By: Dawn Lurie

The passage of the vaguely named “Right to Privacy in the Workplace Act” led to widespread chatter that the law possibly prohibited employers from using E-Verify unless they were explicitly required to do so under federal law. In response to the confusion, Seyfarth attorneys sought clarification from Illinois state representatives and the Illinois Department of Labor (IDOL).

Illinois first implemented the E-Verify provisions in the Right to Privacy in the Workplace Act under Public Act 95-138 in 2008, with an amendment in 2010. Now, new amendments under Public Act 103-879, effective January 1, 2025, further update the law. Key changes include mandatory employee notification related to Form I-9 inspections (remarkably similar to obligations in the state of California), protection against retaliation for exercising rights under E-Verify, and specific corrective action opportunities for employees with tentative nonconfirmations. Employers must also adhere to strengthened anti-discrimination provisions, ensuring that E-Verify is used fairly and transparently.

On October 29, IDOL issued a much welcomed FAQ on the Right to Privacy in the Workplace Act (“SB0508” or “the Act”). It addresses the widespread misinformation and misunderstanding about SB0508’s impact on E-Verify in Illinois and was created by IDOL in response to policy clarification requests.

Most notably, the new FAQ clarifies that SB0508 does not prohibit employers from voluntarily use of E-Verify for employment verification.

The IDOL FAQs help Illinois employers better understand their obligations under SB0508. FAQ #4 reads:

Q. May Illinois employers choose to voluntarily use E-Verify?

A. Yes. Illinois law does not prohibit any employer from using E-Verify. However, employers who use E-Verify must follow the requirements of the Right to Privacy in the Workplace Act.

The FAQ goes on to remind employers that “as of January 1, 2025, prior to enrolling in the E-Verify System, employers are urged to consult the Illinois Department of Labor’s website for current information regarding the accuracy of the program”.

The FAQ also encourages employers to review and understand their legal responsibilities regarding E-Verify.  Employers are also reminded that the Act prohibits misuse of E-Verify and imposes specific training and recordkeeping requirements on employers. The FAQ also discusses E-Verify participation posting requirements, an employer’s obligation in the event of a discrepancy in an employee’s employment verification information, and how to file a complaint.

What is the Cost of Non-compliance?

State investigations remain complaint-driven, with significant increases in monetary fines for willful and knowing violations of the Act, along with broadly defined penalties. Courts may award actual damages plus costs to the charging party and can impose additional penalties. These penalties are nebulously outlined, ‘In determining the amount of the penalty, the appropriateness of the penalty to the size of the business of the employer charged and the gravity of the violation shall be considered. The penalty may be recovered in a civil action brought by the Director in any circuit court.’ Although it remains unclear how SB0508 will be enforced, Seyfarth attorneys are committed to closely monitoring its implementation.

What are Key Provisions in SB0508 and the 2025 Amendments?

1. Voluntary Use of E-Verify: The FAQ reaffirms that Illinois employers may voluntarily use E-Verify, provided that the employer follows the requirements outlined in the Act.  As mentioned above, there is no ban or restriction against the voluntary use of E-Verify in Illinois, countering any contrary assumptions or misinformation.

2. Enhanced Worker Protections: SB0508 expands worker protections by requiring employers to:

  • Follow updated notification timelines. When an employer receives notification from a federal or state agency of a discrepancy as it relates to work authorization, including a tentative nonconfirmation (TNC) from E-Verify, the law reiterates the E-Verify rule that no adverse action should be taken. Additionally, it adds a requirement that employers provide written notice of the issue to the employee pursuant to the following guidelines:
    • Notice should be given via hand-delivery if possible, or alternatively by mail and email within five business days, unless federal law or a collective bargaining agreement specifies a shorter timeline.
    • Note that currently, E-Verify provides a 10-day period to deliver the notice and take action but does not mandate specific timing for the notification.
    • The notice must include an explanation of the determination, the time period for the employee to notify the employer if they wish to contest the determination, the time and date of any meeting with the employer or with the inspecting entity, and notice that the employee has the right to representation.
    • If requested by the employee, the employer must provide the original notice from the federal or state agency within seven business days (note: E-Verify rules already require employers to deliver the “Further Action Notice” to employees)
  • Notify employees of Form I-9 and employment record inspections: Employers must inform employees if their Form I-9 documentation will be inspected. Specifically, employees must be notified of any inspection within 72 hours of receipt, and where appropriate, employee representatives should also be notified. Per the law’s requirement, IDOL will develop and publish a template posting notice that employers may use to comply with this requirement.
  • Notify employees of discrepancies or suspect document determinations made by inspecting entities, generally Homeland Security Investigations (HSI).  Once the inspection is completed, employees should have an opportunity to resolve any verification discrepancies. Employers must notify the employee within 5 business days (or sooner if federal law or a collective bargaining agreement requires). The notification must be hand-delivered. If hand delivery is not possible then SB0508 requires that the notice be sent by mail and email (provided the email address of the employee is known). The notice must include information such as:
    • an explanation of the potential invalidity of the employee’s work authorization documents; a timeframe to respond if they wish to contest;details of any scheduled meetings regarding the issue, if known; and
    • information about their right to representation at these meetings. There are also timelines for providing information to employees if the determination was contested which include onerous requirements such as providing a redacted original notice from the inspecting entity within 7 business days (when such notice is requested by the employee).

It is likely that the hand delivery and snail mail mandates, specifically with respect to E-Verify TNCs, will prove extremely burdensome for employers, especially those that utilize electronic onboarding and I-9 systems. This is an area in which we are seeking further clarification from IDOL.

