Compliance Stuff

In July 2025, the  SEC settled charges  against the Chief Compliance Officers (CCOs) of two investment advisers that involved backdating compliance documents and attempting to conceal these fabrications from examiners. The settlements imposed civil monetary penalties for both officers as well as a three-year bar for the more severe violation. These actions reinforce a lesson that should be familiar: regardless of the party in power, regulators do not look kindly on backdated documents or attempts to mislead them. While most CCOs would never consider engaging in similar conduct, any action against a CCO in their personal capacity inevitably raise broader questions in the industry about what other actions could expose a CCO to personal liability. Put another way: most CCOs understand not to go 60 miles per hour in a school zone, but what if they roll through a stop sign? While every case will be judged individually, SEC staff members have previously provided  some guidance ...

In  Lawson v. Spirit AeroSystems , Inc. , the U.S. Court of Appeals for the Tenth Circuit upheld the forfeiture of certain stock awards for violating a covenant not to compete.  Like the Seventh Circuit in  LKQ Corp. v. Rutledge (which applied Delaware law), the Tenth Circuit concluded that, under Kansas law, the remedy of forfeiting future compensation is not subject to the same reasonableness standard as traditional enforcement of a non-compete obligation.  The Tenth Circuit reached this conclusion even though the executive’s agreement included both a forfeiture-for-competition provision and traditional enforcement rights ( i.e. , the right for the company to pursue monetary damages and specific performance), because the agreement terms enabled the forfeiture provision to be severed from the traditional enforcement provisions. Background and the Court’s Analysis A retirement agreement allowed the former CEO of Spirit AeroSystems (“Spirit”) to receive cash payments ...

  New York City employers are reminded that they are now required to physically and electronically post a copy of their written lactation accommodation policy. As we previously reported , Local Law 109 – which became effective on May 8, 2025 – amends the New York City Human Rights Law’s existing obligations on employers to implement and distribute a written lactation accommodation policy.  The amendment requires that employers both distribute the written policy to employees “at the commencement of employment,” as well as make the policy “readily available to employees by, at a minimum, conspicuously posting such policy at an employer’s place of business in an area accessible to employees and electronically on such employer’s intranet, if one exists.” In addition, the amendment incorporates the recent  change to New York State law  requiring the first 30 minutes of each lactation break be paid.  The amendment requires that a compliant lactation accommo...

On April 9, 2025, Kansas Governor Laura Kelley signed into law Senate Bill No. 241 (the “Bill”), which amends the Kansas Restraint of Trade Act (the “Act”) to (a) create presumptions of enforceability for non-solicitation covenants meeting the Act’s requirements, and (b) require reformation of overbroad restrictive covenants .  The Act expressly excludes non-competition covenants from its scope.  K.S.A. § 50-163(d)(6).  The Bill amended Section 50-163 of the Act to clarify the scope of agreements and restrictive covenants covered by the Act.  Specifically, the Bill clarified that a non-solicit in which an employee agrees not to solicit employees shall be “conclusively presumed to be enforceable” where it: (a) seeks, on the part of the employer, to protect confidential trade secret business information or customer/supplier information,  or  (2) does not continue for more than two years following the employee’s employment.  K.S.A. § 50-163(c)(4). ...

  On February 26, 2025, the United States Supreme Court entertained oral argument in   Ames v. Ohio Department of Youth Services , a case that centered on whether a plaintiff who is a member of a majority group must meet a higher burden—namely, showing supporting “background circumstances”—in establishing a   prima facie   case of discrimination under Title VII. Background Plaintiff Ames, a heterosexual woman, began working at the Ohio Department of Youth Services (the “Department”) in 2004. In 2014, she was promoted to Administrator of the Prison Rape Elimination Act.  In April 2019, Plaintiff applied for another promotion, but was not selected.  Shortly thereafter, Plaintiff alleges that her supervisor suggested that Plaintiff retire.  In May 2019, Plaintiff was demoted, which resulted in a significant pay cut, and the Department hired a 25-year-old gay man for the position.  Later that year, a gay woman received the promotion Plaintiff had appl...

On February 14, 2025, the Fifth Circuit denied the appellants’ petition for rehearing  en banc  in  Mayfield v. United States Dep’t of Labor— a  September 2024 decision  holding that the U.S. Department of Labor’s authority to “define” and “delimit” the terms of the Fair Labor Standards Act’s executive, administrative, and professional (EAP) exemptions includes the power to set a minimum salary for exemption. The dispute in  Mayfield  dates back to 2019, when the DOL issued a  final rule  raising the minimum salary required to qualify for most EAP exemptions from $455 per week to $684 per week.  Mayfield, a small business owner, challenged the rule, arguing that the DOL lacks, and has always lacked, the authority to define the EAP exemptions in terms of salary level (as opposed to by job duties)—an argument that has been embraced repeatedly by the Texas federal district courts (see  here  and  here ).  The district co...

  In a   January 2, 2025 decision in  CompassCare et al. v. Hochul , a Second Circuit panel vacated a permanent injunction issued in April 2022 that halted the requirement that New York State employers include a notice in their employee handbooks regarding the prohibition on discrimination based on reproductive health care choices.  As a result, employers statewide will once again be required to include such notice in their handbooks. Background The notice requirement,  which first took effect in November 2019 , was part of a broader amendment to the New York Labor Law adding a new Section 203-e prohibiting employers from accessing information on employees’ or their dependents’ reproductive health without prior consent, as well as generally prohibiting discrimination and retaliation against an employee “because of or on the basis of the employee’s or dependent’s reproductive health decision making, including but not limited to, a decision to use or access a part...

