Airport alleged that several coworkers, including a maintenance supervisor, subjected her to sexual harassment, including asking if she liked “whips and chains and leathers,” joking about selling her as a prostitute, and displaying pornographic images on computer screens. She claimed that the coworkers frequently joked about rape—up to forty times in a single day. At the time, the plaintiff sent texts to her husband about the harassment.

The employee told her supervisor about the harassment, and he told her that taking any action in response “would just put a larger target on [her] back.” As a result, the employee suffered headaches, nightmares, and vomiting. She started taking antidepressants and took a medical leave of absence. The harassment continued when she returned to work, and she reported it to a human resources manager. While the plaintiff was out on paid administrative leave, the HR manager interviewed witnesses, gave written warnings to some employees, and ordered some employees to undergo additional training. The plaintiff eventually decided to accept the airline’s early retirement offer.

On the plaintiff’s behalf, the U.S. Equal Employment Opportunity Commission (EEOC) sued SkyWest for sexual harassment and retaliation under Title VII. It argued that the internal investigation was insufficient and ineffective. To recover punitive damages, the EEOC needed to prove that SkyWest acted with malice or reckless indifference to the employee’s right to a workplace free of discrimination and harassment based on sex.

In November 2024, a Dallas jury decided that the plaintiff was harassed based on her sex and that SkyWest failed to take prompt remedial action. The jury awarded $2 million in punitive damages and $170,000 for emotional harm. It also found SkyWest did not retaliate against the plaintiff.

SkyWest moved for a new trial, arguing that the federal district court erroneously admitted the plaintiff’s text messages describing the harassment to her husband and others as evidence. The airline also argued that the court failed to instruct the jury to limit compensatory damages for emotional distress. It contended that Title VII plaintiffs have a duty to mitigate their losses by, for example, going to therapy or taking medication.

In March 2025, the U.S. District Court for the Northern District of Texas denied the airline’s motion for a new trial and reduced the damages down to the statutory cap to $300,000. It found that SkyWest did not make a good-faith effort to comply with Title VII because the HR manager “did not interview many of the employees implicated by [the plaintiff’s] allegations; did not subject those employees whom she did interview to fulsome questioning; did not follow her standard practice of writing an investigative summary at the investigation’s conclusion; and subjected the employees whom she found to have violated SkyWest’s sexual harassment policy to lenient corrective action, or, in one case, no corrective action at all.”

The district court stated that “even if Title VII imposes some duty to mitigate compensatory damages, it does not impose a duty to mitigate emotional harm.”

Fifth Circuit Ruling

The Fifth Circuit concluded the text messages were admissible because they described events as they happened contemporaneously, and they reflected the plaintiff’s mental and physical state at the time. The court reasoned that whether the plaintiff “subjectively perceived the harassment as abusive” was relevant to the case.

The Fifth Circuit also held that Title VII plaintiffs are not required to mitigate damages for emotional distress. The court reasoned that because the statute imposes a mitigation requirement for backpay, but includes no comparable requirement for compensatory damages, the U.S. Congress did not intend to impose a duty to mitigate compensatory damages generally. The court further concluded that, even if some duty to mitigate compensatory damages existed, it would not extend to emotional distress because there is no well-established common-law principle requiring plaintiffs to mitigate that type of harm. The Fifth Circuit aligned with the majority of federal courts that have addressed this issue.

The Fifth Circuit further affirmed the jury’s punitive damages award. The court held that evidence that the maintenance supervisor actively participated in the harassment, despite receiving regular sexual harassment training, was sufficient to support a finding that SkyWest acted with malice or reckless indifference. The court held that deficiencies in the HR investigation—including randomly selecting only some witnesses for interviews, failing to ask relevant follow-up questions, and disciplining no one for the supervisor’s conduct—allowed the jury to conclude that SkyWest failed to establish a good-faith defense to punitive damages.

Key Takeaways

Employers can show a good-faith effort to comply with Title VII by distributing a clearly written policy prohibiting sexual harassment, providing training on sexual harassment, and investigating an employee’s sexual harassment complaints. Taking prompt corrective actions to prevent future violations may help to reduce an employer’s liability. In this case, the Fifth Circuit found that, although SkyWest had a sexual harassment policy and provided training, deficiencies in its internal investigation demonstrated that SkyWest could not establish a good-faith defense to punitive damages.

Ogletree Deakins’ Employment Law Practice Group will continue to monitor developments and will post updates on the Employment Law, Louisiana, Mississippi, Texas, and Workplace Investigations and Organizational Assessments blogs as additional information becomes available.

Tiffany Stacy is a shareholder in Ogletree Deakins’ San Antonio office.

Shaina E. Hicks is of counsel 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.

Follow and Subscribe
LinkedIn | Instagram | Webinars | Podcasts