ICE Updates Classification of Form I-9 Violations and Increases Monetary Penalties

APPLIES TO All Employers

EFFECTIVE MAR 16, 2026

QUESTIONS? Contact HR On-Call (888) 378-2456

 

Quick Look U.S. Immigration and Customs Enforcement has updated its long-standing fact sheet Form I-9 Inspection Under Immigration and Nationality Act § 274A to reclassify a number of technical violations as substantive violations. Employers will no longer have a 10-day statutory cure period, upon written notice from the government, for a number of common errors and could be subject to immediate fines of $288 to $2,861 per form.

Discussion

U.S. Immigration and Customs Enforcement (ICE) has updated its long-standing fact sheet Form I-9 Inspection Under Immigration and Nationality Act § 274A to reclassify a number of technical violations as substantive violations. This means employers will no longer have a 10-day statutory cure period, upon written notice from the government, for a number of common errors and could be subject to immediate fines of $288 to $2,861 per form. These changes were made without issuing a Federal Register notice or press release. The following errors have been reclassified as substantive violations:

 

• Missing employee date of birth (Section 1);
• Missing USCIS/alien number (Section 1, when applicable);
• Missing date next to employee signature (Section 1);
• Missing expiration date in Section 1, Box 4;
• Spanish-language Form I-9 used outside Puerto Rico;
• Missing name/title of employer representative;
• Incomplete List A, B, or C data in Section 2 (document title, number, issuing authority, or expiration), even where document copies were retained;
• Missing first day of employment in the Certification;
• Incomplete preparer/translator data in Supplement A;
• Failure to check alternative procedure box/not enrolled in E-Verify when using remote verification; and
• Electronic I-9 audit trail, e-signature, or security documentation deficiencies.

 

ICE has also removed the safe harbor rule that allowed retained copies of employment authorization documents to cure missing Section 2 information. Due to the sharp increase in worksite enforcement activity, employers should audit their Forms I-9 as soon as possible and consult with legal counsel to determine how corrective action should be taken.

 

Action Items

1. Immediately audit Forms I-9 in consultation with legal counsel.
2. Verify compliance of electronic Form I-9 systems.
3. Confirm use of remote verification only when enrolled in E-Verify, if applicable.
4. Have appropriate personnel trained on Form I-9 requirements.
5. Consult with legal counsel upon receipt of a Notice of Inspection from ICE.

 

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Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2026 ManagEase

NLRB Reaffirms Limited Remedies under Ex-Cell-O

APPLIES TO All Employers Subject to the NLRA

EFFECTIVE FEB 26, 2026

QUESTIONS? Contact HR On-Call (888) 378-2456

 

Quick Look Employers may still follow the process of refusing to bargain in order to challenge union certification; monetary remedies will not be imposed.

Discussion

In Longmont United Hospital, the National Labor Relations Board (NLRB) declined to expand a 56-year-old rule limiting remedies for failure to bargain when an employer refuses to bargain in order to initiate a test-of-certification. In 1970 in Ex-Cell-O, an employer refused to bargain with a union so as to initiate a challenge to the certification of the bargaining agreement. Refusal to bargain is the first step in a procedural mechanism through which employers must challenge union certifications. There, employees sought compensatory damages for a failure to bargain. The NLRB previously said that it does not have the authority to make such an award, it would chill negotiations, and damages would be too speculative to quantify.

 

Recently, in Longmont United Hospital, the General Counsel requested the Board to “adopt a remedy that would require employers to compensate employees ‘for the lost opportunity to engage in collective bargaining at the time and in the manner contemplated by the Act’ in test-of-certification cases.” However, the Board declined to stray from the Ex-Cell-O decision, refusing to implement damages where an employer has defended its refusal to bargain on grounds that it is challenging the union’s certification. The Board referred to the same reasoning as was presented in Ex-Cell-O as the reason for denial.

 

Although this ruling may keep standards to challenge certifications at status quo, it is a good reminder to review the process to challenge union certifications with legal counsel before taking action.

 

Action Items

1. Review potential union certification challenges with legal counsel.

 

 

New NLRB Chairman Appointed

On March 27, 2026, President Trump designated Board Member James R. Murphy as Chairman of the NLRB. Mr. Murphy returned to the Board in January, bringing over 47 years of NLRB service. His term will end December 16, 2027. Although Mr. Murphy’s appointment fills an existing gap at the NLRB, no significant changes are expected to immediately result.

