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A No-Go for Employees’ Anti-Trust Claims Based on High-End No-Hire Agreements

Posted: | Category: Restrictive Covenants

By: A No-Go for Employees’ Anti-Trust Claims Based on High-End No-Hire Agreements

Recently, the United States Court of Appeals for the Second Circuit upheld the dismissal of a class action against defendants Saks Inc., Gucci, Prada, Loro Piana, Brunello Cucinelli and other luxury good manufacturers.

The Plaintiffs claimed the luxury good manufacturer defendants violated Federal Anti-Trust laws by entering into no-hire agreements with Saks. In 2023, we noted that the State of California came to the defense of the employees joining an amicus curiae brief.  

The agreements at issue were entered into between the luxury good defendants and Saks as the luxury good defendants agreed not to hire employees who were employed by Saks within the previous six months, unless managers from both companies approved the hire. Plaintiffs claimed that such agreements restrained competition, suppressed wages, and limited employee mobility.

The Court of Appeals agreed that the trial court got it right under several levels of analysis, so it’s a no-go on the employees’ appeal.

The Court of Appeals concluded that these were not per se unlawful because the agreements were not horizontal restraints on trade, and primarily impacted the vertical relationships among the luxury good defendants and Saks.  

The Court then applied the Rule of Reason analysis to the Complaint and concluded that the plaintiffs failed to show an actual adverse effect on competition in the marketplace. It was not enough to show that a specific plaintiff was harmed, but they failed to demonstrate an adverse effect on competition market-wide. The Court reviewed the operative complaint and found that it alleged harm in a purely conclusory manner without specific allegations that there was national market-wide suppression of compensation or mobility among all businesses employing such workers.

The Court of Appeals did not mention amicus briefing from any of the State Attorneys General.

What Employers Should Do In Light of This Decision

Employers need to be cognizant that this case was adjudicated under the Federal Sherman Act, many states, like California have their own anti-trust laws that may be interpreted differently.

Employers seeking guidance on no-hire, no-poach or covenants not to compete involving California employees should seek counsel, including Dan M. Forman and CDF’s Trade Secret Practice Group.

President Trump Nominates New NLRB General Counsel

Posted: | Category: Labor Law - NLRB

By: President Trump Nominates New NLRB General Counsel

According to the March 24 Congressional Record, President Trump nominated Morgan Lewis labor law attorney Crystal Carey as the new National Labor Relations Board General Counsel.    

Ms. Carey has been practicing for approximately fifteen and a half years. She spent time as an attorney with the Board from November 2009 through 2018, before joining Morgan Lewis. She previously practiced in Morgan Lewis’ Philadelphia office and moved to the New York office in 2022. She was promoted to Partner five months ago. 

The NLRB GC has significant power to shape labor law policy across the country as the chief prosecutor and overseer of the NLRB Division of Advice, among other roles.   

Existing Acting NLRB GC William Cowen will likely remain in the position until Ms. Carey’s nomination is confirmed. As we learn more about Ms. Carey and as the confirmation process moves forward, we will continue to keep you updated.  

EEOC Defines Unlawful DEI

Posted: | Category: HR - Diversity, Equity and Inclusion (DEI)

By: EEOC Defines Unlawful DEI

Yesterday, the Federal Equal Employment Opportunity Commission published its guidance entitled: What You Should Know About DEI-Related Discrimination at Work.

While the term “illegal DEI” has been discussed at length over the last two months, including in various Executive Orders, this is the first time that an attempt has been made by the Trump administration to define it and publish a definition.

In the EEOC publication, which acts as an FAQ, the EEOC explains the contours of prohibited DEI as follows:

EEOC Definition of Prohibited DEI

Among other things, Title VII bars discrimination (“disparate treatment”) against applicants or employees in hiring, firing, compensation, or any term, condition, or privilege of employment. The prohibition against discrimination applies to a wide variety of aspects of employment. In order to allege a colorable claim of discrimination, workers only need to show “some injury” or “some harm” affecting their “terms, conditions, or privileges” of employment.

The prohibition against disparate treatment, including DEI-related disparate treatment, includes disparate treatment in:

  • Hiring
  • Firing
  • Promotion
  • Demotion
  • Compensation
  • Fringe benefits
  • Access to or exclusion from training (including training characterized as leadership development programs)
  • Access to mentoring, sponsorship, or workplace networking/networks
  • Internships (including internships labeled as “fellowships” or “summer associate” programs)
  • Selection for interviews, including placement or exclusion from a candidate “slate” or pool;
  • Job duties or work assignments.

Title VII also prohibits employers from limiting, segregating, or classifying employees or applicants based on race, sex, or other protected characteristics in a way that affects their status or deprives them of employment opportunities. This prohibition applies to employee activities which are employer-sponsored (including by making available company time, facilities, or premises, and other forms of official or unofficial encouragement or participation), such as employee clubs or groups. In the context of DEI programs, unlawful segregation can include limiting membership in workplace groups, such as Employee Resource Groups (ERG), Business Resource Groups (BRGs), or other employee affinity groups, to certain protected groups.

Unlawful limiting, segregating, or classifying workers related to DEI can arise when employers separate workers into groups based on race, sex, or another protected characteristic when administering DEI or any trainings, workplace programming, or other privileges of employment, even if the separate groups receive the same programming content or amount of employer resources. Employers instead should provide “training and mentoring that provides workers of all backgrounds the opportunity, skill, experience, and information necessary to perform well, and to ascend to upper-level jobs.” Employers also should ensure that “employees of all backgrounds…have equal access to workplace networks.”

The EEOC further explained that DEI considerations of race, sex, or another protected characteristic does not have to be the exclusive (sole) reason for an employer’s employment action or the “but-for” (deciding) factor for the action for the DEI to be illegal. An employment action still is unlawful even if race, sex, or another Title VII protected characteristic was just one factor among other factors contributing to the employer’s decision or action.

The EEOC also explained that if an employer cannot justify taking an employment action based on race, sex, or another protected characteristic because the employer has a business necessity or interest in “diversity,” including preferences or requests by the employer’s clients or customers.