Unlike SB0508, HSI does not dictate the timeline to notify employees, but rather expects employers to fully address a Notice of Suspect Documents (NSD) within 10 days—either by terminating the employee or ensuring alternative documents are actively under HSI review within this period for those that “contest” the findings. Specifically, when HSI issues an NSD, both the employer and the affected employee(s) are given an opportunity to provide evidence of valid U.S. work authorization if they believe HSI’s findings are incorrect. The 10 day timeline, which incidentally is not required by regulation, is tight: employees must respond promptly by presenting alternative documentation, which the employer then submits to HSI for further review. In some cases, HSI agents may request direct meetings with employees to verify their status.

3. Existing Procedural Requirements: The existing Illinois law mandates that employers and authorized agents using E-Verify adhere to a structured process involving:

  • Employer Certifications: Employers must certify compliance with Illinois-specific E-Verify guidelines upon enrolling in the program. This certification affirms understanding of state-specific rules, including employee notification requirements and anti-discrimination provisions. Specifically, employers must affirm that they have received the E-Verify training materials from the Department of Homeland Security (DHS) and that they have posted the required E-Verify participation and anti-discrimination notices in a prominent place that is clearly visible to prospective employees.
  • Training, Testing, and Certification: Further, all employees who will administer the program must complete the E-Verify Computer-Based Tutorial or equivalent with the appropriate training modules. Users must be certified as having successfully completed training and testing before accessing and using E-Verify. E-Verify offers this training and mandates completion for all new users prior to being allowed into the system. Web Services providers are obligated to create (based on USCIS guidance) these materials and related trainings and associated knowledge tests.  

Employers must maintain proof of meeting these notification, testing, training, and documentation obligations. Although these requirements already exist in Illinois law, they have often been overlooked by employers. The recent amendments emphasize the importance of following these guidelines to ensure fair treatment of employees and at the same time remain compliant with E-Verify obligations.

What Do Employers in Illinois Need to Know?

  • Maintaining Compliance: Employers using E-Verify in Illinois should familiarize themselves with these updates to ensure compliance and safeguard worker rights. Notably, E-Verify remains permitted in Illinois, so employers can continue using it without concern. While minor adjustments to compliance processes may be necessary for some, many of the law’s new safeguards are already required by federal E-Verify rules.
  • Audits and Investigations: In cases where an employer is audited by Homeland Security Investigations or is under investigation by the Department of Labor (DOL) or the Department of Justice’s Immigrant and Employee Rights (IER) section, additional notification requirements and timelines will apply. Employers facing such scrutiny should consult competent legal counsel to navigate these situations and ensure full compliance.
  • Anticipated Clarifications: We expect further clarification from IDOL as we get closer to SB0508’s implementation in January 2025. Seyfarth will monitor and review these clarifications and share any significant updates of which employers should be aware.

Recommended Actions for All E-Verify Employers

With these changes in mind, Illinois employers should take this opportunity to review and, if necessary, update their E-Verify processes and procedures.  In fact, all employers could benefit from an E-Verify review.  Steps to consider include:

  • Reviewing E-Verify Account Structures: Ensuring E-Verify accounts are set up correctly in terms of entities and locations while also ensuring accounts are accessible only to those who have completed the mandatory training.
  • Maintaining “E-Verify Hygiene”: Ensuring that cases have been timely closed, that all new hires at participating hiring sites have been processed through the system, including those initially delayed by receipts or temporary documents, and that mismatches are timely addressed.
  • Updating the MOU with E-Verify.  Ensuring the registered locations, the required Points of Contact, and the number of employees are accurate, along with the employer’s Federal Contractor status, if applicable.
  • Review for trends and red flags. Employers should run E-Verify reports and pay attention to the Dashboard.For example: do you have a user that is opening and closing multiple cases for the same employee? Do you have open TNCs? Do you have employees with Final Nonconfirmations still working for you?  

USCIS’s Account Compliance branch is conducting an increasing number of Desk Review audits on accounts, which heightens the need for accurate, up-to-date account management practices. By maintaining accurate and readily accessible records and following E-Verify protocols, employers can help avoid compliance issues and continue to benefit from the program.  While E-Verify may not be suitable for every employer, it stands as a best practice for supporting a legally compliant workforce.

Looking Ahead

SB0508 strives to ensure transparent, fair, and lawful employment verification practices, but at the same time this law creates a number of onerous requirements for employers. We will continue to monitor updates and keep communications open with the IDOL in an effort to minimize issues for employers.

For more information on the Right to Privacy in the Workplace Act or for other questions regarding E-Verify compliance, or questions relating to I-9 compliance, internal immigration assessments, worksite enforcement audits, Department of Labor immigration-related wage and hour investigations, general H-1B compliance, and DOJ-IER anti-discrimination matters, please contact the Seyfarth Immigration Compliance and Enforcement group, or the author, Dawn Lurie, directly at dlurie@seyfarth.com.

By Ashley Jenkins and Kristina Launey

Seyfarth Synopsis: A federal court recently held that a football stadium must make reasonable modifications to its seating policy to allow a wheelchair user with a ticket for a non-wheelchair accessible seat access to view the game in person.

The football season is well underway, and a recent decision from a federal California Court serves as a reminder that stadiums must offer some form of reasonable modification for wheelchair users who do not have a ticket for an accessible wheelchair space at a game. 