 

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Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2026 ManagEase

Discussion

OSHA Launches Safety Champions Program

On March 16, 2026, the Occupational Safety and Health Administration (OSHA) launched the Safety Champions Program, a new cooperative initiative designed to help employers develop and implement effective workplace safety and health programs with a philosophy of continuous improvement aimed at preventing workplace injuries, illnesses, and fatalities. The program offers three progressive steps: Introductory, Intermediate, and Advanced, which are aligned with OSHA’s recommended practices for safety and health programs, allowing employers to develop safety programs at their own pace and tailor the programs to their specific needs. Participants can work independently or with experienced Special Government Employees who provide guidance and technical assistance.

 

OSHA Cites Massachusetts Contractor Following Fatal Cave-In Incident

On April 1, 2026, and following a fatal trench collapse at a Yarmouth, Massachusetts worksite in November 2025, OSHA announced citations to Revoli Construction Co. Inc. for seven willful, 33 repeat, and 17 serious violations, assessing over $4.6 million in proposed penalties. The violations included failures to provide adequate cave-in protection, a safe means of trench exit, proper shoring systems, and appropriate spoil pile distance from the excavation, among other electrical and fall hazards. The size of the penalty reflects the severity and repeat nature of the violations, particularly where violations are willful or repeat in nature. This case underscores the importance of employers periodically reviewing their workplace safety programs and practices for compliance with applicable OSHA standards and taking advantage of OSHA’s free compliance assistance resources to proactively identify and address potential hazards before they result in workplace injuries.

 

OSHA Updates NEP for Heat-Related Illness

On April 10, 2026, OSHA issued an updated National Emphasis Program (NEP) for indoor and outdoor heat hazard prevention, effective immediately. The revised NEP is set to remain in place for five years and expands the industries targeted for enforcement, adding 22 new industries to the list, including construction, farming, manufacturing, retail, transportation, warehousing, and restaurants. The NEP also introduces new citation guidance requiring inspectors to document weather conditions such as heat index, government heat alerts, wind speed, and relative humidity before issuing a citation. OSHA compliance officers will continue to expand any inspection where heat-related hazards are present on heat priority days and will conduct random inspections in high-risk industries on days when the National Weather Service issues a heat advisory or warning. Although OSHA’s rulemaking effort to establish a permanent federal heat injury and illness prevention standard remains pending, the revised NEP provides an enforceable framework in the interim through the Occupational Safety and Health (OSH) Act’s general duty clause. Employers in covered industries should review and update written heat illness prevention programs, implement hazard reduction measures, and review compliance with OSHA’s reporting obligations for work-related heat injuries.

 

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Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2026 ManagEase

First Circuit: Mere Existence of a PIP is Not Enough to Support Discrimination Claim

APPLIES TO All Employers with Employees in ME, MA, NH, PR, and RI

EFFECTIVE MAR 13, 2026

QUESTIONS? Contact HR On-Call (888) 378-2456

 

Quick Look The First Circuit ruled that placing an employee on a performance improvement plan, without more, does not constitute an adverse employment action under the Age Discrimination in Employment Act. Using the legal standard under Muldrow v. City of St. Louis, an adverse action must leave an employee “worse off” with respect to the terms or conditions of their employment.

Discussion

In Walsh v. HNTB Corporation, the First Circuit Court of Appeals ruled that placing an employee on a performance improvement plan (PIP) did not meet the standard required for an adverse employment action under the Age Discrimination in Employment Act (ADEA).

 

Here, the plaintiff employee worked for HNTB for several years in IT support. After receiving a new supervisor, the plaintiff received a lower performance review rating compared to previous years. The review also noted that the plaintiff was at risk of being placed on a PIP due to not meeting expectations beyond the day-to-day requirements of her role. The following year the plaintiff was placed on a PIP citing feedback from staff and leadership that she was “perceived to be an impediment to the success/performance of the office,” “contentious,” and was “reluctant to engage with employees proactively.” The plaintiff’s team lead, who was responsible for helping her successfully complete the PIP told her she could “be replaced with younger, cheaper people.” Despite this, the PIP was successfully concluded with marginal improvement noted. Although the PIP concluded, the plaintiff claimed that the team lead would take credit for her work and would yell at her. The plaintiff subsequently resigned and filed claims for age discrimination under the ADEA and under Massachusetts state law prohibiting age discrimination, as well as constructive discharge.