Finally, the EEOC also sanctioned DEI-related harassment claims explaining that “an employee may be able to plausibly allege or prove that a diversity or other DEI-related training created a hostile work environment by pleading or showing that the training was discriminatory in content, application, or context. In cases alleging that diversity trainings created hostile work environments, courts have ruled in favor of plaintiffs who present evidence of how the training was discriminatory (for example, in the training’s design, content, or execution) or, at the motion-to-dismiss stage, who make plausible allegations that explain how the training was discriminatory. For this portion of the Guidance, the EEOC cites to its own briefs submitted in connection with a contested lawsuit.

DOJ Partnering With EEOC On DEI Eradication and Enforcement

This is not the only publication issued yesterday The EEOC and DOJ have also jointly published an information sheet for employees explaining to job applications and employees what illegal DEI looks like and what to do if they recognize DEI in their workplaces or prospective workplaces.

Tips for Employers

Now that the EEOC has outlined what constitutes illegal DEI, employers should use these guidelines in reevaluating their current DEI programs to determine if they are inconsistent with the EEOC’s definition of DEI, and, if so, consider what actions to take as a result. There is no question that the Trump administration and current EEOC will be pursuing aggressive enforcement against businesses that it believes engage in illegal DEI. It recently commenced an investigation into 20 large law firms’ DEI practices. It remains unclear what the courts will do with the EEOC guidelines and whether courts will interpret Title VII consistent with the EEOC. This is an emerging and complicated issue and California employers should be looking closely at their DEI policies with experienced legal counsel.

 

The “No Robo Bosses” Act (SB 7): How California’s New Bill Targeted at AI Could Impact the Workplace

Posted: | Category: California - General

By: The “No Robo Bosses” Act (SB 7): How California’s New Bill Targeted at AI Could Impact the Workplace

The newly introduced “No Robo Bosses Act” seeks to regulate the use of AI in the workplace and prevent automated decision-making processes in employment decisions. For employers, understanding the implications of this bill is essential to maintaining compliance and minimizing legal risks, especially as AI becomes increasingly integrated into workplace practices. If enacted, SB 7 would have an immediate impact on employers using AI for workforce management.

California State Sen. Jerry McNerney, who introduced the bill, helped set federal AI policy while he previously served in Congress, where he co-founded the Artificial Intelligence Caucus and authored the AI in Government Act. “Businesses are increasingly using AI to boost efficiency and productivity in the workplace. But there are currently no safeguards to prevent machines from unjustly or illegally impacting workers’ livelihoods and working conditions,” Sen. McNerney said. However, we noted that the California Civil Rights Division is currently considering similar regulations regarding automated decision-making systems (“ADS”). See our prior blog and the status of proposed regulations.

The bill seeks to stop California employers from relying solely on ADS for critical workplace decisions—like hirings, terminations, disciplinary actions, and promotions. Under SB 7, “worker” means any person who is a job applicant to, an employee of, or an independent contractor providing service to, or through, a business or a state or local governmental entity in any workplace. Therefore, it would apply to job applicants and independent contractors, not just employees.

The bill defines an ADS as any computational process that uses machine learning, statistical modeling, data analytics, or artificial intelligence to produce simplified outputs—such as a score, classification, or recommendation—that assist or replace human decision-making and materially impact individuals. However, common workplace technologies were omitted from the definition, such as spam email filters, firewalls, antivirus software, and identity management tools.

In terms of enforcement, SB 7 would prohibit an employer from discharging, threatening to discharge, demoting, suspending, or in any manner discriminating or retaliating against any worker for taking certain actions asserting their rights under this Act. In addition, it would require the Labor Commissioner to enforce its provisions and would authorize a public prosecutor or any worker who has suffered a violation or their representative to bring a civil action.

If the bill is signed into legislation, California employers would need to take steps to ensure compliance in several ways, including but not limited to:

  1. Human Oversight Requirement: Employers would need to ensure that any employment decision influenced by AI also passes through meaningful human review. AI cannot be the sole source of employment-related decisions under SB 7.
  2. Transparency: Employers would be required to notify employees, in writing, when AI tools are being used in decision-making processes. The bill would further require the employer to maintain a list of all ADS currently in use and would require the notice to include the updated list. This could necessitate revising employee handbooks and updating onboarding procedures to include AI usage disclosures.
  3. Data Privacy: Employers must ensure that data used in AI-decision making is handled responsibly and securely.
  4. Predictive Behavior Analysis: If AI-driven decisions result in disparate impacts on protected classes, employers could face discrimination claims. Implementing robust auditing processes of ADS and conducting regular bias testing will be essential to mitigate this risk.
  5. An ADS cannot obtain or infer information about an employee’s immigration status, ancestral history, health history, credit history, or other statuses protected by state law: Employers would need to implement protections in their ADS in this regard.
  6. Enhanced Training for Employees: Employers may consider additional specific training on AI and provide procedures to oversee AI-driven decisions.
  7. Appeals: Employees would have opportunity for appealing decisions made by an ADS. Employers would need to work on an appeals process.

As AI continues to gain traction across industries to improve efficiencies and reduce costs, it is important for California employers to proactively assess their current practices and implement safeguards if they use AI in employment decisions. CDF will monitor the status of the “No Robo Bosses” bill as it moves through the California legislative system.

 

Enforcement Strategy Against DEI In Education and Private Sector Outlined in New Executive Order and U.S. Department of Education Publications

Posted: | Category: HR - Diversity, Equity and Inclusion (DEI)

By: Enforcement Strategy Against DEI In Education and Private Sector Outlined in New Executive Order and U.S. Department of Education Publications

Despite the issuance of a sweeping national federal court injunction against President Donald Trump’s January 20, 2025 and January 21, 2025 Executive Orders that seek to eliminate diversity, equity and inclusion (“DEI”) initiatives in government agencies, educational institutions, and the private sector, the Trump Administration is moving forward with renewed efforts to curtail DEI programing and initiatives across the country.

