Insights

The United States Court of Appeals for the Sixth Circuit held, in an issue of first impression for that court, that the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (EFAA) renders an employer’s pre-dispute arbitration agreement unenforceable as to a plaintiff's entire lawsuit, whenever the lawsuit includes a viable sexual harassment claim.

On February 17, 2026, the U.S. Equal Employment Opportunity Commission (EEOC) filed a complaint against Coca-Cola Beverages Northeast, Inc., in the United States District Court for the District of New Hampshire, alleging that the company violated Title VII of the Civil Rights Act of 1964 (Title VII) by conducting an event limited to female employees. The EEOC’s lawsuit is one of several recent actions from the EEOC in furtherance of its efforts to end what it refers to as “unlawful DEI-motivated race and sex discrimination.” See EEOC and Justice Department Warn Against Unlawful DEI-Related Discrimination | U.S. Equal Employment Opportunity Commission.

The New Jersey Family Leave Act (NJFLA) entitles eligible employees to up to 12 weeks of unpaid, job-protected leave per 24-month period for bonding with a new child, caring for a seriously ill family member, or responding to certain public health emergencies. The law covers employers with 30 or more employees worldwide, and employees must have at least one year on the job and 1,000 hours worked in the preceding 12 months to qualify. Unlike the federal Family and Medical Leave Act (FMLA), the NJFLA does not cover an employee’s own serious health condition, but instead pairs with New Jersey’s Temporary Disability Insurance (TDI) and Family Leave Insurance (FLI) programs, which provide partial wage replacement — funded through employee payroll contributions — when employees are out on qualifying leave. 

Employers are increasingly relying on artificial intelligence and automated decision systems (ADS) in workplaces across California and the world as avenues to boost productivity or achieve cost savings. However, some state legislators have raised concerns about the lack of worker protections and oversight in discipline and termination decisions made by ADS.

Congress has not passed funding bills to keep key parts of the government funded for the remainder of Fiscal Year 2026—including the Departments of Defense, State, Treasury, Labor, Health and Human Services, Transportation, Housing and Urban Development, and Homeland Security, as well as independent agencies, the judiciary, and national security and foreign operations functions. As Congress continues to negotiate a deal in advance of the expiration of funds on January 30, parts of the government may still face a short shutdown, given the time needed for both the Senate and the House to consider and approve legislation. In anticipation of that possibility, agencies whose funding is uncertain are preparing for a shutdown; contractors, grant recipients, and companies that work with those agencies should do the same. Our team is ready and available to advise through the shutdown process.

On January 14, 2026, the United States filed a lawsuit against the State of Minnesota in federal district court, challenging the state's affirmative action requirements for civil service employment as violations of Title VII of the Civil Rights Act of 1964 (“Title VII”). This action comes almost a year after President Trump issued Executive Order 14173, which rescinded federal affirmative action requirements for federal government contractors and set up a potential conflict between federal requirements and certain state contracting requirements. The United States has designated this case as a matter of general public importance. This entitles the federal government to an expedited review by a three-judge panel at the district court with direct appeal to the United States Supreme Court—setting the path for a show-down on affirmative action in employment at the highest court.

Congress has not passed crucial funding bills for the start of Fiscal Year 2026.  If Congress fails to act by September 30, the government may be forced to shut down for lack of funding.  In anticipation of that possibility, agencies government-wide are preparing for a shutdown, and contractors and companies that work with the government should do so as well.  Our team is ready and available to help advise companies through the shutdown process.