 

In reaching its ruling, the court looked at whether the following factors were met in order to support a discrimination claim: (1) she was at least forty years of age; (2) her job performance met the employer’s legitimate expectations; (3) the employer subjected her to an adverse employment action; and (4) the employer did not treat her in an age-neutral manner when taking the adverse action. Using the legal standard under Muldrow v. City of St. Louis, the court stated that an adverse action must leave an employee “worse off” with respect to the terms or conditions of their employment.

 

Ultimately, the court found the plaintiff’s PIP did not rise to this level. The PIP identified problem areas and provided ways to improve them. It did not “assign [her] new duties, alter her title or compensation, or limit her ability to seek other opportunities within the company.” The court also found that the plaintiff’s working conditions did not result in a change that would compel a reasonable person to resign. The court focused on the fact that the plaintiff never complained to Human Resources or submitted a complaint to HNTB’s “hotline” system about being mistreated by her team lead or anyone else. No one at HNTB ever asked or told Walsh to leave her employment.

 

While this case resulted in a favorable ruling for the employer, it stresses the importance of using objective performance factors and recommendations when creating a PIP. PIPs that do result in changes to the terms or conditions of employment, like changes to pay, demotions, or a reduction in hours, could be considered an adverse employment action in support of a discrimination claim.

 

Action Items

1. Create PIPs using consistent and objective factors to measure performance improvements.
2. Have appropriate personnel trained on the requirements.
3. Consult with legal counsel when a PIP results in changes to the terms or conditions of employment.

 

 

Third Circuit: Eliminates Higher Burden of Proof for Reverse Discrimination Claims

 

APPLIES TO  All Employers with Employees in DE, NJ, and PA

EFFECTIVE MAR 6, 2026

QUESTIONS? Contact HR On-Call (888) 378-2456

 

Quick Look The Third Circuit ruled that majority-group plaintiffs alleging reverse discrimination under the New Jersey Law Against Discrimination are not subject to a heightened burden of proof. As a result, the court looked at the following three requirements for a failure-to-promote claim under the NJLAD: (1) the plaintiff was qualified for the promotion; (2) he was denied the promotion; and (3) the position was awarded to an applicant with similar or lesser qualifications.

Discussion

 

In Massey v. Borough of Bergenfield, the Third Circuit Court of Appeals ruled the “background circumstances” rule does not apply to plaintiffs who alleged they have been discriminated against in favor of a minority group under the New Jersey Law Against Discrimination (NJLAD). The background circumstances rule (Rule) was also struck down in Ames v. Ohio Department of Youth Services in Title VII discrimination cases by the U.S. Supreme Court. The Rule required plaintiffs who are non-minorities to prove that they were “victimized by the unusual employer who discriminates against the majority.”

 

Here, Christopher Massey was a white male in the Bergenfield Police Department who interviewed alongside Captain Mustafa Rabboh (an Arab-Muslim male) for the position of Chief of Police. Rabboh was promoted instead of Massey. Massey then brought discrimination claims under state and federal law.

 

The court predicted the Supreme Court of New Jersey would also rely on Ames to end application of the Rule in NJLAD discrimination claims. In Ames, the U.S. Supreme Court found that the Rule “is not consistent with Title VII’s text or our case law construing the statute,” and Title VII “draws no distinctions between majority-group plaintiffs and minority-group plaintiffs.” As a result, the court then looked at the following three requirements for a failure-to-promote claim under the NJLAD: (1) the plaintiff was qualified for the promotion; (2) he was denied the promotion; and (3) the position was awarded to an applicant with similar or lesser qualifications.

 

In this case, Council members admitted they considered Rabboh’s race and religion. The Mayor also believed Massey’s resume was overwhelmingly better, that Rabboh was under-qualified, and the selection process was not “fair.” Rabboh also had a record that included multiple Internal Affairs complaints and a disciplinary suspension. Based on these facts, the court found Massey to have met the burden of proof that discrimination was a motivating factor in the promotion decision. By extending Ames to a state anti-discrimination statute, the court affirmed a move towards scrutinizing the use of diversity or demographic considerations as potential evidence of discriminatory intent.