On February 28, 2025, just one week after the injunction was issued, the United States Department of Education’s Office for Civil Rights (“OCR”) published the “Frequently Asked Questions About Racial Preferences and Stereotypes under Title VI of the Civil Rights Act” (“FAQ”). The FAQ was drafted in response to anticipated questions following the OCR’s publication of the “Dear Colleague Letter: Title VI of the Civil Rights Act following the United States Supreme Court’s decision in Students for Fair Admissions v. President & Fellows of Harvard College, 600 U.S. 181 (2023) (“SFFA”) on February 14, 2025. The FAQ specifically addresses issues related to racial classifications, preferences, and stereotypes and explains how the OCR under the Trump Administration will interpret and enforce cases in this area under Title VI (the education-based counterpart to Title VII of the Civil Rights Act that deals with similar employment-based claims).

The FAQ answers a total of fifteen separate questions ranging from issues related to the Trump Administration’s interpretation of the groundbreaking SFFA opinion to how the administration will enforce Title VI laws with respect to racial discrimination, preferencing and stereotyping. The FAQ provides specific examples of what may be prohibited conduct that constitutes discrimination or creates a hostile environment, as well as limitations on First Amendment protected speech at the secondary and post-secondary level.

The FAQ outlines some key points that both employers and educational institutions should consider going forward with respect to any DEI programs to curtail potential legal challenges. The FAQ did not state that DEI programs violate SFFA, but notes that institutions may not engage in discrimination in implementing DEI programs. The FAQ specifically cautions that such programs must not be used to veil discriminatory policies and may not treat students differently (based on race), create a hostile environment for particular groups, or engage in racial stereotyping, preferences or quotas.

The FAQ notes that an assessment of the legality of DEI programs will “depend on the facts and circumstances of each case.” (See Question 8 of FAQ). However, the government did provide examples of specific conduct to avoid. First, the use of race as a “stereotype or a negative” is unlawful (that is assuming one’s membership in a particular racial group means that they will think the same way as other members, be the representative of a particular culture, or contribute to diversity in the same way as another member of that race). Next, the use of membership in any racial group as a “plus factor,” as set forth in SFFA is prohibited (using race as a plus factor for one group “is necessarily a negative factor for another group”). Consistent with recent guidance from the Administration (See Attorney General Pam Bondi February 5, 2025 Memorandum), the FAQ provides that programs focused on interests in particular cultures, heritages, and areas of the world would not violate Title VI, assuming they are open to–they remain lawful as long as they do not exclude others or create a hostile environment.

Just days after the FAQ was published, President Trump signed another DEI-related Executive Order on March 6, 2025 (“March 2025 Executive Order”). In the March 2025 Executive Order, President Trump specifically attacked the law firm Perkins Coie LLP for allegedly engaging in racial discrimination based on the alleged use of “percentage quotas [ ] for hiring and promotion on the basis of race and other categories prohibited by civil rights laws” and the exclusion of “applicants on the basis of race for its fellowships.” On March 11, 2025, Perkins Coie sued the Trump Administration raising multiple constitutional challenges to the March 2025 Executive Order.

Both the FAQ and the March 2025 Executive Order provide important insight regarding the method by which the Trump Administration will target DEI programs and initiatives. Companies that employ race-based quotas are open to attack, as well as those who maintain DEI related programs that exclude other groups based on race or any other protected category. Indeed, the March 2025 Executive Order directs the Chair of the Equal Employment Opportunity Commission (“EEOC”) to review the practices of other unnamed law firms to ensure that they do not reserve certain positions for individuals of a preferred race (i.e., a set aside or quota) or otherwise make decisions related to promotion, client access, trainings, event participation, or travel on a discriminatory basis. The Executive Order directs the EEOC Chair to investigate and take action against law firms who do business with Federal entities to ensure compliance with race and sex-based non-discrimination laws.

While President Trump’s efforts to dismantle DEI programs and challenges thereto are happening in real time, what is evident is that DEI programs are currently an issue that is hotly contested on both sides, and will likely continue to be for the months to come. Staying up to date on the current legal landscape and reviewing DEI policies are of primary importance during this time. CDF will continue to monitor these developments and report on any updates.

PAGA Update: Key Lessons for Defending and Settling PAGA Cases

Posted: | Category: California - General Tags:

By: PAGA Update: Key Lessons for Defending and Settling PAGA Cases

By: PAGA Update: Key Lessons for Defending and Settling PAGA Cases

Two recent Private Attorney General Act (PAGA) cases underscore the importance of effectively using procedural motions in defending such cases.

1.  Rodriguez v. Packers Sanitation Services LTD., LLC

The first case, Rodriguez v. Packers Sanitation Services LTD., LLC, involved the question of arbitrability in a so-called “headless” PAGA action. In a headless PAGA action, the plaintiff seeks to avoid arbitration by filing a complaint that asserts a PAGA claim solely on behalf of others while the PAGA plaintiff disclaims any individual claim for relief that would be subject to an arbitration.

In Rodriguez the California’s Fourth District Court of Appeal held that, in such cases, trial courts cannot order arbitration of the unasserted individual PAGA claims even if it is true that an individual PAGA claim is a necessary component of every PAGA action.

This decision is odds with the Second District Court of Appeal’s recently published decision in Leeper v. Shipt. In Leeper the appellate court held that trial courts may compel arbitration of unasserted individual PAGA claims because the court concluded that every PAGA action necessarily includes an individual PAGA claim. (For further analysis on Leeper see our prior blog post.)

The Rodriguez decision does not create a split of authority on the issue of whether every PAGA action includes an individual PAGA claim; the appellate court expressly declined to consider that issue. Instead, the Rodriguez decision concludes that trial courts resolving motions to compel arbitration must adopt the PAGA plaintiff’s representations about the scope of their PAGA claim.

However, the Rodriguez case will not necessarily lead to bad outcomes for California employers. In Rodriguez, the plaintiff represented to the appellate court that “he has forgone individual PAGA relief and [they] accepted that representation.” “As a result,” the appellate court found that he “will be precluded from taking a contrary position in the future” and the “conclusion that the complaint does not assert individual PAGA claims will be the law of the case.” In other words, the Rodriguez complaint will next be subject to a motion to dismiss for lack of standing.