On July 29, 2025, Attorney General Pam Bondi issued new guidance to all federal agencies entitled “Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination” (“Guidance”). The Guidance purports to “clarif[y] the application of federal antidiscrimination laws to programs or initiatives that may involve discriminatory practices, including those labeled as Diversity, Equity, and Inclusion (‘DEI’) programs.” It declares that “[e]ntities receiving federal funds . . . must ensure that their programs and activities comply with federal law and do not discriminate on the basis of race, color, national origin, sex, religion, or other protected characteristics,” and identifies a series of “‘Best Practices’ as non-binding suggestions to help entities comply with federal antidiscrimination laws and avoid legal pitfalls.” The Guidance is the most comprehensive articulation of the Administration’s view of what constitutes unlawful DEI released since President Trump’s Executive Order, Ending Illegal Discrimination and Restoring Merit-Based Opportunity, issued on January 21, 2025.

On July 11, 2025, the Department of Education issued a new interpretive rule entitled “Clarification of Federal Public Benefits under the Personal Responsibility and Work Opportunity Reconciliation Act.” The Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) generally limits “eligibility for ‘federal public benefits’ to U.S. citizens, permanent residents, and certain categories of qualified aliens.” The Department concluded that certain postsecondary education programs, “including adult education programs authorized under Title II of the Workforce Innovation and Opportunity Act of 2014, [and] postsecondary career and technical education programs under the Carl D. Perkins Career and Technical Education Act of 2006,” constitute “Federal public benefits under the PRWORA and thus are subject to PRWORA’s citizenship verification requirements.”

Underscoring the Administration’s intention to eradicate DEI preferences and mandates, the Department of Justice (DOJ) launched a new Civil Rights Fraud Initiative (Initiative) to be co-led by DOJ’s Civil Rights Division and Fraud Section. In response, Crowell launched its own DEI and Civil Fraud Initiative to support clients in managing the heightened risks associated with this new enforcement landscape.

On May 19, 2025, Deputy Attorney General Todd Blanche issued a Memorandum creating the Civil Rights Fraud Initiative that will “utilize the False Claims Act to investigate and . . . pursue claims against any recipient of federal funds that knowingly violates federal civil rights laws.” According to the Memorandum, though racial discrimination has “always been illegal,” the Administration posits that “many corporations and schools continue to adhere to racist policies and preferences—albeit camouflaged with cosmetic changes that disguise their discriminatory nature.” In an effort to prevent federal funds from being used in connection with or support of these purportedly racist policies and preferences, the Initiative will wield the power of the False Claims Act, the government’s most powerful tool to fight fraud, waste, and abuse.

The classification of “independent contractors versus employees” – a political football that has undergone many iterations as the White House switched between political parties – has again changed hands. The U.S. Department of Labor (“DOL”) has now introduced new guidance, consistent with earlier Republican iterations, while rejecting the 2024 Democratic formulation. It remains to be seen whether the courts will give DOL much deference in this area.

On April 23, 2025, President Trump signed an executive order, Restoring Equality of Opportunity and Meritocracy, declaring it the policy of the United States “to eliminate the use of disparate-impact liability in all contexts to the maximum degree possible to avoid violating the constitution, Federal civil rights laws, and basic American ideals.” The order reasons that “disparate impact liability all but requires individuals and businesses to consider race and engage in racial balancing to avoid potentially crippling legal liability.”

Late on Friday, a federal judge in Maryland issued a preliminary injunction pausing certain elements of the Trump Administration’s two recent executive orders (“EOs”) addressing “illegal DEI programs.” The two EOs, Exec. Order 14151, Ending Radical and Wasteful Government DEI Programs and Preferencing (the “J20 Order”) and Exec. Order 14173, Ending Illegal Discrimination and Restoring Merit-Based Opportunity (“J21 Order”), contain a number of provisions that, among other things, direct the federal government to dismantle “illegal DEI programs” within federal agencies and federal contractors. Please refer to our prior alert on these EOs for a full breakdown of the provisions in each.

The first day of the Trump Administration included the issuance of 26 executive orders(“EOs”), the most in modern presidential history. Among these EOs, President Trump signed the Defending Women from Gender Ideology Extremism and Restoring Biological Truth to the Federal Government Executive Order (the “EO” or “Order”). While focused on federal policy, the Order has broad implications for private sector employers.