 

Action Items

1. Use clear and neutral, non-discriminatory factors in promotion decisions.
2. Have appropriate personnel trained on the requirements.

 

 

Sixth Circuit: NLRB’s Cemex Standard for Bargaining Orders Struck Down

 

APPLIES TO Employers Subject to the NLRA with Employees in KY, MI, OH and TN

EFFECTIVE MAR 6, 2026

QUESTIONS? Contact HR On-Call (888) 378-2456

 

Quick Look The Sixth Circuit struck down the NLRB’s Cemex standard, holding that the Board improperly used a single adjudication to create a broad rule requiring bargaining orders as the default remedy when a union election is set aside. Under the reinstated Gissel standard, bargaining orders should remain a last resort, available only where an employer’s misconduct makes a fair election unlikely.

Discussion

 

In Brown-Forman Corp., the Sixth Circuit Court of Appeals said that the NLRB remedy set out in Cemex was an improper exercise of the Board’s authority. Specifically, Cemex is an NLRB ruling that requires the Board to issue a bargaining order as the default remedy once it sets aside a union election. In contrast, the Gissel standard set forth by the U.S. Supreme Court says that bargaining orders are considered a last resort option, preferring secret-ballot elections as the primary means to determine union support; bargaining orders are saved for when a fair election isn’t possible.

 

Here, an employer was found to have committed unfair labor practices by offering significant benefits in an alleged effort to curtail a union election by its employees. As a result of these tactics, the union vote failed. An Administrative Law Judge found that the employer interfered with the attempt to collectively bargain and issued a bargaining order under both Cemex and Gissel to recognize the union even though the vote failed. When the Board reviewed the ruling, it came to the same conclusion but explicitly only relied on Cemex in its decision.

 

The Sixth Circuit said that “[t]he Board is empowered to issue a bargaining order, but only if other remedies are insufficient to protect employees’ choice to unionize.” The court said, referring to Gissel, “’where there is . . . a showing that at one point the union had a majority’ of employees’ support, and the employer’s misconduct (or likely repeated misconduct) made the prospect of a fair election unlikely, the Board could issue a bargaining order.” Meanwhile, the Cemex standard, which does not require review of a possible fair election, was an adjudication in a different case that did not follow the Board’s rulemaking process. Rulemaking follows a specific process to create rules and regulations to carry out the terms of the National Labor Relations Act (NLRA). The adjudication process is meant to “resolve disputes between parties, which can serve as precedent for future adjudications.”

 

The court here took issue with Cemex being used as a “rule of general application” rather than a “standard conceived to aid the Board in resolving the parties’ dispute.” Specifically, Cemex declined to follow Gissel, broadly concluding that decades of experience showed that the Gissel standard was insufficient to accomplish the NLRA’s goals; it was not directly responsive to the facts at issue in Cemex. Moreover, the court said that the Cemex standard was not created to resolve the parties’ dispute but was intended to deter future violations of the NLRA. Finally, even in relying solely on Cemex in the Brown-Forman case, “at no point did the Board use the case-specific facts to establish this standard as the proper analytical framework to better resolve the parties’ dispute.” The court ultimately sent the case back to the Board for further evaluation under the Gissel standard.

 

Action Items

1. Review employer activities with legal counsel during unionization attempts to ensure no interference with the process.
2. Have appropriate personnel trained on the requirements.

 

 

Sixth Circuit: Home Care Worker FLSA Exemptions Upheld

APPLIES TO  All Employers with Employees in KY, MI, OH and TN

EFFECTIVE  APR 1, 2026

QUESTIONS? Contact HR On-Call (888) 378-2456

 

Quick Look The 2013 DOL rule barring third-party home healthcare employers from claiming certain exemptions to FLSA overtime is upheld as being authorized by statute and in compliance with Loper Bright.

Discussion

 

In U.S. Dept. of Labor v. Americare Healthcare Services, Inc., the Sixth Circuit upheld the 2013 DOL rule that bars third-party home healthcare employers from claiming the “Companionship Services Exemption” and the “Live-In Exemption” from overtime requirements. The rule was challenged under Loper Bright Enterprises v. Raimondo, which overturned the Chevron doctrine of deferring to agency interpretations of ambiguous statutes.