Although the Rodriguez case will not necessarily lead to bad outcomes for California employers, it incorrectly places form over substance and will create waste. The appellate court should have given no credence to the plaintiff’s assertion that he has forgone relief under PAGA. It is well established that aggrieved employees cannot opt out of a PAGA settlement or judgment, and that a portion of any civil penalty award must be distributed to each aggrieved employee, including the plaintiff. Thus, PAGA does not allow aggrieved employees to forgo their share of a civil penalty award.

The Rodriguez decision also fails to recognize that, under Viking River v. Moriana and Adolph v. Uber, the arbitrable portion of a PAGA action is the threshold issue of whether the plaintiff is an aggrieved employee, not the ultimate issue of whether the court should award a civil penalty. Accordingly, where a PAGA plaintiff signed an agreement requiring arbitration of any claim, dispute, or controversy concerning alleged Labor Code violations, trial courts should order arbitration so long as the plaintiff claims that they are an aggrieved employee under PAGA—that they suffered a Labor Code violation. It should not matter that the plaintiff may claim to have “purely representative” PAGA claims and to have disavowed any “individual relief.”

The Rodriguez decision indicates that it would be prudent for employers to seek dismissal of headless PAGA actions as deficiently pled. However, that may be a trap for the unwary. If an employer seeks dismissal based on representations in the complaint that the plaintiff has no individual PAGA claim and is not seeking individual relief, the plaintiff will oppose the motion by relying on allegations that they are an aggrieved employee, which is sufficient to establish standing under PAGA. The plaintiff will win on that argument, and then claim the employer waived their right to enforce the arbitration agreement by litigating that dispute. Do not fall into this trap. Instead, consider filing a motion for dismissal of the headless PAGA action and, in the alternative, to compel arbitration.

2.  Moniz v. Adecco USA, Inc.

The second case, Moniz v. Adecco USA, Inc., involved a PAGA settlement between one employee (Moniz) and the employer. A second employee, Correa, who had filed a separate PAGA action with overlapping claims challenged the settlement leading to a series of appeals. Ultimately, the trial court approved the settlement, over Correa’s objections, denied Correa’s request for a service award and largely denied her request for an award of attorney’s fees. Unsurprisingly, Correa again appealed. Following the California Supreme Court’s decision in Turrieta v. Lyft Inc. the Moniz court concluded that Correa did not have standing to intervene, move to vacate, or appeal the judgment and settlement in Moniz’s separate PAGA action.

The Moniz court also rejected Correa’s arguments that she had personal interest sufficient to provide her standing to intervene and object to Moniz’s settlement. The “personal interests” asserted by Correa included: (1) bringing a PAGA claim, (2) collecting her share of 25% of recovered penalties, (3) collecting attorneys’ fees and costs, (4) a prevailing party determination that would protect her from any claim to pay the employer’s costs, and (5) collecting a service award. The Moniz court concluded that these “personal interests” arise from PAGA and are mostly derivative of her status as a representative of the state as a PAGA plaintiff and therefore were not sufficient to grant her standing considering the Supreme Court’s reasoning in Turrieta.

In light of Moniz, employers should strenuously oppose attempts by PAGA plaintiffs and their counsel to intervene, object, or oppose settlements in other PAGA cases with overlapping claims made with different employees.

These cases provide valuable insights for employers on the complexities of PAGA actions and the importance of staying informed about legal developments in this area to effectively manage compliance and litigation strategies. CDF will continue to monitor and report on such developments.

Employee Replaced by White Male Coupled With Employer’s Poor Investigation Fuels Disparate Treatment Claim

Posted: | Category: Race Discrimination

By: Employee Replaced by White Male Coupled With Employer’s Poor Investigation Fuels Disparate Treatment Claim

In Lui v. DeJoy, the Ninth Circuit held that a woman of Chinese ethnicity’s demotion, when coupled with a white male replacing her position, gave rise to an inference of discrimination. The employer’s investigation into the demotion and the employee’s related complaints lacked depth and independence and therefore was insufficient to show a legitimate, nondiscriminatory reason for the demotion.

Factual Background

Dawn Lui, a woman of Chinese ethnicity, worked for the United States Postal Service (“USPS”) since 1992 and was promoted to Postmaster of the Shelton, Washington Post Office in 2014. After her promotion, Lui alleged that she was targeted with false complaints related to her sex, race, and national origin. Lui’s supervisor reported his concerns about Lui’s treatment to Human Resources and alleged that the HR Manager worked closely with one of Lui’s alleged perpetrators to pursue discipline against Lui. USPS asked Lui’s supervisor to demote Lui based on “Unacceptable Conduct[.]”He refused because he believed the allegations were false. USPS replaced Lui’s supervisor with a manager who approved Lui’s demotion. USPS then replaced Lui with a white man.

Lui internally appealed her demotion to Karen Bacon, the Tacoma Postmaster. Bacon’s investigation consisted of a documentary review of HR’s demotion decision and written complaints by other employees about Lui. Bacon affirmed the demotion. Lui filed suit against USPS alleging a hostile work environment; discrimination based on race, color, sex, national origin, and age; and retaliation. The district court granted summary judgment against Lui on all of her claims.

The Ninth Circuit’s Ruling

The Ninth Circuit reversed the district court’s grant of summary judgment on Lui’s disparate treatment claim.

Demotion Coupled with White Male Replacement Shows Inference of Discrimination

The Ninth Circuit held that Lui’s showing that she was: (1) demoted from her position at a lower salary and (2) replaced by a white man gave “rise to an inference of discrimination, and that is all she needs to show to satisfy the fourth element” of her prima facie discrimination claim.

To establish a prima facie case of discrimination the plaintiff must show that: (1) she belongs to a protected class; (2) she was qualified for the position; (3) she was subjected to an adverse employment action; and (4) that the position remained open and was ultimately filled by a person outside her protected class. The parties disputed only the fourth element. The Ninth Circuit explained that Lui properly satisfied the fourth element “merely by showing that she was replaced by someone outside her protected class.”