The Complaint alleged the following: One of the plaintiffs — a 78-year old grandfather with polio who uses a wheelchair — received a ticket to see a game with his family.  However, none of the family’s tickets were for wheelchair accessible seats (i.e., open spaces for a wheelchair) and could only be reached by stairs.  As there were a number of unoccupied wheelchair seats nearby, the grandfather took one of those seats.  Stadium security officers refused to let the grandfather remain in that seat, claiming it was against policy, and told the plaintiff he could watch the game on the TV in the concourse.  When the family objected, the security officers threatened to eject the whole family if they did not stop complaining. The family had to carry the grandfather to a non-accessible seat which embarrassed him and prevented him from using the restroom during the game.  Meanwhile, the wheelchair space remained empty for the entire game.

The grandfather and his son brought suit, alleging that the stadium owner had discriminated against them in violation of the ADA and California’s Unruh and Disabled Persons Acts. Plaintiffs argued that the stadium owner had failed to make a reasonable modification to its normal seating policy to allow the grandfather to watch the game in person in an accessible location and retaliated against them when they complained by threatening to eject them from the game.   

The stadium owner moved to dismiss the case, arguing, among other things, that the ADA regulations have detailed ticketing regulations and none of them require stadiums to allow persons who do not have a ticket for a wheelchair seat to occupy such a seat.  The Court disagreed, holding that: “Whether or not defendants were required to permit the [plaintiffs] to use the empty wheelchair seats [they] had identified, the ADA required them to offer [the plaintiff] some reasonable accommodation to account for his wheelchair-bound status.”  In short, the Court found that the ADA required that the stadium make some reasonable modification beyond what was offered – watching the game in the concourse on a TV.  The Court also held that the Complaint stated a claim for retaliation based on the alleged threatened ejection from the game.

It is important to keep in mind that this was just a decision on a motion to dismiss in which the Court had to assume that all the facts alleged by the Plaintiffs are true.  What actually transpired, and the legal decisions that flow from those facts, may be much different after discovery and an adjudication on the merits.  Nonetheless, the decision provides some important reminders.  First, adhering to specific regulatory mandates, such as the ADA’s ticketing rules, is not always sufficient.  When there is a request, public accommodations must also make reasonable modifications to normal policies, practices and procedures, unless doing so would fundamentally alter the nature of the goods and services normally provided.  The DOJ has made this clear in other cases.  Second, responding to requests for reasonable modifications with empathy and a willingness to solve the problem at hand can often be a winning strategy for lawsuit avoidance. Edited by Minh Vu and John Egan

By Justin K. Beyer

Seyfarth Synopsis: In 2016, the Defend Trade Secret Act, 18 U.S.C. § 1836 (the “DTSA”), passed Congress and went into effect. At its heart, it effectively codified the Uniform Trade Secrets Act at the federal level, creating a federal cause of action. Prior to the enactment of the DTSA, a large body of federal common law had developed around the remedies available to a plaintiff after a defendant allegedly misappropriated a trade secret, including the “inevitable disclosure doctrine.” Through this doctrine, even in the absence of a non-compete or non-solicitation agreement, a court could fashion a remedy that enjoined a defendant from performing certain or all work on behalf of their new employer.

The seminal decision on the inevitable disclosure is PepsiCo. v. Redmond, a 1995 Seventh Circuit decision. 54 F.3d 1262 (7th Cir. 1995). Through PepsiCo., the Seventh Circuit found that a court had the inherent power to enjoin a former employee from working with a new employer, in whole or in part, if that defendant misappropriated trade secrets, and their conduct was duplicitous in so doinFollowing this decision, numerous courts throughout the country have adopted the inevitable disclosure doctrine. See Phoseon Technology, Inc. v. Heathcote, 2019 WL 7282497, at *11 (D. Or. 2019) (identifying states adopting the inevitable disclosure doctrine).

However, with the passage of the DTSA, one of the provisions contained within the DTSA created uncertainty as to the ongoing viability of the inevitable disclosure doctrine. In particular, 18 U.S.C. §1836(b)(3) states:

Remedies.—In a civil action brought under this subsection with respect to the misappropriation of a trade secret, a court may—

(A) grant an injunction—

(i) to prevent any actual or threatened misappropriation described in paragraph (1) on such terms as the court deems reasonable, provided the order does not—

(I) prevent a person from entering into an employment relationship, and that conditions placed on such employment shall be based on evidence of threatened misappropriation and not merely on the information the person knows

(Emphasis added). And to that end, some courts have determined that inevitable disclosure relief is unavailable under the DTSA as a result. See, e.g.IDEXX Labs., Inc. v. Bilbrough, 2022 WL 3042966, **5-6 (D. Me. Aug. 2, 2022) (discussing and collecting cases).

Late last week, though, the Northern District of Illinois in My Fav Electronics, Inc. v. Currie, 24-c-1959, 2024 WL 4528330 (N.D. Ill. Oct. 18, 2024) (Pallmeyer, J.), further muddied the waters on this question, when it enjoined the defendant Currie based on the inevitable disclosure doctrine. Specifically, the court entered a preliminary injunction enjoining the defendant from performing certain work, including soliciting former customers of the plaintiff, for a year from the date of the order, despite the fact that the defendant had not signed a non-compete or non-solicitation agreement with the plaintiff.