 

Here, a claim was brought against a home healthcare employer for failing to pay overtime as required under the Fair Labor Standards Act (FLSA). The employees were live-in workers taking care of their own family members under state Medicaid waiver programs. The employer claimed the 2013 rule was invalid, and therefore it did not owe unpaid overtime because of the stated exemptions under the FLSA.

 

The Sixth Circuit ultimately upheld the 2013 regulation as a valid exercise of the DOL’s expressly delegated authority. The court applied the three-step framework from Loper Bright, confirming the delegation was constitutional, that it fell within the boundaries of the agency’s authority, and that the DOL engaged in reasoned decision-making. Critically, the court relied on Supreme Court precedent, which said that the FLSA expressly delegates authority to the Secretary of Labor to determine whether third-party employers fall within the exemptions’ scope, a holding the court found was not disturbed by Loper Bright. The court further found that the express delegation in the Companionship Services Exemption extended to the Live-In Exemption insofar as both cover the same workers (live-in companionship service employees), and that the DOL’s detailed explanation of industry changes made its 2013 regulation “reasonable and reasonably explained.”

 

Moreover, the court reinforced the Supreme Court’s intention stated in Loper Bright that, by overruling Chevron, it “[did] not call into question prior cases that relied on the Chevron framework.” This understanding guided the court’s analysis of Chevron-era caselaw in at least two ways: “(1) it makes clear that cases relying on Chevron remain binding as insofar as they interpret the statutes at issue; and (2) it cautions that the Court’s ruling in Loper Bright is not a sufficient basis for courts or litigants to second-guess agency actions that have already been upheld as lawful (because reasoning that a case ‘was wrongly decided … is not enough to justify overruling a statutory precedent’).”

 

Action Items

1. Review compensation practices for compliance with overtime pay requirements.
2. Have appropriate personnel trained on overtime requirements.
3. Consult with legal counsel regarding any historical corrections.

 

 

Seventh Circuit: BIPA 2024 Amendment Applies Retroactively

APPLIES TO  All Employers with Employees in IL

EFFECTIVE  APR 1, 2026

QUESTIONS? Contact HR On-Call (888) 378-2456

 

Quick Look The Seventh Circuit held that the 2024 amendment to the Illinois’ Biometric Information Privacy Act limiting statutory damages applies retroactively to cases pending at the time of enactment.

Discussion

 

On April 1, 2026, the Seventh Circuit Court of Appeals issued a unanimous ruling in Clay v. Union Pacific Railroad Co., with significant implications for Illinois employers facing litigation under the Illinois Biometric Information Privacy Act (BIPA).

 

BIPA requires employers to obtain written consent before collecting employees’ biometric data and prohibits disclosure of that data without consent. In 2023, the Illinois Supreme Court held in Cothron v. White Castle that a new BIPA claim accrues with each individual scan or disclosure, opening the door to potentially catastrophic “per-scan” damages. In response, the Illinois legislature amended BIPA in August of 2024 to limit recovery to a single award of statutory damages per plaintiff where the same biometric identifier is collected using the same method, regardless of how many times it was scanned. The key question left unanswered was whether that amendment applied to cases already pending in court.

 

In Clay, the Seventh Circuit held that the 2024 amendment does apply retroactively to all BIPA cases pending at the time it was enacted. The court reasoned that because the amendment only affects the damages available to plaintiffs, it constitutes a procedural change rather than a change to BIPA’s underlying substantive standards, which triggers retroactive application under Illinois law.

 

The ruling is a significant win for BIPA defendants, as it forecloses the potential damages exposure that “per-scan” liability created for cases that were pending at the time the amendment was enacted. Employers with pending BIPA litigation should also be aware that, because per-scan damages were frequently used to establish the minimum amount in controversy required for federal court jurisdiction, district courts may now need to reassess whether those cases belong in federal court. As a result, certain cases may be dismissed or remanded to state court.

 

Action Items

1. Review biometric data collection practices and consent procedures for compliance with BIPA.
2. Have appropriate personnel trained on BIPA requirements.
3. Consult with legal counsel regarding pending BIPA litigation.