Bacon’s Investigation Did Not Establish Legitimate, Nondiscriminatory Reason for the Demotion

The Ninth Circuit also held that USPS’s investigation into Lui’s demotion did not satisfy USPS’s burden to show a legitimate, nondiscriminatory reason for the adverse employment action. The court pointed out that USPS (1) heard no live testimony; (2) never met any of the employees who submitted complaints about Lui; and (3) credited their written complaints even after Lui’s supervisor raised concerns that their complaints were motivated by racial animus. Under those circumstances, the court held that USPS’s investigation failed to establish that the demotion was an independent decision or the result of bias.

Takeaways for Employers

The court’s ruling emphasizes two critical elements of employment decision-making. First, recognizing the importance of employment decisions that raise an inference of discrimination, and having independent evidentiary support for the decision. Second, ensuring that there are strong, in-depth, independent investigations of employee discrimination complaints. When both of these issues arise, companies should proceed carefully and make sure their decisions are supported at each step.

If you have questions about your organization’s employee investigations or need assistance reviewing your policies, please contact one of our experienced labor and employment CDF attorneys.

 

Wilcox Fired? Not So Fast

Posted: | Category: Labor Law - NLRB

By: Wilcox Fired? Not So Fast

About a month ago, President Trump terminated the employment of NLRB Board Member Gwynne Wilcox. This left only two active Board members and stopped the NLRB in its tracks as it takes three members for the NLRB to have a quorum and issue decisions and make rulings.

The law is unclear whether the President has the right to summarily dismiss an NLRB Board Member. Wilcox filed a lawsuit with the District of Columbia District Court in Washington DC to fight the termination decision shortly after it was made, claiming it was a clear violation of the National Labor Relations Act.

Earlier today, Judge Berly A. Howell, who was appointed to the bench by President Obama, and was assigned the Wilcox case, granted NLRB Board Member Gwynne Wilcox’ motion for summary judgment and declared that “the termination of plaintiff Gwynne A. Wilcox was unlawful, in violation of the National Labor Relations Act and therefor null and void.” Judge Howell further declared that “Wilcox remains a member of the National Labor Relations Board” may only be removed “upon notice and hearing for neglect of duty or malfeasance in office, but for no other cause” in accordance with the National Labor Relations Act.

Wilcox’ returning to the NLRB restore the board’s three-member quorum and allow it to begin ruling on cases, and issuing injunctions and decisions. President Trump is expected to immediately seek to appeal this decision to the United States Court of Appeals for the District of Columbia and will likely seek an injunction prohibiting enforcement of Howell’s order during the pendency of the appeal. Ultimately, this case, along with other cases dealing with summarily dismissed government officials, will likely head to the United States Supreme Court for examination under that Court’s decision in Humphrey’s Executor from 1935.

Stay tuned!

Insight from the New NLRB General Counsel

Posted: | Category: Labor Law - NLRB

By: Insight from the New NLRB General Counsel

Last week, I attended the American Bar Association’s Mid-Winter Meeting for the Committee on Development Under the Law of the NLRA in Clearwater, Florida.

William Cowen, the new National Labor Relations Board (NLRB) General Counsel, was one of the featured speakers. Of course, he could not say too much, but GC Cowen did speak for over an hour. He was more candid than most government officials, which was appreciated by the attendees, who represent both the union and management side, as well as a number of NLRB officials and employees.

Here are some of the things he reported on that I thought many blog readers might be interested in, with a bit of my personal commentary:

  1. GC Cowen has only been there a few weeks, so he is still figuring things out day-to-day.
  2. GC Cowen’s view is that the NLRB is an executive agency and therefore he plans to follow the agenda set by the Executive Branch and the President of the United States. This means that things should get a lot more friendly for employers facing NLRB issues in the next four years.
  3. Approximately 30 of approximately 1300 NLRB employees took the government’s recent deferred resignation program. GC Cowen does not feel that will have a major impact.
  4. According to GC Cowen, there has been no detailed analysis of the NLRB budget yet. The Board does not expect to get any increase in funding. From GC Cowen’s perspective, flat funding would be ideal, but he has no sense of where it is going.
    • Please note that this statement was made prior to the announcement late last week that all federal agencies have to submit plans for budget cuts by March 13, so I guess we can predict now where it is going. I expect that the NLRB will have material budget cuts going forward causing even further backlogs.
  5. GC Cowen is a big proponent of settlement and plans to re-empower Regional Directors to handle settlements.
  6. Currently, according to GC Cowen, every Region is overworked and if the budget takes a major hit, it is only going to get worse.
  7. GC Cowen is going to take steps to minimize unfair labor practice (ULP) processing delays. From my perspective, this is going to be difficult to accomplish, if the Board is not given sufficient money in their operating budget and/or if material cuts in Board employees is implemented by DOGE.
  8. GC Cowen’s personal view is that NLRA preemption does not allow states to regulate areas that the NLRB regulates (for example captive audience meetings). It is unclear whether the NLRB will step in to assist the Cal Chamber and California Restaurant Association lawsuit challenging the California Captive Audience Meeting ban set forth in SB 399. GC Cowen certainly did not go that far.

The General Counsel of the NLRB is vested with significant power as the chief prosecutor of the agency. With the NLRB currently lacking a quorum, there are additional delegations of authority to the General Counsel related to operations, issuing of 10(j) injunctions and other functions. Over the next few months, we will learn a lot more about how GC Cowen will operate and how it will influence the landscape for United States labor law in the next four years and beyond.

Employer Not Required To Initiate Arbitration Following Court-Ordered Arbitration

Posted: | Category: HR - Arbitration Issues

By: Employer Not Required To Initiate Arbitration Following Court-Ordered Arbitration

The California Court of Appeal, Second Appellate District recently issued a clarifying decision in Michelle Arzate, et al. v. ACE American Insurance Company, addressing which party is responsible for initiating arbitration following a court order granting employer’s motion to compel arbitration. For employers, the decision offers essential guidance on structuring arbitration agreements to avoid ambiguity and potential disputes.

