The announcement of the AI-Unemployment Tracker follows two recent actions taken in California to address AI in the employment context. First, Governor Newsom issued a May 2026 executive order directing state agencies, labor experts, economists, universities, and industry leaders to assess AI’s labor market impacts and develop policy responses for affected workers. Second, as we previously discussed, California’s Civil Rights Council finalized regulations in June 2025, effective October 1, 2025, that clarified that employers may be liable under the existing Fair Employment and Housing Act (FEHA) framework.

Employers using AI-driven hiring, promotion, productivity, or discipline tools are now expected to evaluate those systems for disparate impact, maintain relevant records, and make sure algorithmic outputs do not unlawfully influence employment decisions.

The AI-Unemployment Tracker is a further signal that California continues to lead the way in exploring AI in the employment context. Rather than focusing only on discrimination risks, the state seems increasingly concerned with broader labor market disruption, including displacement, retraining needs, and workforce transition planning.

Employers should expect continued scrutiny over how AI affects employment decisions and the workforce structure itself. However, scrutiny does not automatically translate to liability under FEHA’s anti-discrimination framework. It is too early to predict if data from the AI-Unemployment Tracker will support a claim under FEHA or similar statutes.  Data-wise, the California Policy Lab and EDD’s initial data shows no evidence of rising statewide unemployment claims in AI-exposed occupations, and the data did not show large disproportionate increases by race, ethnicity, gender, or age in the number of high AI-exposure unemployment insurance claimants. Procedurally, California’s Unemployment Insurance Code bars litigants from using unemployment insurance hearing findings as evidence in separate or later actions.

For now, these developments reflect California’s evolving regulatory strategy: not only addressing how AI impacts workers when used to make employment decisions, but now also tracking how AI impacts workers’ employment status when used to replace workers’ job functions.

As California continues building this regulatory infrastructure, employers should continue building processes and designating personnel to perform impact assessments, perform bias audits, and report any adverse findings from the assessments and audits to relevant internal stakeholders.

Dorsey continues to monitor new developments in the AI employment and workplace privacy space. Contact Melonie Jordan or your preferred Dorsey attorney for guidance in this fast-evolving area.

U.S. government interest in forced labor enforcement is intensifying on multiple fronts. For example, the Uyghur Forced Labor Prevention Act creates a presumption that goods originating from the Xinjiang region of China are made with forced labor, and companies can face detention of shipments, civil fines, and sanctions if they cannot rebut that presumption. The law thus places the burden squarely on the U.S. importer to demonstrate that forced labor is not found in their supply chains. Most recently, the Trump administration launched forced labor investigations into dozens of countries as part of its expanded enforcement posture, signaling that exposure is no longer confined to any single geographic region or industry.

Against that backdrop, plaintiffs’ lawyers have increasingly used the Trafficking Victims Protection Reauthorization Act (TVPRA), codified at 18 U.S.C. § 1595, to bring civil claims against persons or entities for their participation in, or benefit from, forced labor and human trafficking that occurs anywhere in their supply chains. Although certain industries such as textiles, critical minerals, and agriculture are particularly at risk, companies across industries can face meaningful exposure under the statute. U.S. courts have found that the TVPRA does not confine liability to those who directly participate in a violation but extends it to any commercial actor that benefited from a venture the actor “knew or should have known” was violating the law. Because plaintiffs frequently bring TVPRA claims against multiple defendants and often pursue their claims as class actions, a single lawsuit can expose a company to significant damage claims, attendant litigation costs, and reputational harm. Thus, companies should establish appropriate mechanisms to identify, address, and confirm the absence of forced labor in their supply chains.

Background: 18 U.S.C. § 1595.

The TVPRA extends civil liability beyond those who directly commit the offenses. Specifically, liability reaches any person or entity that (1) knowingly benefits, financially or otherwise, (2) from participation in a venture (3) that the person knew or should have known was engaged in forced labor, human trafficking, or other conduct prohibited by the statute. 18 U.S.C. § 1595.

Knowledge.

Courts have drawn a firm line between general awareness that a sector or region has a forced-labor problem and actual or constructive knowledge that a particular supplier or a particular facility has engaged in specific violations. The former, standing alone, does not suffice to establish knowledge of the prohibited activity. How specific that knowledge must be, however, is a question courts have answered differently. Some courts have required that defendants be shown to have constructive knowledge tied to the specific individual bringing the claim. Doe v. Red Roof Inns, Inc., 21 F.4th 714, 725 (11th Cir. 2021). Other courts have found that constructive knowledge of the venture’s general pattern of violations is sufficient. G.G. v. Salesforce.com, Inc., 76 F.4th 544, 558 (7th Cir. 2023).

Participation in a Venture.

Whether a company has “participated in a venture” turns on the nature and depth of its relationship with the offending entity, not just whether a commercial relationship existed. For courts to find that an entity is a venture, the offending entity does not need to be a trafficking or forced labor enterprise; a legitimate business whose operations have engaged in conduct that violates the statute can qualify as a venture. However, not every commercial relationship rises to the level of participation. For example, a company that purchases goods through a supply chain without exercising meaningful operational involvement in or control over its suppliers’ conduct has not crossed the “participation in a venture” threshold.