While the full extent of the defendant’s conduct is discussed in the court’s detailed opinion, for purposes of this article, defendant Currie’s conduct can be summarized as follows:

  • Left plaintiff’s employ after perceiving to have been demoted;
  • Following her demotion, she downloaded via email and external media scores of files from plaintiff;
  • Attempted to hide such downloads by renaming files to appear to be personal in nature;
  • Returned the plaintiff’s laptop computer in an unusable state, after allegedly “dropping it in the bathtub”;
  • Allegedly retained the documents to defend herself if plaintiff was ever sued for purported unscrupulous conduct and allegedly turned over the documents to an attorney; and
  • Denied accessing documents post-termination, despite metadata showing she had accessed several of the documents post-termination and at times that would suggest use on behalf of her new employer.

On this record, the court analyzed the extent to which defendant would be enjoined. It is important to note that Currie agreed to certain injunctive relief, including returning plaintiff’s property, and not using it further, but she argued against further injunctive relief (though her arguments more focused on the lack of trade secret status than the scope of the injunction).

Despite that, the court still determined that it had the power to enjoin defendant in a manner that, at least at first blush, would call into question the interplay between DTSA and PepsiCo. And while that is seemingly inconsistent with certain federal court decisions, the My Fav court’s decision actually appears to be wholly consistent with the statutory framework of the DTSA.

To wit, while the DTSA prohibits a court from “prevent[ing] a person from entering into an employment relationship,” the statute also appears to permit the court to place “conditions” “on such employment” “based on evidence of threatened misappropriation.” In other words, provided that a plaintiff can demonstrate that the defendant threatens continued misappropriation, the court may place conditions on that employment. And this, in turn, is the lynchpin of the PepsiCo. decision; i.e., based on the defendant’s prior conduct, they cannot be trusted to differentiate between information that must be protected from their prior employment and will “inevitably disclose” that information in performing their job on behalf of their new employer. 54 F.3d at 1271. In this case, the My Fav court restrained Currie from “contacting, soliciting, or otherwise participating in the procurement of Apple device buyback services, any of [Plaintiff’s] existing customers”, which has the effect of “screen[ing]” defendant “from working on procurement matters related to [plaintiff’s] most important opportunities … but will not be restricted from performing job responsibilities unrelated to the confidential information at issue here.” 2024 WL 4528330, at *18. This decision seems to thread the proverbial needle between the inevitable disclosure doctrine and the DTSA’s prohibition on outright prevention of new employment. What this means, practically speaking, is that PepsiCo v. Redmond and the inevitable disclosure doctrine appear to be alive and well, provided that the court does not completely restrict the defendant’s employment and tailors the relief to prohibiting activities that would threaten the plaintiff’s trade secrets. For plaintiffs seeking injunctive relief against a former employee, the My Fav decision may provide a roadmap for tailoring the relief sought and should be considered heavily.

By: Lukas Huldi (senior fellow) and Erin Dougherty Foley

Seyfarth Synopsis: The Seventh Circuit’s recent decision – holding that an employee’s request for a second chance that allows them to change their behavior to meet employer expectations is not a “reasonable accommodation” under the ADA – clarifies the standard for employers.

The Seventh Circuit Court of Appeals released a decision on October 17, 2024, clarifying that an employee’s request for a second chance at meeting job performance standards is not a “reasonable accommodation” under the ADA. Schoper v. Board of Trustees of W. Ill. Univ., 2024 WL 4508970 (7th Cir. 2024).

Professor Sarah Schoper was a tenure-track professor at the Western Illinois University when she suffered a pulmonary embolism that caused a traumatic brain injury. Schoper developed physical disabilities and high-functioning mild aphasia – a condition that causes difficulty retrieving words. Following her neurologist’s advice that intellectual activity would speed her recovery, Schoper returned to teaching as quickly as possible. The University provided physical accommodations and allowed her to return to teaching her previous courses without serving on any University committees.

Under the University and faculty union’s collective bargaining agreement, tenure-track faculty received retention evaluations within five years of joining the University. In their sixth year at the University, faculty could apply for tenure. Applicants not recommended for tenure would receive a terminal contract for the following year. The agreement provided for a “stop-the-clock” provision, allowing faculty to request an additional year to apply for tenure in the case of significant illness. To utilize this provision, faculty had to request the extension by the year six application due date. In this case, Schoper did not request to “stop-the-clock” but instead applied for tenure in the time provided. Only after Schoper received negative recommendations from the Department committee and Department chair did she request more time to achieve tenure. By this time, however, the due date to “stop-the-clock” already had passed, and the Department chair concluded that he could not grant that request under the collective bargaining agreement.

After an extensive review process involving five university officials, three separate committees, and several requests for reconsideration, Schoper was denied tenure and issued a terminal contract. Of particular concern to the University was Schoper’s student evaluations, which consisted of both qualitative feedback and numerical ratings on a five-point scale.

Before her injury, Schoper’s average numerical student evaluation score was over 4.0. After her injury, however, Schoper could no longer see the left side of her classroom and struggled to read non-verbal cues and track discussions. Schoper slowed her teaching pace and wrote out agendas on the white board to stay on track. After her first semester back, students began to leave negative comments on her evaluations and her average teaching score dipped from 4.6 to 3.8. By the time her tenure application was under review, Schoper’s average teaching scores in seven of her ten most recent classes ranged from 3.14 to 3.78, well below the University’s standard.  Additionally, students had complained that Schoper had class favorites, graded based on personal preference, did not take feedback well, wasted class time, and regularly complained in class about other faculty and not having tenure.

After receiving her terminal contract, Schoper sued the University, alleging that it discriminated against her on the basis of her disability and refused to offer reasonable accommodations in violation of the Americans with Disabilities Act (“ADA”). The District Court granted the University summary judgement, finding that Schoper could not establish a genuine dispute of material fact as to whether her disability was the but-for cause of her termination. Schoper appealed to the Seventh Circuit.