 

 

Eighth Circuit: Out-Of-State Employee Not Covered by Minnesota Whistleblower Act

APPLIES TO  All Employers with Employees in MN

EFFECTIVE MAR 26, 2026

QUESTIONS? Contact HR On-Call (888) 378-2456

 

Quick Look The Eighth Circuit affirmed dismissal of a whistleblower retaliation claim, finding that a Hawaii-based employee who completed training in Minnesota did not qualify as an “employee” under the Minnesota Whistleblower Act. The court reasoned that brief, passive training visits did not constitute “performing services for hire” in Minnesota, and did not satisfy the law’s ongoing physical presence requirement.

Discussion

In Ghosh v. Abbott Laboratories, the Eighth Circuit addressed the scope of coverage under the Minnesota Whistleblower Act (MWA), finding that a Hawaii-based employee who completed training in Minnesota did not qualify as an employee under the MWA.

 

In this case, the plaintiff was a Hawaii-resident and was hired as the Hawaii direct sales manager for CSI, a Minnesota-based medical device company and Abbot Laboratories subsidiary. Before beginning his role, the plaintiff completed required training over two trips to Minnesota totaling 12 days, during which he accompanied sales representatives on hospital visits and participated in educational sessions. Shortly after completing training, CSI terminated the plaintiff, citing inappropriate conduct. The plaintiff alleged the termination was retaliatory, claiming he had reported violations of the federal Anti-Kickback Statute. He filed suit under the MWA and, separately, Hawaii’s whistleblower statute.

 

The Eighth Circuit affirmed dismissal of both claims. On the Minnesota claim, the court focused on whether the plaintiff qualified as an “employee” under the MWA, which requires a person to perform services for hire in Minnesota. The court found that the plaintiff’s training activities did not constitute intentional, active, and commercial services, because they were primarily passive and educational in nature, designed to prepare him to sell products in Hawaii. The court further held that even if those activities could be characterized as commercial, 12 days of training out of a 118-day period of employment did not satisfy the MWA’s requirement of ongoing physical presence in the state.

 

On the Hawaii claim, the court held that the choice-of-law clause in the plaintiff’s employment agreement, designating Minnesota law as governing, barred him from pursuing a claim under Hawaii’s whistleblower statute.

 

Action Items

1. Review internal complaint and reporting procedures for compliance with applicable anti-retaliation protections.
2. Have appropriate personnel trained on proper complaint and reporting procedures.
3. Consult with legal counsel on applicability of out-of-state employment law protections.
4. Review choice-of-law provisions with legal counsel.

 

 

Ninth Circuit: Arbitration Agreement Severability Clause Doesn’t Change Arbitrator’s Delegated Power

APPLIES TO All Employers with Employees in AK, AZ, CA, HI, ID, MT, NV, OR, WA, Guam, and the Northern Mariana Islands

EFFECTIVE MAR 19, 2026

QUESTIONS? Contact HR On-Call (888) 378-2456

 

Quick Look The Ninth Circuit held that a severability clause in an arbitration agreement does not affect the delegation of power to the arbitrator to resolve questions of validity.

Discussion

 

In Sandler v. Modernizing Medicine, Inc., the Ninth Circuit Court of Appeals said that, even though an arbitration agreement may contain a severance clause, it did not change the agreement’s directive for the arbitrator to resolve claims of validity.

 

Here, an employee made age and disability discrimination claims against her employer in federal court; however, the employer sought to enforce the arbitration agreement. The agreement said that “a court or other body of competent jurisdiction” can sever provisions found to be invalid. It also said that the arbitrator had the power to resolve questions of whether the agreement is valid. The employee claimed the severability language negated the delegation of review clause.

 

The court ultimately found there was a clear and unmistakable intention to have the arbitrator resolve any challenges as to the validity of the agreement. The term was clearly stated in the JAMS rules incorporated into the terms of the agreement. Such a clear term does not conflict with nor is negated by the presence of a severability clause. “The reference to a ‘court’ in a severability clause does not mean that the parties did not agree to have an arbitrator decide questions about an agreement’s validity; all it means is that, in the event that a court were to interpret the contract … severance would be permitted.” Moreover, whether the parties manifested a clear and unmistakable intent to delegate arbitrability to an arbitrator is a question of federal law when the agreement is subject to the Federal Arbitration Act (FAA).