The decision in Doe v. Apple Inc., 96 F.4th 403 (D.C. Cir. 2024) illustrates how courts have drawn the line between participation and non-participation in an offending enterprise. In that case, plaintiffs claimed that major technology companies such as Apple, Alphabet, Dell Technologies, and others were liable under the TVPRA for purchasing cobalt that was sourced by their suppliers through mining companies that used forced labor in the Democratic Republic of the Congo. The U.S. Court of Appeals for the District of Columbia Circuit affirmed the lower court’s dismissal of the case. On the venture element, the appeals court held that end-purchasers who had no direct relationship with, or operational involvement in, the mining operations where the abuses occurred had not participated in a venture within the meaning of the statute finding that they had merely bought a product at arm’s length. Apple Inc., 96 F.4th at 415–16. The appeals court went further, finding that certain facts that plaintiff relied upon to establish the defendant’s “control,” including the commercial pressure held by defendants over the supplier and the contractual rights to inspect and conduct third-party audits of supplier facilities, were insufficient to transform a commercial relationship into venture-level participation. Id. at 416.

Companies can draw two primary lessons from Apple Inc. First, the case confirms that downstream purchasers who lack operational entanglement with their suppliers are not, by virtue of that commercial relationship alone, participants in a venture under the TVPRA. Second, Apple Inc. signals that companies investing in robust supplier audit programs should not fear that those efforts will be turned against them as evidence of control. The court  made clear that having the contractual right to audit differs from exercising the kind of operational control that transforms a buyer into a participant. Therefore, companies should not let fear of exposure to TVPRA liability deter them from proactively building a robust compliance program. On the contrary, as explained in the section below, requiring supplier compliance with U.S. law is an integral part of any successful compliance program, as it both reduces the likelihood of forced labor occurring in the supply chain and preserves a company’s ability to defend itself against a TVRPA claim.

Framework for Reducing Exposure.

Companies with different supply chain structures, vendor relationships, and operating models face different risk profiles. But the doctrinal picture that emerges from the TVPRA case law demonstrates that courts rely heavily on the facts of a case to determine liability. Therefore, companies would be wise to be proactive when building their compliance programs to ensure they are conducting necessary due diligence and implementing safeguards to prevent exposure. To achieve that objective, companies may wish to consider the following guiding principles:

1. Understand the Supply Chain

Meaningful supply chain visibility, meaning beyond Tier 1, is the best way for companies with multi layered supply chains to identify weaknesses or areas of potential risk. Knowing not just who your suppliers are, but how they operate, who they engage with, and where risk concentrates allows companies to direct due diligence resources where they matter most and to intervene before a compliance problem becomes a legal one.

2. Conduct Supplier or Vendor Due Diligence

Before engaging with a new supplier or affiliate, companies should screen such potential vendors against restricted government entity and sanctions lists, review publicly available information about the supplier’s labor history or working conditions, ask the supplier directly for documentation of its compliance programs, and retain that information. Both the Department of Homeland Security and the Department of Labor have resources outlining goods, industries, and countries where the U.S. agencies suspect forced labor to be prevalent. Companies should create a record that demonstrates its diligence efforts and outlines the reasons why they did or did not proceed with the engagement.

3. Implement Strong Internal Policies, Monitor, and Enforce

Companies should operationalize their supplier codes of conduct and anti-forced labor policies through defined procedures, consistent monitoring of supplier conduct, and clear consequences for suppliers that fail to meet the company’s stated standards. Training for procurement and sourcing personnel should equip employees with specific “red flag” indicators of forced labor and establish a clear path for raising concerns to the appropriate personnel.

4. Include Enforceable Standards Into Vendor or Supplier Contracts

Contractual provisions requiring suppliers to comply with applicable labor laws, prohibiting forced labor and granting company audit rights, serve two functions: they reduce the risk of forced labor occurring and they establish, for litigation purposes, that the company did not simply acquiesce or turn a blind eye to its suppliers’ practices. A company with a documented history of detailing and enforcing these obligations is better positioned to argue that it lacked the actual or constructive knowledge of specific violations that the statute requires.

Reprinted with permission from the June 1, 2026 edition of the New York Law Journal  © 2026 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or asset-and-logo-licensing@alm.com.

Nisha was quoted in a USA Today article, noting that “they both have a right to claim victory,” adding that each party prevailed on “significant and novel issues within their respective cases.” She also discussed the lasting reputational impact public litigation can have on individuals and organizations alike.

Find the full article: Nisha Verma Offers Insight on Lively/Baldoni Settlement and Reputational Impact | News & Resources | Dorsey

Whether and when to notify employees about a hotel sale is often overlooked during hotel acquisitions and is often viewed as solely an HR matter.  In practice, however, compliance with mandatory employee notification requirements can significantly impact transaction timing, operational continuity, and post-closing liability allocation between a hotel buyer and seller.

The WARN Act requires employers to provide at least 60 days’ advance notice to employees, union representatives, and certain government entities in the event of certain plant closings or mass layoffs. The statute is designed to give employees time to prepare for job loss, seek alternative employment, or pursue retraining. Owners and operators, however, often believe that providing advance notice of an impending hotel sale to employees may undermine the continuity in staffing and management needed to transition the hotel through closing.  Front-line employees and department heads are critical to maintaining guest experience during a transition.  Providing advance notice of potential layoffs may lead employees to seek other opportunities, undermining stability during the transition period.

Not every hotel falls within the WARN Act’s scope.  The statute generally applies to employers with at least 100 full-time employees, or 100 or more employees (including part-time workers) who collectively work at least 4,000 hours per week, excluding overtime.  In the hospitality sector, roughly 10% of U.S. hotels fall within its scope.  If you are buying or selling a hotel that may meet these thresholds, you should engage experienced hospitality-focused counsel with labor and employment specialists to advise on WARN Act exposure and strategy.