To provide a failure to accommodate claim, a plaintiff must show: (1) she is a qualified individual with a disability; (2) the employer knew of her disability; and (3) the employer failed to reasonably accommodate her disability. Schoper’s claim failed the first and third of these elements.

Schoper failed to meet the first element of this claim because the ADA does not protect individuals who do not meet the position’s requirements. Although Schoper had previously been recognized as a “superior teacher,” after her injury she no longer met the “necessary prerequisites” for the tenured position. Tenured positions at the University required a certain level of teaching ability—measured by average student evaluation score of at least 4.0—and Schoper no longer met that criterion. Because Schoper could not meet the position’s minimum criteria, the Court concluded she was not a “qualified individual” under the ADA.

Schoper also did not show that the University failed to offer a reasonable accommodation. A reasonable accommodation is one that allows a disabled employee to perform the essential functions of the position. The belated time extension Schoper requested was, according to the court, not one for an accommodation, but for a “do-over.” Schoper herself decided to return to teaching quickly to hasten recovery at the risk that her student evaluation scores would drop. The ADA does not require the University to insulate her from her chosen strategy. To the contrary, the court had previously decided in Siefken v. Village of Arlington Heights that an employee’s request for a second chance to change their own behavior is not a reasonable accommodation.

Schoper was similarly unsuccessful in her disability discrimination because, the court concluded, the evidence would not allow a reasonable factfinder to conclude that her disability caused her termination. Even if Schoper were a qualified individual under the ADA, she would not be able to shoulder the burden of showing that her traumatic brain injury was the “determinative factor” in the University’s decision to deny her tenure.

While the reviewers focused on Schoper’s comparatively poor teaching scores, which were caused by her brain injury, they did not consider them in isolation. Rather, they looked at the scores in conjunction with students’ written evaluations. None of the evaluations highlighted by the reviewers concerned Schoper’s disability; they instead focused on other problems, such as Schoper’s playing favorites with students, struggling to handle feedback, and complaining about other teachers in class. Even the most incendiary student comments looked at by the reviewers—one referring to Schoper as a weed that should be pulled from a garden and another comparing her to a preschooler—were not necessarily discriminatory as these comments could just as easily be directed to any teacher of questionable quality. According to the court, a reasonable juror could neither draw a discriminatory animus from those comments themselves, nor ascribe such an animus to all comments in general, let alone conclude that the reviewers relied on discriminatory comments.

Although results such as this one may often seem harsh, Courts interpreting the ADA have held that providing an employee with an accommodation does not require the employer to lower their expectations as to an employee’s job performance.  This case further confirms that when an employee fails to meet the expectations of a position, even if caused by a disability, an employer is not required to offer the employee another shot at meeting expectations. Such a request is not a “reasonable accommodation” required by the ADA. 

Please contact the authors, a member of Seyfarth’s Leave and Accommodations Team or your Seyfarth lawyer with any questions you may have.

Welcome to Decoding Appeals, where Seyfarth’s Appellate Team brings you insights and expertise from the front lines of the courtroom. Throughout this short video series, we break down the nuances of appellate advocacy, sharing tips and lessons we’ve learned to help you navigate the complexities of the appeals process.

In this third episode, host Michael Steinberg sits down with guest Chris Robertson to give viewers an insider’s look at the Supreme Court appeal process. Chris breaks down each step, from filing and opposing cert petitions, to the role of amicus briefs and the rare certiorari before judgment. Viewers also get a behind-the-scenes glimpse of how SCOTUS handles cases compared to other courts, along with what goes into preparing for a Supreme Court appeal. Tune in for practical takeaways on navigating the nation’s highest court.

By Christopher J. DeGroffAndrew L. ScrogginsSamantha BrooksJames P. Nasiri and Ridhima Bhalla

Seyfarth Synopsis: Following a handful of sluggish years in terms of EEOC litigation activity, the Commission returned to form by filing 144 merit lawsuits in Fiscal Year 2023. Given that the EEOC finally secured its Democratic majority and had a notably active FY 2023, many expected the Commission to continue this momentum into FY 2024. However, the exact opposite happened—at the time of publication, the EEOC filed only 96 merit lawsuits. This represents not only a filing decline of about 35% compared to FY 2023, but also one of the lowest numbers of EEOC-initiated merit lawsuits in nearly three decades. While the EEOC had a surprisingly quiet year on the litigation front, a close analysis of its FY 2024 filings can help employers understand the Commission’s priority areas and understand what to expect going forward.

In the years following the start of the COVID-19 pandemic, the EEOC scaled down its litigation efforts by filing far fewer lawsuits than it had in years past. For example, our prior EEOC year-end reports documented 94 merit filings in FY 2020, 111 filings in FY 2021, and 94 filing in FY 2022 (the EEOC’s fiscal year runs from October 1 to September 30).These numbers stood in stark contrast to the EEOC’s litigation activity under the Obama Administration, where the Commission filed as many as 300 merit lawsuits in certain years.

As the EEOC transitioned into FY 2023, the Commission appeared to have the necessary leadership and resources in place to increase its litigation activity to these Obama-era levels. The EEOC’s national leadership structure of five Commissioners no longer had a Republican majority, and the Republican General Counsel had been fired. The EEOC also received a sizable budget increase. This situation predictably led to more litigation activity, as the EEOC filed 144 merit lawsuits in FY 2023, which represented a five-year high for the Commission. In addition, in the final month of FY 2023, the U.S. Senate confirmed President Biden’s appointee for EEOC Commissioner (Kalpana Kotagal), giving Democratic appointees majority control of the Commission for the first time in many years. Then just weeks later the Senate confirmed a new General Counsel (Karla Gilbride) to lead litigation efforts.