 

Action Items

1. Have arbitration agreements reviewed by legal counsel for clarity.

 

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Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2026 ManagEase

California: Arbitration Agreements Must be Read in Context

APPLIES TO All Employers with Employees in CA

EFFECTIVE FEB 19, 2026

QUESTIONS? Contact HR On-Call (888) 378-2456

 

Quick Look The California Court of Appeal held that arbitration agreements must be evaluated in context when determining whether they are unconscionable. Relevant contextual factors include the agreement’s specific language, the circumstances of its formation, and the nature of the employer-employee relationship.

Discussion

In Ayala-Ventura v. Superior Court, the California Court of Appeal examined whether an arbitration agreement between an employee and her commercial janitorial employer was unconscionable and therefore unenforceable. Unconscionability analysis involves two components: procedural unconscionability, which focuses on how the contract was formed (e.g., pressure, surprise, or lack of meaningful choice), and substantive unconscionability, which examines whether the contract’s actual terms are unreasonably one-sided or oppressive. Both elements must be present for an agreement to be deemed unenforceable, though not necessarily to the same degree.

 

The employee brought wage and hour claims in court, but the employer sought to enforce her arbitration agreement. The employee argued the agreement was unenforceable because it was overbroad in scope, indefinite in duration, and lacked mutuality. On review, the court found only minimal procedural unconscionability. While the agreement was a pre-printed, take-it-or-leave-it form, the circumstances of its formation did not reflect significant oppression or surprise. The agreement was a standalone document written in clear, legible type with labeled sections, available in both English and Spanish, and expressly informed the employee of her right to consult legal counsel before signing. There was no evidence of time pressure, duress, or manipulation.

 

The court also rejected all three of the employee’s substantive unconscionability arguments. On scope, the court construed the agreement’s broad language narrowly, limiting it to employment-related claims to preserve the agreement’s validity. It further noted that, unlike a large institution such as a university with hospitals or athletic facilities, a commercial janitorial company poses little realistic risk of unrelated claims ever arising. On duration, the court found that the agreement’s survival past the end of employment was not unconscionable given the employer’s limited operational footprint. On mutuality, the court found the agreement adequately bilateral, as it equally bound both the employer and the employee to arbitrate their respective claims.

 

Ultimately, the court upheld the agreement as valid and enforceable. The arbitral scheme was deemed fair and accessible, ensuring the employee retained meaningful access to pursue her statutory claims. The decision reinforces that courts will evaluate arbitration agreements in context, and that a broad or lengthy agreement is not automatically unconscionable when the employer’s scope and reach are limited.

 

Action Items

1. Review arbitration agreements with legal counsel for compliance.

 

 

California: Court Upholds AI Training Data Transparency Law

APPLIES TO Covered Businesses with Publicly Available AI in CA

EFFECTIVE MAR 4, 2026

QUESTIONS? Contact HR On-Call (888) 378-2456

 

Quick Look A federal district court denied X.AI’s request to block enforcement of California’s AI Training Data Transparency law, rejecting arguments that the disclosure requirements would expose trade secrets or violate free speech rights. The law remains in effect and requires generative AI developers to publicly disclose information about the datasets used to train their systems.

Discussion

 

California’s Artificial Intelligence Training Data Transparency law (AB 2013) took effect January 1, 2026, requiring developers of generative AI systems available to Californians to publicly post summaries of the datasets used to train their systems, including whether the data includes personal or copyrighted content, when it was collected, what modifications were made, and how it is used in training.

 

In December 2025, X.AI filed suit against the California Attorney General, arguing that AB 2013 would effectively destroy trade secrets and gut the AI industry by giving competitors a roadmap to reverse-engineer rival models. X.AI sought a preliminary injunction to halt enforcement while the case proceeded. On March 5, 2026, a U.S. district court denied the injunction, finding that X.AI had not demonstrated a likelihood of success on the merits of any of its three arguments. Specifically, the plaintiff raised three objections to AB 2013: (1) that it violates the Takings Clause of the Fifth Amendment; (2) that it violates the First Amendment; and (3) that it is unconstitutionally vague.