The employer’s obligation to provide notice is triggered by:

• a plant closing affecting 50 or more full-time employees; or
• a mass layoff affecting at least 50 full-time employees where they represent at least 33% of the workforce at a single site, or 500 or more full-time employees regardless of percentage.

Keep in mind, employment losses occurring within a 90-day period may be aggregated to meet these thresholds, preventing employers from structuring staggered terminations to avoid compliance.

Allocating Liability in a Hotel Purchase and Sale Transaction

When a hotel is sold, WARN Act liability does not disappear but generally shifts to the buyer as of the closing date of the transaction. That timing distinction is critical when planning workforce changes shortly after the closing.

The transfer of employment from seller to buyer is not considered an employment loss under the WARN Act as long as those employees (or a sufficient amount) are rehired by the buyer under certain circumstances, after the transaction closes.  Buyers can avoid WARN Act liability by rehiring, or causing a new hotel management company to rehire, a sufficient amount of employees under these rules.  Note, however, that if these employees are offered re-employment with significant changes to their wages, benefits, job duties, or working conditions it may constitute “constructive discharge”.

If notification is required, the seller will want to defer any termination of employees until after the transaction closes in order to reduce or eliminate the seller’s exposure under the WARN Act and shift the notification burden to the buyer.  This approach also helps preserve operational continuity and reduces the risk of employee attrition if the transaction does not close.

Buyers must consider any anticipated workforce reductions shortly after closing and plan accordingly.  If a buyer plans a qualifying layoff at or within 60 days after closing, it will need to coordinate with the seller to fulfill its pre-closing notice obligations.  Purchase and sale agreements for hotels often restrict a buyer’s ability to communicate with employees and any notification of employees prior to closing should come from the seller.  Both sellers and buyers can avoid the associated risks of pre-closing notification by delaying any qualifying employee layoffs or closures until 60 days or later after the sale is completed.

Temporary Layoffs

Branded hotels are often required by the franchisor to complete significant renovations as directed under a property improvement plan (PIP) in connection with the hotel transfer and execution of a new hotel franchise agreement.  Any resulting full or partial hotel closure may require the owner or manager to temporarily lay off employees while the renovations are underway.  Under the WARN Act, temporary layoffs expected to exceed six months are treated the same as permanent layoffs and trigger notice requirements.

Third-Party Management

Often hotels are operated by third-party managers who serve as the employer in lieu of the hotel owner.  As a result, hotel managers often seek contractual protection against owner-driven decisions, such as a sale or closure that could trigger WARN Act obligations.

If a hotel is subject to a hotel management agreement, upon the sale, the agreement can either be assigned to the buyer or terminated. If the hotel management agreement is terminated, the buyer may decide to transition the hotel to self-management or enter into a new hotel management agreement with the existing manager or a new third-party manager.  In any case, the buyer may desire to retain selected employees for operational continuity.  Note that if a third-party manager is employed, it will typically have operational control to decide most personnel decisions and in most cases an owner’s input is limited to the hotel’s general manager and some key personnel.

State-Specific Requirements

In addition to federal requirements, approximately 20 states—including California, New York, and New Jersey—have their own “mini-WARN” statutes, some of which impose stricter thresholds or longer notice periods.  For example, in California, the layoff of 50 employees will trigger the statute, even if 33% of the workforce is not affected.  These laws may apply independently of the federal statute and should be analyzed on a jurisdiction-by-jurisdiction basis.

Bottom Line

If you’re buying or selling a hotel with 100 employees and plan to either close the location (including sometimes temporarily) or terminate the employees or offer employment under materially different terms, you may be subject to the WARN Act which requires 60 days’ prior notice to employees, throwing a massive wrench in your plans to maintain operational continuity through the closing of the sale.  Buyers and sellers who address these issues early are better positioned to avoid disruption and liability.  Hotel investors should engage legal advisors experienced in the hospitality industry and labor and employment issues to guide them through the transaction process and advise on strategies to mitigate WARN Act exposure while managing operational continuity.

Multistate employers face a growing patchwork of state and local sick leave laws across the country.  In recent years, numerous states and municipalities have passed laws mandating job-protected sick leave for private sector employees.  At least seventeen states, the District of Columbia and numerous municipalities require employers to provide job-protected sick leave to their employees.  In this article, we will summarize the new requirements imposed by ESSTA.

Amendments to ESSTA

In 2025, the New York City Counsel amended ESSTA to require employers to provide employees with 20 hours of paid prenatal leave, 32 hours of unpaid safe and sick leave (in addition to up to 56 hours paid safe and sick leave), and to provide for expanded uses of safe and sick leave, including to care for a minor child or attend a legal proceeding for subsistence benefits.  New York City Mayor Zohran Mamdani’s office recently issued a press release announcing an enforcement blitz by the Department of Consumer and Worker Protection (“DCWP”), the agency responsible for enforcing ESSTA.  DCWP sent out compliance warnings to more than 56,000 employers, and announced a new data-driven enforcement strategy to compare paid sick leave use in employer records with national data from the U.S. Centers for Disease Control and Prevention for evidence of likely noncompliance.[1]

Scope of ESSTA.  The law applies to private sector employees who work in New York City, with the exception of certain employees covered by collective bargaining agreements and certain hourly professionals licensed by the New York State Education Department. Employers located outside of New York City must provide ESSTA leave to any of their employees who work in New York City, including employees who work remotely in New York City or who live outside of the City.