Late on the night of January 21, 2025, President Trump signed the “Ending Illegal Discrimination And Restoring Merit-Based Opportunity” Executive Order (the “EO”). This EO, like a number of the executive orders issued on his first day in office, took aim at Diversity, Equity, and Inclusion (“DEI”) programs by, among other things, broadly directing executive agencies and departments to terminate all “discriminatory and illegal preferences, mandates, policies, programs, activities, guidance, regulations, enforcement actions, consent orders, and requirements;” curtailing the Office of Federal Contract Compliance Programs’ (OFCCP) operational authority and directing agencies to scrutinize the DEI practices of private sector employers. Additionally, this language raises questions about the future and status of certain programs, preferences, and set-aside procurements administered by the U.S. Small Business Administration, U.S. Department of Transportation, and other agencies. 

Following a multi-million-dollar ruling against it by the National Labor Relations Board (“NLRB”), nursing home operator Care One, LLC, is now challenging the authority of NLRB-appointed Administrative Law Judges (“ALJs”) on constitutional grounds before the Second Circuit Court of Appeals. The Second Circuit’s line of questioning during the November 12, 2024, oral argument revealed the Court’s apparent skepticism towards Care One’s challenges, creating the prospect of a circuit court split on key issues that are likely to make their way to the Supreme Court. Care One’s arguments follow the trend over the past several years of employers increasingly questioning the authority of ALJs to adjudicate their labor and employment claims before administrative agencies.

On October 29, 2024, the Office of Federal Contract Compliance Programs (“OFCCP”) published a notice in the Federal Register that it received two requests under the Freedom of Information Act (“FOIA”) for 2021 Type 2 EEO-1 Reports filed by federal contractors.  The two requests came from the University of Utah and a non-profit organization named “As You Sow.”  The OFCCP notified federal contractors that the information might be protected from disclosure under FOIA Exemption 4, which protects disclosure of confidential commercial information, and requested that any entities that filed these reports and object to their disclosure submit objections by December 9, 2024.  Objectors are strongly encouraged to use the OFCCP portal.  Alternatively, contractors may also submit written objections via email at OFCCPSubmitterResponse@dol.gov, or by mail. 

On Friday, October 4, 2024, the Supreme Court granted certiorari in an appeal from the Sixth Circuit decision in Ames v. Ohio Department of Youth Services, a Title VII case involving claims of reverse sexual orientation discrimination.  Plaintiff Marlean Ames, a heterosexual woman, alleges that she was demoted and replaced by a gay man and was also denied a promotion in favor of a gay woman because of her sexual orientation.  The Sixth Circuit affirmed summary judgment in favor of the employer-defendant, holding that—to establish a prima-facie case under Title VII as a member of the majority—in addition to the “usual” showing Plaintiff was required to make an additional showing of “background circumstances to support the suspicion that the defendant is that unusual employer who discriminates against the majority.” 87 F.4th 822, 825 (6th Cir. 2023) (citation omitted). The Court observed that such a showing is typically made with evidence that the minority group (here, gay people) made the challenged employment decision or with statistical evidence showing a pattern of discrimination by the employer against members of the majority group—neither of which Plaintiff satisfied.

Effective January 1, 2026, H.B. 3773 amends Article 5, Section 2 of the Illinois Human Rights Act to explicitly prohibit employers from using artificial intelligence (“AI”) for a broad swath of employment decisions, including recruitment, hiring, promotion, renewal of employment, selection for training or apprenticeship, discharge, discipline, tenure, or the terms, privileges, or conditions of employment, if such use has the effect of subjecting employees to discrimination on the basis of a protected class.  The amendment also prohibits employers from using zip code as a proxy for protected classes.  H.B. 3773 further provides that employers will be required to provide notice to employees prior to using AI for such employment-related purposes.  The law applies to any employers employing one or more employees within Illinois during 20 or more calendar weeks during the calendar year.