Key Case Details

The plaintiffs, employees of ACE American Insurance Company, filed a class action lawsuit alleging various wage and hour violations. ACE moved to compel arbitration based on an arbitration agreement (“Agreement”) between the parties. The trial court granted this motion and stayed the case pending arbitration. However, neither party initiated arbitration within the 30-day period specified in the Agreement, prompting the plaintiffs to request that the stay be lifted. The trial court ruled that ACE’s failure to initiate arbitration waived its right to arbitrate. On appeal, the California Court of Appeal reversed that decision, holding that the responsibility to initiate arbitration rested with the plaintiffs—the party asserting employment-related claims—rather than with ACE, the party requesting arbitration.

The Court of Appeal’s Reasoning

The Court of Appeal focused on the language of two documents:

  1. Language of the Arbitration Agreement: The agreement did not explicitly assign the duty of commencing arbitration to the employer. Instead, it used language that designated initiation to the party who “wants” to commence arbitration. Interpreting this broadly, the appellate court determined that the plaintiffs, as the claimants, were responsible for initiating arbitration, despite plaintiffs’ claims that they did not “want” to commence arbitration.
  2. AAA Rules Incorporated by Reference: The arbitration agreement incorporated the American Arbitration Association (AAA) rules, which clearly assign the responsibility for initiating arbitration to the “initiating party” identified as the claimant. Because the plaintiffs were the ones who filed the lawsuit, they were deemed the claimants and, therefore, responsible for initiating arbitration under the agreement’s terms.

The Court of Appeal rejected plaintiffs’ argument that the employer, ACE, being the party “wanting” arbitration, should be responsible for starting the process. They found this argument to be too narrow of an interpretation and emphasized that initiating arbitration is the duty of the party asserting claims, regardless of who originally requested arbitration. Ultimately, the appellate court concluded that the plaintiffs’ failure to initiate arbitration prevented the process from moving forward. The ruling underscores that advancing a case—even if by way of arbitration—is the responsibility of the claimant.

What This Ruling Means for California Employers

This decision carries several important implications for California employers:

  • Arbitration Agreements Should Be Clear: Employers should review their arbitration agreements to eliminate any ambiguity about which party is responsible for initiating arbitration. Clearly defining these obligations can help prevent disputes and streamline the arbitration process.
  • AAA Rules and Similar Provisions: If an arbitration agreement incorporates rules from organizations such as the AAA, ensure that employees are informed about these rules and their implications.
  • Minimize the Risk of Waiver: While the appellate court ruled that a failure to initiate arbitration does not automatically constitute a waiver, clear agreements help employers preserve their arbitration rights and avoid unwarranted challenges.
  • Consult Legal Counsel: Seek legal advice to ensure that arbitration clauses are enforceable and aligned with current case law developments.

If you have questions about your organization’s arbitration agreements or need assistance reviewing your policies, please contact one of our experienced labor and employment CDF attorneys.

CDF Webinar: Work Visas in a Shifting Landscape – What’s Changing for Employers in 2025?

Posted: | Category: Immigration - General, Labor & Employment Law Events

The ever-changing landscape of employment-based immigration continues to pose challenges for U.S. employers. With increased scrutiny on foreign national workers, compliance audits, and evolving nonimmigrant visa policies, companies must stay informed to successfully manage their workforce while avoiding legal pitfalls. Join CDF for an exclusive webinar featuring Richard Green, Partner & Chair of CDF’s Immigration Practice Group, who will break down the mechanics of nonimmigrant work visas and provide insights into the anticipated changes under the new administration. Whether your company sponsors H-1B, L-1, TN, or other nonimmigrant visas, this session will offer practical guidance to help you stay compliant and proactive in 2025. What You’ll Learn: H-1B Visa Updates & the Upcoming Cap Lottery – What to expect in 2025 Alternatives to H-1B Visas – L-1,…

Federal Court Temporarily Blocks Enforcement of President Trump’s Anti-Diversity Equity and Inclusion Executive Orders

Posted: | Category: HR - Diversity, Equity and Inclusion (DEI)

By: Federal Court Temporarily Blocks Enforcement of President Trump’s Anti-Diversity Equity and Inclusion Executive Orders

On February 21, 2025, the federal district court for the District of Maryland blocked President Donald Trump from enforcing a majority of two January 2025 Executive Orders that seek to eliminate diversity, equity and inclusion (“DEI”) initiatives in government agencies, educational institutions, and the private sector. The first Executive Order was signed on January 20, 2025, and is entitled “Ending Radical and Wasteful Government DEI Programs and Preferencing.” (the “First Order”). See our prior article on the First Order here. The second Executive Order was signed on January 21, 2025, and is entitled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” (the “Second Order”). (collectively “Executive Orders”).  

The court held that the Executive Orders impermissibly target the expression of views supportive of equity, diversity and inclusion and violates the First and Fifth Amendments of the United States Constitution. The federal court noted that the Executive Orders are in fact antithetical to federal anti-discrimination law:

“[E]nsuring equity, diversity, and inclusion has long been a goal, and at least in some
contexts arguably a requirement, of federal anti-discrimination law. But the
administration has declared ‘DEI’ to be henceforth ‘illegal,’ has announced it will be
terminating all ‘equity-related’ grants or contracts’—whatever the administration
might decide that means—and has made ‘practitioners’ of what the government
considers ‘DEI’ the targets of a ‘strategic enforcement plan.’”

The lawsuit was brought by four plaintiffs that include the Mayor and City Council of Baltimore, the National Association of Diversity Officers in Higher Education (“NADOHE”), the American Association of University Professors (“AAUP”), and the Restaurant Opportunities Centers United (“ROC United”). The plaintiffs represent a coalition of faculty, academic professionals, chief diversity officers and professionals, restaurant workers, and governmental representatives who work for institutions that receive federal government grants and contracts for their work in DEI. These groups sued President Trump, the U.S. Attorney General, and various other federal government agencies and agency heads based on the Executive Orders. National Association of Diversity Officers in Higher Education, et al. v. Donald J. Trump, et al., Case No. 1:25-Cv-00333-ABA (D. Md. 2025).  