Paid Safe and Sick Leave

Employers with fewer than 100 employees in the U.S. must provide employees with 40 hours of paid sick and safe leave per year.  However, if an employer has fewer than five employees and a net income of less than $1 million in the previous tax year, it may provide this 40-hour allotment of safe and sick leave as unpaid time off.  Employers with 100 or more employees in the U.S. must provide employees with 56 hours of paid safe and sick leave per year. Employers may calculate safe and sick leave time based on the calendar year, a benefits year, or some other 12-month period.

Paid safe and sick leave accrues at the rate of one hour for every 30 hours worked.  For purposes of accrual, most exempt employees are assumed to work 40 hours per week.  Employers have the option to frontload paid safe and sick time by making it available at the beginning of each year, rather than requiring employees to accrue it over time.  Frontloading the full amount of paid safe and sick time at the beginning of the year relieves employers of the obligation to track and note accruals on pay statements.  However, it does not relieve them of the obligation to track and note an employee’s use and balance of safe and sick leave on pay statements, as described in more detail below.

Pursuant to ESSTA, employees may carryover from one year to the next up to 40 hours (for employers with fewer than 100 employees) or 56 hours (for employers with 100 or more employees) of accrued, unused paid safe and sick leave.  However, employers may cap the use of paid safe and sick leave at 40 or 56 hours per year (depending on employer size).  The ability to carryover paid safe and sick time from one year to the next is beneficial for employees who may need to use such time early in the year, before they have accrued sufficient paid leave in that year.  Employers who both frontload the full amount of paid sick and safe time at the beginning of each year and pay employees for any unused time at the end of the year do not need to permit carryover.

Unpaid Safe and Sick Time

All employers, regardless of size and net income, also must provide employees with 32 hours of unpaid safe and sick leave as of February 22, 2026, upon hire and on the first day of each year.  The annual 32 hours of unpaid safe and sick time may not be prorated, including for employees who commence employment mid-way through the year.

Unlike paid safe and sick time, these 32 hours of unpaid leave do not accrue, and are available for immediate use on the first day of each year or upon hire.  Employers are not required to allow employees to carryover unused unpaid safe and sick leave from one year to the next.  Employers must, however, allow employees to exhaust their paid safe and sick leave before using any unpaid safe and sick time.

Permitted Uses of Safe and Sick Leave

Both paid and unpaid safe and sick leave may be used for a number of reasons, including (i) to care for an employee’s own health needs or that of a family member, (ii) during a business, school or daycare closure for a public health emergency, (iii) to seek assistance or take safety measures if an employee or a family member is the victim of domestic violence, unwanted sexual contact, stalking, human trafficking or workplace violence, (iv) to care for a child or for a family or household member with a disability, (v) to attend housing and public benefits appointments and hearings, and (iv) to stay home when the government declares a public disaster (e.g., fires, hurricanes, terrorist attacks).

Paid Prenatal Leave

In addition to safe and sick leave, ESSTA also requires employers, regardless of size and net income, to provide employees with 20 hours of paid prenatal leave.  Employers must provide employees with a separate bank of paid prenatal leave that is distinct from, and cannot be combined with, any other leave including safe and sick leave.

Paid prenatal leave does not accrue and is immediately available for use upon hire and on the first day of every 52-week period.  For purposes of calculating paid prenatal leave, a 52-week period for a particular employee will begin on the first day that the employee uses paid prenatal leave.  Employees may use paid prenatal leave to receive health care during pregnancy or related to pregnancy, including fertility treatment.  Only employees who are directly receiving health care for their pregnancy may use paid prenatal leave, and such leave may not be used after childbirth.

Additional Requirements

ESSTA imposes several additional obligations and restrictions on employers.

First, employers must note on an employee’s pay statement or other form of written documentation provided each pay period: (i) the amount of paid safe and sick time the employee has accrued during a pay period; (ii) the amount of paid and unpaid safe and sick time the employee used during a pay period; and (iii) the amount of paid and unpaid safe and sick time the employee has available for immediate use.

Additionally, for each pay period in which an employee uses paid prenatal leave, an employer must note on the employee’s pay statement or in other written documentation provided to the employee, both the amount of paid prenatal leave used during the pay period and the amount of paid prenatal leave available for immediate use.

Second, ESSTA only permits employers to require reasonable documentation from an employee that their use of leave was for an authorized purpose when the employee takes leave for more than three consecutive workdays.  The law also circumscribes the types of documentation that employers may require, and prohibits employers from requiring employees to disclose the nature of the employee’s or family member’s medical condition or care, or the underlying reason for using safe time.

Third, employers may require reasonable advance notice of an employee’s need for leave.  When the need for leave is foreseeable, an employer may require notice up to seven days in advance.  However, when the need for leave is not foreseeable, an employer may only require notice as soon as practicable, including upon the employee’s return from leave.

Fourth, employers must provide employees with a written notice of rights under ESSTA upon hire and within 30 days of any change to such rights.  Employers also must post a notice of rights in the workplace.  The DCWP published a model notice of employee rights on its website that employers may use.

Finally, employers must maintain a written policy on ESSTA leave that addresses several issues including accrual, frontloading and carryover of safe and sick time,  the amount of safe and sick leave that is immediately available for use, the availability of a separate bank of paid prenatal leave, any advance notice requirements and procedures, requirements regarding written documentation of leave and consequences for failing to provide such documentation, minimum increments for use, any policy regarding misuse of leave, and a statement that the employer will not ask employees for details about the reason for use of ESSTA leave and that the employer will treat any information it receives as confidential.  Employers should update their policies as necessary to reflect the recent amendments to ESSTA.

