Compliance Corner [August 2025]

compliance
Written By Hennrietta Smith

Here is what is new in August 2025

  • Virginia Non-Compete Ban Extended

  • PTSD Qualifies as Disability under ADA

  • Recruiter Settles Discrimination Charge

  • Draft ACA Forms Released

  • Secure Act Catch-Up Roth Contributions to Resume

  • E-Verify Not Foolproof

  • Employers Advised to Check E-Verify (anyway)

  • ADA Does Not Cover Retirees

  • Importance of Accurate and Timely Documentation – and Honesty

  • The Cost of Unreasonable Discipline and Ageism

  • States with Pay Transparency Laws

  • Blatant Violation

  • New Privacy Laws for Businesses in Tennessee and Minnesota

  • Washington State and California Leading the Field in Protecting Individuals’ Private Health Data

  • ACA Preventive Care Mandate Upheld

  • Ensure Accuracy of Electronic or Electronically-Signed I-9 Forms

  • Documentation Sinks Lawsuit

  • Minimum Wage Increases in Effect July 1:

  • POWER Act – a New Burden for Philadelphia Employers

  • Reminder: Disparate Impact Is Still Illegal

  • States with Current or Pending AI Laws

  • More from California

  • SCA Rates to Increase

  • False Claims Costly

  • News Items

Virginia Non-Compete Ban Extended

Effective July 1, the ban on non-compete agreements was expanded to ALL non-exempt employees (i.e., those eligible for overtime pay) regardless of their earnings level. Previously, the cap for non-compete agreements was the average weekly wage for Virginia workers, currently $1,468.10 per week or $76,081 per year. That cap still applies to any exempt employees, to any interns, students, apprentices, trainees, and independent contractors compensated at an hourly rate that is more than Virginia’s median hourly wage for all occupations for the preceding year, as reported by the U.S. BLS. Employees whose earnings are primarily from commissions, incentives or bonuses are exempt from this ban.

PTSD Qualifies as Disability under ADA

A military veteran working at a nuclear power plant for 17 years starting in 2006 was rated in 2019 at a 70% disability by the Veterans Administration. His position of “senior site emergency preparedness specialist” required unescorted access throughout the plant, subject to periodic requalifications. He had not disclosed his PTSD on his medical questionnaire because his VA disability attorney had told him he did not need to do so. He subsequently submitted VA documentation stating he was able to perform all needed functions and was no danger to anyone. A medical review officer for the company, however, called him a liar and refused to approve renewal, which caused him to lose access and thus his job. He filed a charge with EEOC and will likely prevail based on erroneous interpretations because the denial of access was discriminatory.

Recruiter Settles Discrimination Charge

A recruiting company in California was charged with favoring H-1B visa holders over American workers in violation of the Immigration and Nationality Act. It actually advertised that certain positions were available only to H-1B visa holders – a violation of the Act. The company settled with DOJ for $70,916. The lawsuit is a result of the change in focus by the Administration on immigration overall and discrimination against American workers in particular.

Draft ACA Forms Released

The IRS has released draft 2025 forms for Affordable Care Act (ACA) reporting under Internal Revenue Code Sections 6055 and 6056. Draft instructions are still pending. The draft forms are on the IRS website at https://www.ifebp.org/resources---news/news-and-regulatory-updates/regulatory-updates/2025/06/12/irs-issues-draft-aca-2025-forms.

Secure Act Catch-Up Roth Contributions to Resume

January 1, 2026 marks the restart of Roth (before-tax) contributions to 401(k), 403(b), or 457(b) plans from “High-Wage Earners” that were deferred in accordance with the SECURE 2.0 Act of 2022. This applies to employees earning over $145,000 annually. Because these are Roth contributions, they must be made with after-tax dollars, not pre-tax.

E-Verify Not Foolproof

While partners of VBS may not be likely to be employers of people with stolen identities, that turns out to be a problem for some employers. A meat-packing plant in Omaha, NE, was “visited” by ICE who wanted to examine 97 employees – and ended up detaining about 70 of them. While the plant “complied 100% with E-Verify,” stolen IDs foiled their efforts. All employers can do is be as careful as possible. The company was not charged, by the way, because they made a good-faith effort to comply.

Employers Advised to Check E-Verify (anyway)

The foregoing notwithstanding, because E-Verify status is dynamic (both pro and con), employers are advised by DHS to check the status of any employees in question on a regular basis to minimize the chance of “surprises,” – particularly for natives of certain Latin American countries. It is noted that some employers’ access is through their HRIS, which can complicate obtaining timely reports.

ADA Does Not Cover Retirees

The Supreme Court has ruled that because retirees are not active employees, they are not covered by the Americans with Disabilities Act. Consequently, accommodation is not required for them.

Importance of Accurate and Timely Documentation – and Honesty

The owner of a Chili’s franchise was found liable for age discrimination in the termination of a restaurant manager. A trial court had granted summary judgement to the owner, but an appeals court reversed that decision because the presented evidence could not be authenticated and was not admissible. The Manager was 59 years old, one of the oldest in the region; he was replaced by a 33-year-old who was allegedly inexperienced. The documentation presented by the owner was apparently compiled after the termination decision was made – and after the manager had complained to HR about age discrimination.