 

Regarding the trade secrets argument, the court acknowledged that training datasets could potentially qualify for protection, but found X.AI’s pleadings too generalized and abstract to demonstrate that its specific datasets were meaningfully distinct from competitors’ in a way that merited protection. On vagueness, the court rejected the argument that terms like “dataset” and “data point” were undefined, noting that X.AI itself used those terms fluently throughout its complaint. On free speech, the court found that X.AI had not shown at this stage that the law’s disclosure requirements violated First Amendment rights.

 

As of now, the law remains enforceable while litigation continues, although an appeal has already been filed. Employers should continue to look for developments on this issue.

 

Action Items

1. “Developers” of generative AI systems should evaluate whether the bill applies to them.
2. Review third-party AI providers’ compliance with AB 2013’s requirements.
3. Audit and document datasets used in AI training to identify any personally identifiable or copyrighted content that may be subject to disclosure.
4. Consult with legal counsel regarding trade secret protections and how to structure required disclosures.
5. Monitor ongoing litigation and legislative developments related to AI enforcement.

 

 

California: Parties May Voluntarily Elect FAA Governance of Arbitration Agreements

On January 13, 2026, the California Court of Appeal affirmed an order compelling arbitration of an employee’s individual claims and dismissing her class claims in Tuufuli v. West Coast Dental Administrative Services, LLC. The court held that the FAA governs an arbitration agreement where the parties expressly agree to its application, meaning employers do not need to independently establish that the underlying employment relationship involves interstate commerce in order for the FAA to apply. The court also affirmed the dismissal of the employee’s class, collective, and representative claims, finding the arbitration agreement’s express prohibition on such proceedings enforceable under the FAA. California employers should review their arbitration agreements with legal counsel to identify the governing law, the scope of arbitrable claims, and any limitations on class or representative proceedings.

 

Costa Mesa, CA: New Self-Checkout Staffing Ordinance

Effective April 20, 2026, the City of Costa Mesa will require drug retail establishments and qualifying food retail stores to meet new staffing and operational standards for self-checkout operations. Under the new ordinance, food retail establishments include stores that are: (1) over 15,000 square feet and primarily sell household food products, or (2) over 85,000 square feet with at least 10 percent of their sales floor dedicated to nontaxable food products. Covered employers must dedicate at least one employee to exclusively monitor self-checkout stations, maintaining a minimum ratio of one employee per every three self-checkout stations. Covered employers must also keep at least one traditional staffed checkout lane open whenever self-checkout is available. The ordinance also restricts self-checkout use to approximately fifteen items and prohibits processing of age-restricted products and items with theft-deterrent devices through self-checkout. Required public notices must be posted in customer-accessible areas, and employees are protected from retaliation for reporting violations. Retailers operating in Costa Mesa should evaluate whether the ordinance applies to their operations and update staffing plans and internal procedures.

 

REMINDER | San Francisco, CA: HCSO Reporting Requirements Due May 1, 2026

San Francisco employers covered by the Health Care Security Ordinance (HCSO) and/or the Fair Chance Ordinance (FCO) must submit their 2025 Annual Reporting Form to the San Francisco Office of Labor Standards Enforcement (OLSE) by May 1, 2026, or face a penalty of $500 per quarter. The HCSO applies to for-profit businesses with 20 or more workers and nonprofits with 50 or more workers operating within San Francisco, requiring them to report quarterly employee counts, HCSO-eligible employees, total health care expenditures, and health care coverage options offered. The FCO, which applies to any employer doing business in San Francisco with five or more employees, restricts the use of criminal background information, including banning criminal history checkboxes on job applications, and requires employers to report hiring totals, whether background checks were conducted, and whether individuals with conviction histories were hired. Both forms and reporting instructions are available on the Annual Reporting Form website.

 

REMINDER | California Pay Data Reporting Due May 13, 2026

Private employers with 100 or more employees or labor contractors anywhere, with at least one person in California, must complete the annually required pay data reporting by May 13, 2026. This reporting is required under California Government Code § 12999. Employers should note that state reporting is separate and different from federal EEO-1 reporting. Employers are required to report pay, hours worked, demographic, and other workforce data by establishment and job category. Note that the Civil Rights Department (CRD) released updated reporting templates and FAQs. Review the CRD’s website for more information.

 

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Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2026 ManagEase