The court held that the Executive Orders violated the plaintiffs’ freedom of speech and due process rights under the First and Fifth Amendments with respect to three primary provisions of the Executive Orders:

  1. Termination Provision (this provision requires that all executive agencies terminate equity-related grants or contracts);
  2. Certification Provision (this provision requires that all executive agencies include in every contract or award a certification that the federal contractor or grantee does not operate any programs promoting DEI that violate applicable Federal anti-discrimination law); and,
  3. Enforcement Threat Provision (this provision requires that the Attorney General take appropriate measures to end illegal discrimination and preferences, including DEI, to deter such programs and conduct compliance investigations to encourage such deterrence, which largely targets private companies and educational institutions). 

The Court noted that all three provisions of the Executive Orders are unconstitutional because they are vague, abridge freedom of speech in the form of viewpoint discrimination, and condition the award of federal funding on viewpoints that are consistent with the Trump administration’s ideology. “[A]lthough the government may cho[se] to fund one activity to the exclusion of another [ ], it may not punish government contractors or grantees ‘because of their speech on matters of public concern.’” 

The court enjoined the Certification Provision and Enforcement Threat Provisions because they raised First Amendment concerns given that they impermissibly forced the “plaintiff’s to either restrict their legal activities and expression that are arguably related to DEI or forgo federal funding altogether.” Similarly, the court held that the Enforcement Threat Provision, which broadly applies to the private sector as well, violated the Constitution because it threatens the “initiation of enforcement action against Plaintiffs (in the form of civil compliance investigations) for engaging in protected speech.” The Executive Orders also unconstitutionally imposed content-based “viewpoint discrimination” in violation of the First Amendment, which prohibits the government from “seeking to regulate speech” as a condition of funding (i.e., the termination of government contracts required under the Termination Provision).  

The court also held that the Executive Orders violated the plaintiff’s Fifth Amendment due process rights on grounds that they are unconstitutionally vague (with a strong likelihood of arbitrary and discriminatory enforcement). Moreover, the court determined that the Executive Orders failed to provide sufficient notice to grantees regarding whether and how they could adapt their conduct to avoid terminating their respective grants or contracts. 

Under the preliminary injunction, the only remaining provision of the Executive Orders in place includes the provisions authorizing the Attorney General to prepare reports or conduct limited investigations. However, the Termination Provision, Certification Provision, and Enforcement Threat Provisions are no longer enforceable. It is expected that the Trump Administration will challenge this ruling at the district court level and likely in further appellate proceedings. In the meantime, the preliminary injunction provides a temporary reprieve regarding anti-DEI efforts by the Trump Administration.  

How A Smart Watch May Lead To Unintended Concerns For Employers

Posted: | Category: HR - General

By: How A Smart Watch May Lead To Unintended Concerns For Employers

By: How A Smart Watch May Lead To Unintended Concerns For Employers

New technologies continue to transform the workplace and raise additional legal considerations for employers. Wearable technologies such as smart glasses, watches, and exoskeleton suits are valuable tools that help workers increase productivity. However, these technologies may also collect and track personal information, including location data, brain activity, and other medical information.

Several states and regulatory agencies enacted laws and regulations to protect employees using wearable technology in the workplace. Employers who are implementing or planning to implement wearable technology should be aware of the following key considerations:

1.    Wearable Technologies and the ADA:

Wearable devices with sensors may be considered “medical examinations” under the Americans with Disabilities Act (ADA). For example, some devices collect data on heart rate, blood pressure, eye movement, and more. Additionally, employees might be required to disclose health information before being permitted to use wearable technologies. In these cases, employers must limit medical examinations and disability-related inquiries to situations that are job-related and consistent with business necessity. And, any medical information should be stored in a secure manner. Employers may also need to engage in discussions about reasonable accommodations if the employer learns about a medical condition or disability as a result of the wearable technology.

2.    Avoiding Discrimination Based on Sensitive Data:

Employers must ensure that the data collected from wearable technologies is not used to discriminate against employees based on protected characteristics, such as race, color, religion, sex, age, or disability. For example, using wearable data to infer that an employee is pregnant and taking adverse actions based on that assumption could be actionable.  Also, tracking an employee’s location to identify visits to medical providers and then improperly investigating the purpose of those visits could violate privacy laws and lead to discrimination or retaliation claims.

3.    Privacy Practices and Data Security:

Before collecting sensitive medical and personal data through wearable technologies, employers should review their privacy policies to ensure that proper notice has been provided to employees. In California, an employer governed by the CCPA/CPRA may need to update its privacy policy and notice to employees. It is also critical that employers maintain this sensitive information securely and in compliance with applicable state and federal regulations.

While wearable technologies can significantly improve workplace efficiency, they also raise significant concerns regarding the collection and safeguarding of sensitive personal information and the potential fallout from having that knowledge. Employers must address potential compliance issues related to privacy laws to avoid legal pitfalls. It is advisable for employers to work with legal counsel to stay informed about relevant laws and regulations.

For more guidance, feel free to contact Dan M. Forman or Linda Wang of CDF’s Privacy Practice Group, or your favorite CDF attorney for a consultation.

Sixteen State Attorneys General Affirm Support for DEI Programs

Posted: | Category: HR - Diversity, Equity and Inclusion (DEI)

By: Sixteen State Attorneys General Affirm Support for DEI Programs

By: Sixteen State Attorneys General Affirm Support for DEI Programs

On February 13, 2025, a coalition of 16 state Attorneys General from left-leaning states such as California, Massachusetts, Illinois, Maryland, and New York issued Guidance entitled “Multi-State Guidance Concerning Diversity, Equity, Inclusion, and Accessibility Employment Initiatives,” which affirms the legality and importance of diversity, equity and inclusion (DEI) initiatives in the workplace. (“Guidance”). 