With this momentum, many expected the EEOC to continue its trajectory into FY 2024 and further increase its filing activity. But the litigation surge appears to have weakened significantly. The EEOC filed just 96 merit lawsuits in FY 2024—back to pandemic levels and among the very lowest number observed in the past three decades. To put this number in context, last year in FY 2023, the EEOC filed 71 lawsuits in September alone. The bottom line is that the Commission exhibited a staggering drop in litigation activity in FY 2024.

Begging the question: why did the EEOC’s litigation activity take such a dramatic downturn in FY 2024? With a Democratic majority and Democratic General Counsel in place at the EEOC, it does not appear that partisan politics obstructed any of the Commission’s litigation goals. One potential factor could relate to the EEOC’s resources. The Commission requested a budget increase of more than $26 million in FY 2024, but ultimately, Congress only approved the same amount of funding the EEOC received in FY 2023. A 5.2% pay raise for employees combined with increased operational costs at the Commission cut into that amount, and just last month, the EEOC was faced with a potential one-day furlough to address its limited funding. The EEOC was able to avoid this furlough, but budget concerns are surely top-of-mind for EEOC leadership. Added to the mix: this year’s EEOC was saddled with a cumbersome inventory from the previous year’s filing surge, and aging cases from years before that. Ultimately, the EEOC approached FY 2024 with more cases but the same resources.  

FY 2024 Cases Filed By Month

At the end of every EEOC Fiscal Year, our team at Seyfarth analyzes each EEOC filing in order to identify key trends and provide our one-of-a-kind analysis. Beginning with the timing of the EEOC’s filings, the line graph below displays the number of EEOC lawsuits filed per-month from FY 2021 through FY 2024. As is typical, the EEOC started out FY 2024 at a slow pace, filing only five lawsuits between October 2023 and January 2024. However, unlike prior years, the Commission’s filing activity did not increase as the year progressed. The EEOC filed just three lawsuits in each of March and June, which represents a four-year low in each respective month. The Commission’s litigation activity typically sees a dramatic spike in September, but this FY, the EEOC filed only 56 lawsuits in September (compared to 71 September filings in FY 2023, 46 September filings in FY 2022, and 59 September filings in FY 2021). Additionally, while the Commission did hit a four-year high in terms of its 19 filings in May, almost all of these cases (14 of 19) concerned the enforcement of EEO-1 Report requirements (see below for a more detailed discussion of these cases).

FY 2024 Cases Analyzed By EEOC District Office

With the EEOC experiencing such a significant dip in overall lawsuit filings in FY 2024, the expectation may be that all EEOC District Offices saw a decline in filings as well. Surprisingly, a few EEOC Districts actually increased their number of filings in FY 2024 despite overall EEOC filings decreasing by about 35%. The Indianapolis District Office filed 10 lawsuits in FY 2024 (compared to 9 last year), the Atlanta District Office filed 11 lawsuits this year (compared to 7 last year), and the Phoenix District Office also filed 9 lawsuits this year (compared to 8 last year). Conversely, Districts that have traditionally led the pack in filings—such as Chicago, Los Angeles, and New York—saw extreme declines in filings this year, as these Offices filed only 7, 3, and 8 lawsuits, respectively. The West Coast in particular was notably quiet this year, as the Los Angeles and San Francisco combined for just 7 merit filings in FY 2024. The Philadelphia District Office, which led the way last year, saw the largest decline from 22 filings in FY 2023 to just 14 filings in FY 2024.

Analysis of the Types of Lawsuits Filed in FY 2023

In addition to tracking the timing and location of EEOC lawsuit filings, we also analyze the underlying claims asserted in all EEOC-initiated cases. At a high level, despite the drastic dip in overall filings, the EEOC’s FY 2024 filing numbers generally align with prior years. Once again, the vast majority of its lawsuits were filed under Title VII and the Americans with Disabilities Act (“ADA”). While the Age Discrimination in Employment Act (“ADEA”) is typically the third-most common statute cited in EEOC cases, the Commission lodged only seven ADEA filings in FY 2024.

Equal Pay Act (“EPA”) claims are typically not a common basis for EEOC lawsuits, and that trend continued this year as just two were filed. On the other hand, the Commission opted to file its first case in several years alleging violations of the Genetic Information Nondiscrimination Act (“GINA”), which prohibits discrimination based on genetic information in employment and medical coverage. The EEOC also filed a handful of lawsuits this year alleging pregnancy-based claims. Most notably, the EEOC filed its first three lawsuits under the Pregnant Workers Fairness Act (“PWFA”). The PWFA went into effect June 27, 2023, and on April 15, 2024, the EEOC issued its final regulations concerning enforcement of the Act.

Taking a closer look at these numbers, the ADA remained a focus for the EEOC. The Commission filed 42 disability-related lawsuits in FY 2024, which is nearly 40% more than it filed in FY 2022, despite overall filings in FY 2022 totaling just two fewer than this year. While the EEOC’s filings concerned a broad range of disabilities, the Commission built on a trend from the end of the previous year and continued to prioritize hearing-related disabilities. In January 2023, the EEOC published guidance regarding hearing disabilities in the workplace. Since that point, the Commission has filed a total of 16 ADA cases on behalf of hearing impaired employees (nine in FY 2023 and seven in FY 2024).