Employers who fail to comply with their obligations under ESSTA may be subject to progressive civil penalties assessed on a per employee and per instance basis as well as private rights of action by employees to recover compensatory damages, injunctive and declaratory relief, and attorneys’ fees and costs.

[1] New York City Mayor’s Office, Mayor Mandani Announces Major Expansion of Protected Time Off for 4.3 Million Workers and New Data-Driven Enforcement strategy (February 20, 2026): https://www.nyc.gov/mayors-office/news/2026/02/mayor-mamdani-announces-major-expansion-of-protected-time-off-fo; New York City Department of Consumer and Worker Protection, Benchmarks for Evaluating Compliance with NYC’s Protected Time Off Law: https://www.nyc.gov/assets/dca/downloads/pdf/media/Protected-Time-Off-Report.pdf.

Reprinted with permission from the April 6, 2026 edition of the New York Law Journal © 2026 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or asset-and-logo-licensing@alm.com.

Illinois lawmakers were busy in 2025, passing laws and amendments to existing laws that impact Illinois employers as of January 1, 2026.

First, Illinois amended the Illinois Human Rights Act (“IHRA”), which prohibits discrimination, harassment, sexual harassment, and retaliation against individuals

in connection with employment. The Illinois Department of Human Rights (“IDHR”) administers the IHRA and is the agency to which employees submit complaints when they believe an employer has engaged in conduct that violates the IHRA. Effective January 1, 2026, it is now discretionary, rather than mandatory, for the IDHR to bring employee complaints to a fact-finding conference. This means the IDHR now has discretion to investigate employee complaints based on written submissions by the parties alone.

Further, a previously passed IHRA amendment making it a civil rights violation for an employer to use AI in a manner that subjects employees to discrimination went into effect on January 1, 2026. Illinois employers must now ensure that AI used or relied upon to make employment decisions does not have a discriminatory effect on employees based on a protected class. Failure to notify employees of the employer’s use of AI is also now a civil rights violation.

Third, Illinois’ VESSA law was amended and expanded as of January 1 to prohibit employers from firing, refusing to hire, discriminating against, or otherwise retaliating against an empl

oyee who uses employer-issued devices to record a crime of violence, including domestic violence or sexual violence, committed against the employee or their family or household member.

Next, the legislature amended the Illinois Workplace Transparency Act (“IWTA”). First enacted in 2019 in the midst of the #MeToo era, the IWTA restricted nondisclosure and nondisparagement language in employment, separation, and settlement agreements unless the clauses were mutual; limited the use of mandatory arbitration for sexual harassment or other discrimination claims; required annual sexual harassment training for all employees; and mandated that employers report settlements and adverse judgments to the Illinois Department of Human Rights.

As of January 1, 2026, the IWTA has been amended to expand its scope and impact on employment, separation, and settlement agreements. For example, the definition of “unlawful employment practice” has been expanded to include most employment claims, including wage and occupational safety claims. The law also now includes a definition of “concerted activity” and provides that agreements may not prohibit, prevent, or restrict an employee from reporting allegations of unlawful conduct to government officials or engaging in concerted activity to address work-related issues.

Perhaps most consequentially, the amendments address several technical provisions. The IWTA now provides that employers may not condition employment or continued employment on an agreement to shorten the applicable statute of limitations, apply non-Illinois law to an Illinois employee’s claim, state that confidentiality is the employee’s preference, or require a venue outside of Illinois to adjudicate an Illinois employee’s claim. Finally, confidentiality provisions related to alleged unlawful employment practices must be supported by distinct, bargained-for consideration separate from the consideration provided in exchange for a general release of claims. This may be accomplished by explicitly allocating a portion of the consideration payment to the confidentiality provision within the agreement.

Other Illinois employment laws that went into effect on January 1, 2026, include:
• Employee Blood and Organ Donation Leave Act: amended to apply to part-time employees
• Nursing Mothers in the Workplace Act: requires employers to provide nursing mothers with reasonable paid break time to express milk
• Family Neonatal Intensive Care Leave Act: requires employers to provide unpaid leave if an employee’s child is in the NICU

In light of these changes to Illinois employment laws, now is a good time to review employment policies and agreements to ensure compliance with these acts and amendments.

Following his inauguration in January 2025, President Trump signed a flurry of executive orders affecting diversity, equity, and inclusion (“DEI”) policies across the public and private sector. Particularly concerning for private employers who are federal contractors, Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” addresses “illegal” private DEI and diversity, equity, inclusion, and accessibility (“DEIA”) policies by directing agencies, such as the Equal Employment Opportunity Commission (“EEOC”), to “combat illegal private-sector DEI preferences, mandates, policies, programs, and activities.” Additional information about the EEOC and its guidance is available here and here. Private employers have also been taking note and updating their policies. However, the EEOC’s ability to enact this directive was hindered until it gained a quorum in October 2025. Now that it is operating at full capacity, emplhoyers have some visibility into the agency’s priorities.

After a slow start, the EEOC initiated litigation against an employer for sponsoring a female-only networking event.