The Guidance addresses concerns arising from a recent executive order by President Trump targeting private-sector DEI policies. Related articles regarding the President’s Executive Orders on DEI programs in the federal government and private sector can be found here and here. In a Press Release, California Attorney General Rob Bonta stated that many of the Nation’s Civil Rights laws are examples of DEI that cannot be altered by President Trump, as follows: 

“The Civil Rights Act of 1964. The Americans with Disabilities Act. The Age Discrimination in Employment Act. All of these ‘diversity, equity, and inclusion’ laws have made our country fairer and stronger and a place where everyone can thrive. Despite what the President may say, diversity, equity, inclusion, and accessibility initiatives are not illegal – nor can he unilaterally make it so.”

The Guidance emphasizes that efforts to promote diverse and inclusive workplaces are lawful and beneficial for businesses, employees, and consumers alike. 

Key Points from the Guidance:

  • Legality of DEI Initiatives: The Guidance clarifies that DEI initiatives are consistent with federal and state laws, including the Civil Rights Act of 1964, the Americans with Disabilities Act, and the Age Discrimination in Employment Act. These initiatives focus on creating equitable opportunities and fostering inclusive environments, distinct from unlawful hiring or promotional preferences based on protected characteristics.
     
  • Prevention of Workplace Discrimination: Implementing DEI practices helps prevent unlawful discrimination by proactively identifying and addressing policies that may adversely impact certain groups. Research indicates that well-developed DEI initiatives contribute to promptly identifying and resolving discriminatory conduct.
     
  • Benefits to Business Performance: Organizations prioritizing DEI principles often experience enhanced financial performance, increased employee morale, and reduced turnover. A study highlighted that companies in the top quartile for diversity were 35% more likely to have financial gains than their industry counterparts.

The Guidance also recommends the following Best Practices for Employers:

  • Recruitment and Hiring:
    • Engage in broad recruitment efforts to attract a diverse applicant pool.
    • Utilize panel interviews to mitigate individual biases.
    • Establish standardized evaluation criteria focusing on skills and experience.
    • Ensure recruitment processes are accessible, providing reasonable accommodations as needed.
  • Professional Development and Retention:
    • Offer equal access to professional development, training, and mentorship programs.
    • Create Employee Resource Groups to support employees from various backgrounds.
    • Conduct training on topics such as unconscious bias and inclusive leadership.
    • Provide reasonable workplace accommodations to ensure inclusivity.

Implications for California Employers: Navigating DEI Amid Federal Uncertainty

History often repeats itself and this instance appears to be no different. After the United States Supreme Court decision in Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, 600 U.S. 181 (2023) (“SFFA”), in which Havard and University of North Carolina’s affirmative action policies were challenged, 13 different state attorneys general from traditionally Republican States sent letters to various Fortune 100 CEOs about their use of DEI in the workplace. Soon after, 21 attorneys general from traditionally Democrat States sent their own letters to Fortune 100 CEOs about continuing DEI efforts. We see this pendulum shift here and given the conflicting messages from federal and state authorities, California employers should proceed with caution and clarity by taking the following steps:

  • Review and Refine DEI Policies: Employers should ensure that their diversity initiatives focus on inclusivity, equitable access to opportunities, and compliance with existing anti-discrimination laws rather than implementing explicit hiring preferences based on protected characteristics.
     
  • Avoid Quotas or Preferences: While increasing workplace diversity is a lawful and beneficial goal, employers must be careful to avoid policies that could be construed as unlawful preferences or set-asides for specific demographic groups. Instead, DEI efforts should emphasize outreach, equal opportunity, and bias reduction in hiring and promotions.
     
  • Monitor Federal and State Developments: Given the evolving legal landscape, California businesses should stay informed on both state and federal actions that may impact workplace policies to ensure the legality of DEI initiatives.
     
  • Consult Legal Counsel: Given the potential for legal challenges from both federal authorities and private litigants, employers should work closely with employment law attorneys to ensure their DEI initiatives are structured to withstand legal scrutiny.
     
  • Document and Justify Business Rationale for DEI Initiatives: Companies should frame their DEI programs around well-documented business benefits—such as fostering innovation, improving employee retention, and increasing competitiveness—rather than solely as social justice efforts. Having clear, objective metrics tied to business outcomes can help defend against legal challenges.

Conclusion

While President Trump’s executive order has created uncertainty, the Guidance reassures employers that DEI initiatives remain legally viable and beneficial for workplaces. However, businesses must proceed with caution, ensuring that their policies comply with existing anti-discrimination laws while continuing to foster inclusive and diverse workplaces. Employers should seek legal counsel, stay informed, and focus on equity-driven practices aligning with business objectives and legal requirements.

If you have questions regarding this Order, please do not hesitate to contact your favorite CDF attorney.

CDF Attorneys Named to 2025 Southern California Super Lawyers List

Posted: | Category: Law Firm News

CDF Labor Law LLP (CDF) proudly announces the following twelve CDF attorneys have received the 2024 Southern California Super Lawyers® designation:

2025 Southern California Super Lawyers (listed in alphabetical order by first name)
• Carolina Schwalbach
• Dan Forman
• Dawn Irizarry
• Leigh Ann White
• Lindsay Ayers
• Marie DiSante
• Nancy Lubrano
• Tim Freudenberger
• Todd Wulffson

2025 Southern California Rising Stars (listed in alphabetical order by first name)
• Adelyn Vigran
• Charanjit Singh
• John Kenney

About Super Lawyers
Super Lawyers, a Thomson Reuters business, is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement. Attorneys selected for inclusion are chosen using a patented multiphase process that includes a statewide survey of lawyers, an independent research evaluation of candidates and peer reviews by practice area.

About CDF Labor Law LLP
For over 30 years, CDF has distinguished itself as a top employment, labor and business immigration defense law firm in California, representing businesses in single-plaintiff and class action lawsuits and advising employers on related legal compliance and risk avoidance. The firm employs 50 attorneys in five California offices (San Diego, Orange County, Los Angeles, San Francisco, and Sacramento), who exclusively focus on labor and employment issues affecting California businesses and provide timely, cost-effective, and knowledgeable solutions to protect employers’ time, dime and peace of mind. For more information, visit: www.CDFLaborLaw.com. Sign up for our timely and informative California Labor & Employment Law Blog at www.CalLaborLaw.com.