Another consistent litigation priority for the EEOC is curbing workplace harassment. To that end, in April 2024, the EEOC released its updated Workplace Guidance to Prevent Harassment. This guidance expanded upon prior EEOC materials by addressing harassment in virtual work environments. Additionally, in June 2024, the Commission released anti-harassment guidance specifically targeting employers in the construction industry. The EEOC’s emphasis on halting workplace harassment was reflected by the Commission filing double-digit hostile work environment lawsuits for at least the third straight year.

The EEOC accused several employers of running afoul of anti-harassment laws in non-office work environments. For example, in FY 2024 the EEOC sued:

  • An Arizona manufacturer of human and pet health supplements alleging sex discrimination, sexual harassment, and retaliation (EEOC v. Good Health Manufacturing, Inc., No. 2:24-cv-1679, D. Ariz.);
  • An Illinois hog farm alleging discrimination and harassment on the basis of an employee’s sex and gender identity (EEOC v. Sis-Bro, Inc., No. 3:24-cv-968, S.D. Ill.);
  • A Massachusetts tire dealer alleging a pattern of discrimination and harassment against Hispanic employees (EEOC v. Bob’s Tire Co., Inc., No. 1:24-cv-10077, D. Mass); and
  • Two car dealers—one in Texas and the other in Indiana—alleging sexual harassment against female employees (EEOC v. NICPA Central Auto Group, LLC & Central Austin Motorcars, No. 1:23-cv-01541, W.D. Tex.; EEOC v. Chesterfield Valley Investors, LLC, No. 1:24-cv-00721, S.D. Ind.).

Another interesting takeaway from the EEOC’s FY 2024 filing numbers is that, for the first time in many years, the EEOC used its litigation capabilities to enforce the submission of EEO-1 Reports. By way of background, the EEOC requests annual workforce data from employers with more than 100 employees, with the most common type of report being an EEO-1 Employer Information Report. As the EEOC notes on its website, “[e]mployers meeting the reporting thresholds have a legal obligation to provide the data; it is not voluntary.” In an effort to enforce this requirement, the EEOC filed a whopping 16 lawsuits alleging Title VII violations against covered employers who failed to file adequate EEO-1 Reports. The Commission posted a press release in May touting these EEO-1 Report filings, and emphasizing that “data collection is an important tool” and that Congress authorized the EEOC not only to collective EEO-1 Report data, but also to enforce data reporting compliance in the courtroom. The vast majority of these cases (14 of the 16) were filed in May, and nearly every EEOC District Office filed a lawsuit concerning EEO-1 Reports. The only District Offices that did not file such a case in FY 2024 were Chicago, Memphis, San Francisco, and Washington, DC (which did not file any lawsuits this year).

As a final point regarding the type of claims asserted by the EEOC in FY 2024, the Commission filed only four religion-based cases. This is particularly interesting because, as we noted in our July 2023 post analyzing EEOC charge numbers, EEOC charges alleging religious discrimination increased nearly seven-fold between FY 2021 (2,111 religion-based charges) and FY 2022 (13,814 religion-based charges). The EEOC filed 11 religious discrimination cases last year, including multiple lawsuits brought on behalf of employees terminated for refusing to comply with vaccine mandates on religious grounds. Despite this massive spike in religious discrimination charges, the EEOC filed only four religion-based lawsuits in FY 2024, with just one of these cases involving COVID-19 vaccination. Given that it has been several years since this batch of EEOC charge filings, it seems that the apparent wave of EEOC religion-based, COVID-19 litigation will be left largely to the private plaintiffs’ bar.

Implications For Employers

While the overall takeaway from the EEOC’s FY 2024 is that the Commission saw a substantial decrease in litigation activity, employers should not drop their guard. One of the EEOC’s two Republican Commissioners (Keith Sonderling) left the EEOC last month, thereby solidifying a Democratic majority for the near future. The Commission also requested a budget increase of over $33 million for FY 2025, which if approved would allow the EEOC to enhance its litigation resources, and likely result in increased case filings. Moreover, the EEOC’s activity in FY 2024 demonstrates that employers—particularly those within the Atlanta and Indianapolis regions—should stay tuned to EEOC trends, with a special emphasis on harassment and disability-related filings. Covered employers should also be sure to submit their EEO-1 Reports in a timely fashion, as the Commission has shown that it will resort to litigation to obtain these reports.

We will continue to monitor these changes closely and keep readers apprised of developments. And, as always, we will keep up-to-date on EEOC data amid the ever-changing political climate and a surprisingly quiet year at the Commission.

For more information on the EEOC or how the Commission’s filing activity may affect your business, contact the authors—Christopher DeGroffAndrew ScrogginsSamantha Brooks, and James Nasiri—or a member of Seyfarth Shaw’s Complex Discrimination Litigation Group.

By Karla Grossenbacher and  Martha Gates

Seyfarth Synopsis: The Equal Employment Opportunity Commission filed a flurry of lawsuits last month alleging violations of federal law concerning pregnancy and related conditions. These cases highlight a new “Bermuda Triangle” of laws that employers must navigate when responding to pregnancy-related requests for accommodation.

The Pregnant Workers Fairness Act added more protections for pregnant workers—employees or applicants who have known limitations related to, affected by, or arising out of pregnancy, childbirth, or related medical conditions—beyond the ones available under existing federal law.