The EEOC filed suit on February 17, 2026, against Coca-Cola Beverages Northeast, Inc., over its DEI initiatives, alleging that by sponsoring a two-day networking event at a casino for only female employees, Coca-Cola had discriminated against male employees on the basis of their sex. Female attendees were excused from their work duties, received their regular pay, and reimbursement for food and lodging expenses. The EEOC claims that the exclusion of male employees from attending the event was a denial of equal compensation, terms, conditions, or privileges of employment on the basis of sex.

The EEOC’s subpoena and enforcement authority has become a preferred investigative and enforcement tool in reviewing private employers.

Although the EEOC has always had broad authority to subpoena private employer records while an investigation is pending, the agency has demonstrably increased its use of this authority. Just a month after obtaining a quorum, the EEOC sought an enforcement action against Northwestern Mutual Life Insurance Co. in Wisconsin. While investigating a claim that an employee had been discriminated against based on his sex (male), race (white), and national origin (American-Irish) in violation of Title VII, the agency sought extensive information pertaining to Northwestern’s training, development, and promotion policies and initiatives over a three-year period. When Northwestern objected, the EEOC brought the lawsuit to compel compliance.

The EEOC specifically demanded the following information:
• Employee records from 2022 to 2025 for any training where race, national origin, sex, or sexual orientation was a criterion considered for participation in any employer-sponsored advisor or mentorship program.
• All reports or summary documents from 2022 to 2025 that consolidated information about diversity and inclusion at Northwestern.
• Based on a racial-equity initiative published on the company’s website, documents reflecting the structure, function, budget, staffing, programs, and participation in that initiative.

• A list of employee names and contact information for anyone who had either received a “Diversity & Inclusion Champion Award,” and each woman or person of color retained, promoted, or sponsored, for whom another manager received “credit” or “positive feedback.”
• Documentation of Northwestern’s performance management metrics and systems, including any systems used to track DEI goals and progress.

The Wisconsin court has not yet decided whether to limit the EEOC’s inquiries. Other courts have found that the EEOC has broad statutory authority to investigate and request any company information relevant to a charge, which could include company-wide data and policies. For instance, in December, a California court ordered a supermarket chain operated by Vallarta Food Enterprises, Inc., to comply with an EEOC subpoena. The agency, investigating whether the company had excluded non-Hispanic individuals from employment, requested: extensive applicant and employee data (including demographic and contact information); screening questions used during the hiring process; job descriptions; and information about other race and national origin complaints.

External advocacy efforts may be contributing to EEOC-led investigations into employer DEI practices.

Although EEOC investigations are typically triggered by an individual complaint filed by a current or former employee or applicant, the EEOC can initiate investigations based on other information as well. Recent filings in the EEOC’s enforcement action against Nike, Inc. reveal that the EEOC’s now-Chair Andrea R. Lucas issued a Commissioner Charge against Nike in 2024 following receipt of more than 30 letters by America First Legal (“AFL”) urging the agency to investigate major corporations’ DEI programs. AFL is a nonprofit organization that litigates social and corporate issues and prioritizes (among other things) “Dismantling Diversity, Equity, and Inclusion.” Nike’s campaigns and public documents commenting on social justice and inequity had previously drawn attention from policymakers. The EEOC issued wide-ranging requests for information, including:
• Nike’s organizational structure
• Programs used to increase racial and minority representation in its U.S. workforce
• The effect of minority representation on executive compensation• Employee layoffs in 2024
• Racial and ethnic minority employee data
• Consideration, application, and selection materials and information for 16 employment-related programs

The court has not yet decided whether Nike must comply with all of the EEOC’s requests.

Employers continue to settle discrimination claims investigated by the EEOC.

Over the past few months, the EEOC has announced several settlements with employers over discrimination claims. A few notable examples include:
• A $1.4 million settlement with LeoPalace Resort in Guam over allegations that it treated Japanese employees more favorably than non-Japanese (including those of American national origin) employees.
• A $1.1 million settlement with Battleground Restaurants Group, Inc., which owns and operates several Kickback Jack’s restaurants in North Carolina. The lawsuit alleged the restaurants violated Title VII by intentionally failing to hire male applicants for host, bartender, and server positions.
• A $150,000 settlement with Seward & Son, a large farming operation in Missouri accused of discriminating against American (and primarily Black) farm workers by providing foreign workers with preferential job assignments and other fringe benefits.

However, a recent decision in Missouri suggests employers may be able to limit certain legal challenges to DEI programs.

The state of Missouri sued Starbucks last February for its hiring, mentorship, and promotion policies and programs, claiming that its initiatives placed non-white, non-male, and “other preferred minorities” in an unlawful position of advantage over others in the workforce, in violation of state and federal laws. The heart of the allegations rested on Starbucks’ mentorship and employee-led affinity groups, which for a time were limited to specific employee populations. However, on February 5, 2026, the lawsuit was dismissed because the state had failed to allege its own specific injury or that of any individual or group of employees.

Other EEOC actions demonstrate continued investigations of traditional discrimination claims.

Based on these recent developments, employers might assume that the EEOC’s priorities have shifted. However, the agency continues to pursue allegations of race, sex, disability, and pregnancy discrimination and retaliation. Recent lawsuits include a Tennessee employer accused of restricting Black employees from a breakroom reserved for white employees and firing a supervisor who “failed to restrain” one of his direct reports from making internal and external complaints of discrimination. Another involves a Michigan-based in-home health care provider who refused to assign home visits based on a nurse’s race because it believed that some residents would prefer to be cared for by a non-Black nurse. Recent settlements also involved:
• $100,000 settlement of a former employee’s religious discrimination claim against the Young Men and Women’s Hebrew Association. The EEOC found that the employer failed to accommodate a Christian employee’s request to attend Sunday church services and retaliated against her, forcing her to resign.
• $95,000 settlement with JACO Coach Company, LLC following an employee’s report of sexual harassment and unwanted touching by a male coworker.
• $75,000 settlement of age discrimination and retaliation claims by workers in a long-term care facility who were mocked because of their age and treated less favorably than younger workers.