  The New York State Department of Labor (NYDOL) has issued informal guidance regarding the Paid Prenatal Leave benefit that will be available to New York employees beginning January 1, 2025 .  The guidance includes   general information   about the new benefit, as well as a   Frequently Asked Questions   page.  As we  previously reported , the State’s 2025 fiscal year budget expanded the New York State Paid Sick Leave Law to include a requirement for employers to provide up to 20 hours of paid leave during any 52-week period for employees to attend prenatal appointments or obtain health care services during or related to their pregnancy.  Paid Prenatal Leave does not accrue and is available to employees immediately upon a covered need for same.  Paid Prenatal Leave may be taken in 1 hour increments. The newly issued guidance provides some additional details around the new benefit.  Some key points from the guidance are as follows: ...

On October 18, 2024, the Federal Trade Commission (“FTC”) gave notice that it would appeal a Texas federal court’s decision halting its non-compete rule (the “Rule”) from taking effect as to all employers nationwide. The appeal sets the stage for a decision by the conservative Fifth Circuit, which has become a key battleground for challenges to federal rules.  In August, in  Ryan LLC v. Federal Trade Commission , No. 3:24-cv-00986-E (N.D.Tex.), the United States District Court for the Northern District of Texas  enjoined enforcement  of the Rule nationwide, preventing it from taking effect as intended on September 4, 2024. T he court found that the FTC lacked authority to issue the Rule under the FTC Act, and that the near-complete ban on noncompetes imposed by the Rule was arbitrary and capricious.  On similar grounds, the Florida federal court in  Properties of the Villages Inc. v. Federal Trade Commission,  No. 5:24-cv-00316 (M.D.Fla), issued ...

  Last week, the Departments of Labor, Treasury, and Health and Human Services finalized   regulations   implementing the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA).  Although the final regulations step back from certain burdensome aspects of the proposed rules (which we blogged about   here ), compliance with the final rules w ill require action from virtually all group health plans that cover mental health and substance use disorder (MH/SUD ) benefits before the end of the year. How did we get here? MHPAEA requires that group health plans that provide MH/SUD benefits cover them in parity with medical and surgical benefits .  Evaluation of whether benefits are in parity is performed for each classification of benefits under the plan, and this analysis requires evaluating: (1) financial and other quantitative treatment limitations, and (2) non-quantitative treatment limitations (NQTLs).   At the end of 2020, Congress added a require...

  On August 20, 2024, in   Ryan LLC v. Federal Trade Commission , No. 3:24-cv-00986-E (N.D. Tex.), the United States District Court for the Northern District of Texas granted summary judgment to the p laintiffs and ordered the Federal Trade Commission’s (“FTC”) non-compete rule (the “Rule”) to be set aside with respect to all employers nationally and that it shall not be enforced or take effect on September 4, 2024. The FTC may immediately appeal the court’s decision to the Fifth Circuit. Repeating the same reasoning it reached in granting a  preliminary injunction  on July 3, 2024, the court held that: ( 1) the FTC exceeded its statutory authority in issuing the Rule; and (2) the Rule was arbitrary and capricious under the Administrative Procedures Act (“APA”).  The court found that Section 6(g) of the FTC Act, which the FTC relied on to issue the Rule, does not grant it authority to issue substantive rules, but is instead a “housekeeping statute,” which only a...

  On August 9, 2024, Illinois Governor JB Pritzker signed into law   HB3773 , a bill amending the Illinois Human Rights Act to address employers’ use of artificial intelligence (AI).  The amendment clarifies that it is a civil rights violation to use AI that has the effect of discriminating on the basis of protected classes under Illinois law, or to “use zip codes as a proxy for protected classes. ”  775 ILCS 5/2-101(L)(1).  In doing so, Illinois becomes one of the first states to expressly ban the use of zip codes as a proxy. In addition, the amendment also requires employees to “provide notice” to employees when they use AI for purposes of “recruitment, hiring, promotion, renewal of employment, selection for training or apprenticeship, discharge, discipline, tenure, or the terms privileges, or conditions of employment. ”   Id.  5/2-101(L)(2).  Forthcoming regulations should define the contours of this obligation, as the amendment empowers t...

  For the past 40 years, federal administrative agencies have enjoyed broad latitude in interpreting statutes passed by Congress.  Known as “ Chevron  deference,” courts have routinely deferred to the agencies’ often politically motivated and even self-empowering interpretation of an otherwise ambiguous statute .  This has led to a significant delegation (indeed, some would say surrender) of authority by the legislative and judicial branches to the executive branch, which has resulted in a kudzu-like growth of administrative regulations affecting all aspects of American society. This phenomenon came to an abrupt end last Friday, when the Supreme Court overruled its own opinion in  Chevron  and struck a major blow to executive agency power in a 6-3 decision in  Loper Bright Enterprises v. Raimondo .  Writing for the majority, Chief Justice John Roberts noted that “…agencies have no special competence in resolving statutory ambiguities. Courts do.” ...