The Cost of Unreasonable Discipline and Ageism

A 58-year-old employee who had already won an age discrimination case against Caterpillar, Inc. (he had been passed over for promotion) won another one when he was presented with an “impossible” performance improvement plan (PIP). One of the deadlines in the PIP had already passed when it was presented to him, but his supervisor refused to modify it. He was then terminated for non-performance of the PIP anyway. He therefore sued for both age discrimination and retaliation. The district court ruled against him on both counts; however, the appeals court disallowed the retaliation claim but upheld his age discrimination claim. His supervisor’s actions sealed the defeat for the company. The supervisor had made informal notes regarding the employer; those were accepted by the district court but were dismissed as “hearsay” by the appeals court because they were not supported by other parts of his formal record.

States with Pay Transparency Laws

States with pay transparency laws currently in effect are California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Minnesota, New Jersey, Nevada, New York, Rhode Island, Vermont, Washington, DC, and Washington State. In addition, Massachusetts has a law on the books that will become effective at the end of October, and 11 other states have legislation pending. A number of cities also have their own laws, notably New York City and several in California.

Blatant Violation

A healthcare company in California used a pre-employment questionnaire containing 150 medical questions that were not job-related, affecting 172,070 applicants. The company was fined $1 for each applicant, with the proceeds going to the pro-bono law group that handled their case.

New Privacy Laws for Businesses in Tennessee and Minnesota

Tennessee:

  • Second state to require both a revenue threshold and a processing volume threshold to trigger applicability.

  • Provides a 60-day cure period to address violations, with no sunset date.

  • Provides companies with an affirmative defense for violations if the business creates, maintains and complies with a written privacy policy that is compliant with the National Institute of Standards and Technology (NIST) Privacy Framework or other documented policies, standards and procedures designed to safeguard consumer privacy.

  • No private right of action.

Minnesota:

  • Includes more prescriptive requirements for opt-out rights than many other US state comprehensive consumer privacy laws, such as providing access to a clear and conspicuous method outside the privacy notice for consumers to opt out of:

    • The sale or processing of their personal data for targeted advertising.

    • The use of their personal data for profiling in furtherance of decisions that produce legal effects concerning a consumer or similarly significant effects concerning a consumer.

  • Requires privacy notices to include a description of retention policies for personal data.

  • Requires privacy notices to be made available to the public in each language in which a product or service is provided.

  • No private right of action.

Washington State and California Leading the Field in Protecting Individuals’ Private Health Data

With the proliferation of apps on cell phones that track individuals’ location data, vendors are able to infer people’s locations and, potentially, the purpose of their travels – e.g., trips to doctors’ offices, etc. Federal law does not protect such location data, so WA and CA have taken the lead in doing so. The California Consumer Privacy Rights Act (CPRA) and the Washington My Health My Data Act are the pioneering privacy protection legislative efforts at the state level. A recent lawsuit revealed that the advertising software in Amazon advertising software pinpointed location data for the advertisers – without the consumers’ knowledge or permission. Various other apps, including the Weather Channel and “OfferUp” included the Amazon software development kit, which enabled them to locate the users even when their apps were not being used. This lawsuit, apparently based in Washington State, alleges that the location data “dump” violates the Federal Wiretap Act, the Computer Fraud and Abuse Act and the Washington My Health My Data Act.

This demand for protection of consumer data will only spread, so employers, service providers and marketers should be ready to comply with whatever comes down the pike.

ACA Preventive Care Mandate Upheld

A variety of preventive services are automatically provided for no extra charge under the Affordable Care Act. A body of appointed individuals titled the United States Preventive Services Task Force (USPSTF) makes graded recommendations regarding preventive services desired by the public or legislators. To be covered, a given service must receive a grade of “A” or “B”; those below that level are not covered. A lawsuit had challenged the authority of the USPSTF to make such recommendations, but the Supreme Court ultimately upheld the body as structured, so no change is forthcoming.

Ensure Accuracy of Electronic or Electronically-Signed I-9 Forms

Employers are being cautioned to double-check I-9 forms for accuracy in the following areas:

  • Electronic forms may pre-populate fields inaccurately, and

  • Paper forms that are signed electronically may not be compliant with other, more complicated requirements that apply to electronic forms.

  • Further, DHS regulations require the following capabilities:

    • Ensures only authorized personnel have access to electronic records.

    • Provides for backup and recovery of records to protect against information loss, such as during power interruptions.

    • Ensures that employees are trained to minimize the risk of unauthorized or accidental alteration or erasure of electronic records.

    • Ensure that whenever the electronic record is created, completed, updated, modified, altered or corrected, a secure and permanent record is created that establishes the date of access, the identity of the individual who accessed the electronic record and the particular action taken.