The EEOC’s focus on DEI-related enforcement is likely to continue.

Employers can expect that the EEOC’s pursuit of Title VII discrimination and retaliation claims will continue. On February 26, Chair Andrea Lucas issued a letter to 500 of the largest employers in the U.S., urging chief executive officers, general counsel, and board chairs to “reject identity politics” and hire and promote individuals based on merit rather than protected characteristics. The EEOC appears committed to this approach through education, compliance efforts, and enforcement actions. Employers facing discrimination charges or agency information requests should engage legal counsel early to evaluate and preserve potential defenses. Employers who value and promote diversity may also wish to review programs, policies, and public-facing information to assess potential risks while fostering an inclusive, respectful workplace. Dorsey’s labor and employment attorneys are well-prepared to provide guidance as employers navigate the evolving DEI landscape.

[1] Ending Illegal Discrimination And Restoring Merit-Based Opportunity – The White House

[2] https://aflegal.org/priorities/

Current legislative and administrative reforms sought to curb aggressive litigation tactics by refining penalty structures and dramatically expanding an employer’s right to “cure” identified violations. New administrative regulations aim to standardize filings and limit abusive practices while implementing procedural mechanisms, such as early judicial evaluation, that allow the courts to narrow the scope of the cases from the outset. Concurrently, case law continues to evolve regarding the enforceability of provisions in arbitration agreements that require adjudication of an individual employee’s PAGA claim in arbitration first, before the representative claims on behalf of other allegedly aggrieved employees can proceed in court (commonly called “headless” claims) – a question that has courts divided and is pending Supreme Court review[1] in a decision that could effectively end these “headless” PAGA claims.

Yet, despite these reforms, one central reality persists: PAGA continues to exert significant pressure on employers. Filings remain robust, settlement incentives remain high, and trials are exceedingly rare. Compliance audits, cure efforts, and procedural refinements matter – but they do not eliminate the leverage embedded in representative claims or repeated filings. PAGA has been shaped, structured, and regulated – but it has not been diminished. The current landscape reflects a complex interplay of reform, litigation strategy, and enforcement dynamics, where standing, repeated filings, and settlement pressures continue to define employer exposure.

1. Legislative Reform and Cure: Structure Without Contraction

The July 2024 legislative amendments championed by Governor Gavin Newsom demonstrated a profound and meaningful effort to rein in abusive bounty-hunter litigation towards a system that incentivizes employer transparency. By implementing strict standing requirements and robust “cure” provisions, the amendments have sought to reduce the prevalence of opportunistic filings, on one hand, while simultaneously affording a larger share of recovered penalties delivered directly to the impacted work force, on the other.

First, the 2024 reform tightened standing by requiring that a PAGA plaintiff personally suffer each specific alleged violation within the one‑year statute of limitations. This replaces the previous, highly permissive standard that allowed an employee to act as a proxy for the entire workforce and pursue penalties for a wide array of Labor Code violations they never actually experienced, so long as they suffered at least one unrelated violation, even if the underlying labor code violation was outside the statute of limitations. Put simply, this change requires PAGA plaintiffs to have more “skin in the game” for all the violations alleged, thus narrowing what claims an employee may pursue on behalf of others. In theory, the reforms created a procedural threshold that should filter out claims that exist primarily as leverage for settlements rather than vindicate actual employee harm.

The 2024 reform has had particularly pronounced effects in headless PAGA cases – where the named plaintiff’s individual PAGA claim has been dismissed – raising the question as to whether that plaintiff retains standing to pursue the representative PAGA claims on behalf of others. This question, which has the courts divided, is now situated for Supreme Court review, and the answer is not purely academic; rather, this determination will inevitably influence settlement strategy, affect the effectiveness of arbitration, and shape how repeated filings are leveraged. In other words, if an employee’s individual PAGA claim is first compelled to arbitration, that employee must successfully arbitrate their claims in full before proceeding in court with respect to PAGA claims on behalf of others. In effect, counsel may have to actually litigate individual cases rather than simply leveraging settlements based on unverified representative claims. However, until resolved by the Supreme Court, representative claims can continue to generate significant pressure, independent of other procedural or statutory refinements, as counsel hems and haws about how the law will unfold until this decision has been rendered.

Second, those reforms also refined how penalties are assessed and capped for common errors and expanded opportunities to cure violations by making aggrieved employees whole. On paper, through internal audits, employers can now identify and correct potential violations, implement compliance measures, and document “reasonable steps” that legally cap penalty exposure: 15% if completed before a PAGA demand or 30% if completed after notice of the PAGA action. As it stands, legislation is unclear as to how often these audits are to be performed, but an annual audit may ensure compliance well before any demand arises. Further, the 2024 amendments also offer an additional defense: once an employer has performed a qualifying audit and cured identified errors, they have a statutory right to “stay” subsequent litigation for early judicial evaluation through an early neutral evaluation (“ENE”).