Employees using electronic signatures must provide an attestation to their signature, but several electronic I-9 systems fail to provide for that attestation, not even providing a checkbox for that process (even though that would suffice). This can invalidate the I-9 and cause legal compliance problems for the employer. For example, Abercrombie & Fitch was fined over $1 million for “technology-related deficiencies” in their electronic I9 system. DHS has increased the penalty for I-9 paperwork violations from $2,789 to $2.861 per violation. According to DHS, if the electronic I-9 vendor is out of compliance, the actual employer will be held liable.

Documentation Sinks Lawsuit

A female lab technician sued Exxon Mobil for allegedly terminating her because of her gender. Her only performance review, however, ranked her in the lowest of their performance rankings. She was given the option of resigning or being terminated, in accordance with company policy. She chose the latter and sued. Both trial and appellate courts agreed with the company’s policy because of accurate and thorough documentation of both the policy and her performance.

POWER Act – a New Burden for Philadelphia Employers 

A brief overview: The Philadelphia city government has enacted a new law titled the “Protect Our Workers, Enforce Rights (POWER) Act.” A quick overview includes the following: 

  • On May 27, 2025, Philadelphia Mayor Cherelle L. Parker signed the “Protect Our Workers, Enforce Rights (POWER) Act” into law, which strengthens worker protections and enforcement mechanisms in the city. (It was effective immediately upon signing.) 

  • The POWER Act empowers the Philadelphia Department of Labor’s Office of Worker Protections to conduct independent investigations, maintain a “Bad Actors Database,” and revoke business licenses for noncompliant employers. 

  • The POWER Act includes provisions for retaliation protections, immigrant worker support, increased sick pay for tipped employees, extended recordkeeping requirements; and it allows workers to file civil actions for violations without exhausting administrative remedies. 

Reminder: Disparate Impact Is Still Illegal 

A number of employers have discovered to their chagrin that the “deprioritizing” of disparate impacts by the Administration does NOT mean that it is now legal. The plaintiffs’ bar has been pursuing disparate impact cases. Employers are strongly advised to analyze carefully whether apparently neutral rules have a negative impact based on a protected trait/characteristic in order to manage employment law risks. What counts is the effect of a given rule or process on one or more employees based upon a protected characteristic, not the intent of that rule or process. An erroneous assumption on the part of some employers has been that Executive Order 14281 eliminated consideration of disparate impact. It did not – and could not – because disparate impact is defined under Title VII, the law of the land. 

States with Current or Pending AI Laws

Pending: Colorado (a “pioneering,” very comprehensive law that may become a blueprint for future such laws, similar to the EU AI Act); also Illinois (additional regulations), and Texas 

Current: California, Illinois, Maryland, and New York (state & city) 

More from California 

The California Civil Rights Department (CRD) has issued a notice under AB 2499, which provides expanded leave and accommodation protections for employees who are victims of, or have a family member who is the victim of, qualifying acts of violence. A notice must be provided to new hires at their time of hire and whenever the employer is informed of an employee or their family member being the victim of violence. 

SCA Rates to Increase 

The Department of Labor has announced the following fringe benefit (Health & Welfare) rate increases for SCA-covered contracts:  

  • $5.55 per hour (increase from $5.36) 

  • $5.09 per hour for EO 13706 contracts (increase from $4.93) 

  • $2.42 per hour for Hawaii Prepaid Healthcare Act (HPHCA) employees 

  • $1.96 per hour for Hawaii Prepaid Healthcare Act (HPHCA) employees on EO 13706 contracts 

Effective July 7, 2025, the Wage and Hour Division (WHD) was to have posted the increased Health & Welfare (H&W) rates on Wage Determinations. Contractors are required to provide the H&W rate from the Wage Determination that is applicable on the anniversary date of a multiple-year contract or at the beginning of the contract option period. Additionally, contractors should only provide the new H&W rate after their Contracting Officer has formally notified the contractor of the rate increase. 

False Claims Costly

Raytheon Corp. plus its parent, RTX Corp. and affiliate Nightwing Group, LLC, have agreed to pay $8.4 million to the federal government to resolve a claim under the False Claims Act. The defendants claimed to be in compliance with cybersecurity requirements of their contract with the DoD. A whistleblower first revealed the use for six years by Raytheon of an internal computer system that did not meet DoD requirements. While Raytheon eventually self-reported the deficiency, it had already been in place for five years, so the government decided to proceed with the charges.

News Items

  • EEOC actions:

    • Sued Chrysler’s corporate owner, FCA, for failing to accommodate an Orthodox Jew’s observance of his religious obligations for time off.

    • Settled a claim of racial discrimination against a Maryland retirement move after a minority employee was treated unfairly compared to two majority-race employees.

    • Settled with a lending institution that failed to remedy sexual harassment by a supervisor.

  • The firing of an employee of Miami-Dade County was upheld in court as justified because he wrote an “inflammatory” opinion piece against LBGTQ+ people that brought a storm of complaints to the county government.

  • DOJ has brought charges in two separate cases involving North Korean IT workers who posed as Americans to gain access to American employers’ trade secrets and technology and to funnel their payroll money back to North Korea. This is NOT a new scam and employers must be wary.

Hennrietta Smith
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