However, while the ENE promises to clarify disputed issues, evaluate proposed cures, and streamline resolution, the reality is that this forum is ripe with uncertainty and offers less flexibility than traditional mediation. Experienced neutrals and practitioners have raised concerns that this “newfangled” step may complicate rather than simplify resolution. Because the statute does not clearly map out what happens once an evaluation is initiated, parties may find themselves navigating a process that adds time and expense without necessarily making settlements easier or more likely than achieved by mediation with a mutually agreed-upon mediator who is trusted by both parties.

Because very few PAGA actions ever go to trial, as most are resolved through negotiation or settlement long before formal adjudication, the true impact of these reforms is largely untested. Until these limitations are litigated, the practical effect of these reforms remains more theoretical in nature. Employers will likely cite to audits and cure efforts while plaintiff’s lawyers continue to cast aside their impact on settlement strategy.

1. Further Legislative Reforms Attempt to Curtail the Reach of PAGA

The ongoing tension between expanding enforcement and controlling abuse remains ever present in the legislative reforms and administrative developments. On February 2, 2026, the Legislature rejected Senate Bill 310 (“SB 310”), which sought to push back on the July 2024 reforms and create a standalone private right of action for untimely wage payments, which would increase PAGA penalties. Days later, on February 6, 2026, the LWDA Notice of Proposed Rulemaking demonstrated yet another meaningful effort to rein in PAGA. If adopted, these regulations would:

• Standardize administrative notice requirements and require detailed factual and evidentiary certification;
• Impose additional certification for high-frequency filers (200+ notices annually) with increased scrutiny for noncompliance;
• Clarify the cure process and how employers can document remediation; and
• Enhance oversight of settlements, including opportunities for affected employees to comment.

However, these mechanisms do not materially change the economic incentive for plaintiffs to file broad, representative claims. The proposed rules may refine the process and filings, but repetitive, lightly modified claims will persist absent litigation as to the full impact and extent of these changes.

• The State of Play for PAGA and the Path Forward

The recent PAGA reforms aim to narrow the statute’s reach, but their ultimate effect depends on how case law continues to solidify in 2026. Compliance programs, audits, and well-designed policies remain as critical as ever, and their importance will only grow if courts begin to give real weight to these defenses, providing meaningful tools to cap PAGA penalties. Historically, because most PAGA cases never reach a verdict, these actions have been driven by settlement pressure rather than adjudication. Yet, this evolution of PAGA presents opportunities for courts to impose meaningful caps on penalties for employers who conduct audits, cure and require individualized litigation before representative claims can proceed. This shift restores the significance of the individual employment relationship – historically sidelined in a lawyer-driven process – by requiring plaintiffs to personally suffer every alleged violation to maintain standing. Thus, by focusing on strong employee relationships and proving compliance, employers effectively neutralize the settlement-driven momentum that has largely driven PAGA litigation.

[1] The California Supreme Court is expected to release its decision in Leeper v. Shipt, Inc. in early 2026, having granted review in April 2025, with a briefing schedule that concluded in December 2025.

Ryan handles matters arising from all aspects of the employment relationship, including wage and hour issues, hiring disputes, background checks, and restrictive covenants.

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Who is covered?

This law applies to all employees in Washington, even if their employer is based elsewhere.

My company is based outside Washington state, and we have only one employee there. Does the law apply to us?

This law applies to all employees in Washington, even if their employer is based elsewhere.

We’re a really small company, does it apply to us?

Yes. The Act includes all entities employing one or more people and which has business activity in Washington. Even if the company is small, and even if it is based elsewhere.

What is prohibited?

The law defines a non-compete agreement to include any written or oral covenant, agreement or contract that “prohibits or restrains” a worker (employee or independent contractor) from engaging in a lawful business. The phrase is to be liberally construed against enforcement of a noncompetition covenant. The law gives several examples, including contracts that “directly or indirectly prohibits the acceptance or transaction of business with a customer,” or between performers and locations.

How about retention incentive agreements or training benefits?

The law expressly prohibits any threat or demand that an employee repay or return any compensation or benefit as a consequence of engaging in a lawful profession. This arguably includes stay incentives, training benefits conditioned on continued employment, and the like. There is a limited exception for educational expenses, so long as the covenant expires within 18 months of the start of employment (not the start of the educational program), it is limited to pro rata repayment and releases the obligation if the employee is separated based on “good cause” (a defined term).

Are there exceptions?

Yes, but narrow ones. Nonsolicitation agreements are allowed, but not if they ““directly or indirectly” prohibit the acceptance or transaction of business with a customer. This language is intentionally very broad. Restrictions on confidentiality, trade-secret protections, and sale of goodwill of a business are allowed (but then only if the person signing the covenant owns 1% or more of the business), and some franchisee agreements.

What if I have an existing noncompete agreement with an employee who moves to Washington from out of state?

The new law would apply to that employee and the noncompete agreement would be unenforceable.

Does the law require me to do anything?

Yes. By October 1, 2027, employers must make reasonable efforts to provide written notice to all current and former employees and independent contractors whose noncompetition covenant is still within its effective time period that their noncompetition covenant is void and unenforceable.

When does this law start?

The Act generally takes effect June 30, 2027. The written notice must be sent by October 1, 2027.

What should I do now?

Employers should review all noncompetition, nonsolicitation, and confidentiality agreements now to ensure either compliance or an orderly transition of agreements. This includes handbooks, policies, and other documents which could directly or indirectly impose an unlawful restraint. Employers should also begin planning for the employee notice (due on October 1, 2027). Experience in other states cautions that this process can be more complicated and time-consuming than expected.