Prior to the PWFA’s passage last year, pregnant workers were protected only by the Pregnancy Discrimination Act, which essentially requires that pregnant workers be treated the same as similarly situated non-pregnant workers, and the Americans with Disabilities Act, which requires employers to accommodate physical and mental conditions that rise to the level of a disability absent undue hardship. Many pregnancy-related conditions, however, don’t constitute disabilities under the ADA.

All three laws now apply whenever an employer is considering a pregnant worker’s accommodation request, and the cases filed by the EEOC in September and October, just months after its final rule issued in June, provide a compliance roadmap for employers reviewing such requests. In short, employers must recognize that pregnancy-related requests for accommodation must be handled differently from others.

Forced leave is an accommodation of last resort. The PWFA, unlike the ADA, expressly includes a provision that prohibits employers from forcing a pregnant worker who is requesting accommodation to take leave when there are other reasonable accommodations available that would allow the employee to keep working.

The EEOC alleged in cases filed against Wabash National Corp. and Urologic Specialists of Oklahoma that the employers forced the pregnant workers to take unpaid leave as an accommodation despite their requests that would allow them to continue working. In the Wabash case, the employee had requested to perform only those duties of her assembler job that didn’t involve bending over for an extended period of time or to be placed on light duty. In the Urologic Specialists case, the employee requested the ability to sit and take breaks.

Employers should engage in the interactive process. Although not alleged as a separate violation of law, the EEOC said in the cases it filed against Wabash and Kurt Bluemel Inc. that the employers didn’t engage in the interactive process with the employee before denying the accommodation. Employers should have meaningful communications with employees requesting accommodations for pregnancy-related conditions or disabilities to properly evaluate the requests, and document these efforts.

Employers need to consider modifying existing policies. The EEOC’s filings are also a warning against rigid policies that don’t account for pregnancy-related needs. In its case against Polaris Industries Inc., for example, the EEOC alleged the company violated the PWFA by failing to accommodate an employee who requested time off for medical appointments and to be relieved of the need to perform mandatory overtime.

Instead of modifying its policies, the company allegedly kept issuing attendance points against the employee when she went to medical appointments and refused to exempt her from mandatory overtime requirements. The EEOC alleged in the Polaris case that its human resources specialist told the employee that “her doctor could give her pregnancy restrictions, but the doctor did not know Defendant’s policies.”

Ability to perform essential functions isn’t required. Unlike the ADA, the PWFA requires accommodation for pregnant workers even if they temporarily can’t perform essential functions of their job. In a number of its recent lawsuits, including the ones against Urologic and Polaris, the EEOC reiterates this rule.

Conduct can give rise to multiple legal violations. Employers must keep top of mind that denying an accommodation request from a pregnant worker can give rise to claims under the related three laws. In its filing against ABC Phones of North Carolina Inc. doing business as Victra, the EEOC alleged that Victra violated both the ADA and the PDA when it withdrew a job offer after a newly hired pregnant worker requested to reschedule a training session so she could go to an urgent ultrasound appointment.

The company allegedly told the employee to reapply when she could “100% attend” any scheduled training. The EEOC said Victra violated the ADA by failing to reschedule the training session to accommodate the pregnant worker and by regarding the pregnant worker as having a disability based on her disclosure of her pregnancy-related complications.

The EEOC also asserted that Victra violated the PDA because Victra had allowed non-pregnant new hires to adjust or reschedule training dates. And in its cases against Polaris and Urologic, the agency asserted a constructive discharge claim under the PWFA against the company because the employee resigned when her accommodations weren’t granted.

Develop separate processes for pregnancy-related accommodations. In the case against Wabash, the EEOC alleged that the company’s use of an existing ADA form in connection with evaluating a pregnant worker’s accommodation request violated the law by making disability-related inquiries that were unnecessary to evaluate her request under the PWFA.

Employers using such forms as part of their process should develop separate forms for use in evaluating accommodation requests from pregnant workers. They must note that use of such forms can’t be mandated, and that requesting documentation to support an accommodation request under the PWFA isn’t allowed in several instances. Employers should also make sure their human resources personnel and management team receive training so they understand the rules handling accommodation requests from pregnant workers.

Astute employers will take notice of the EEOC’s recent filings on accommodations of pregnant workers and learn from them. Compliance with the new trio of laws will only become more important as enforcement continues and caselaw develops in this area.

About the Program: Seyfarth’s Pioneers and Pathfinders virtual roundtable series has tackled critical topics intended to help our clients navigate the implications of generative AI and natural language processing models in the legal industry. Next up in our series—Seyfarth is pleased to bring together an expert panel to address the legal and commercial challenges of disinformation and deepfakes.

Panelists

Catherine Porter, Chief Business Officer, Prove
Hon. Paul W. Grimm (Ret.), David F. Levi Professor of the Practice of Law and Director of the Bolch Judicial Institute at Duke Law School
Puya Partow-Navid, Partner, Seyfarth Shaw LLP
Stephen Poor, Partner and Chair Emeritus, Seyfarth Shaw LLP

Thursday, November 7, 2024
2:30 p.m. to 3:30 p.m. EDT
1:30 p.m. to 2:30 p.m. CDT
12:30 p.m. to 1:30 p.m. MDT
11:30 a.m. to 12:30 p.m. PDT

Cost: There is no cost to attend, however registration is required.

REGISTER HERE

In simple terms, a deepfake is a type of synthetic media where images, videos or audio seem real but have been manipulated or generated with artificial intelligence. While some synthetic or manipulated media have legitimate applications, the ability of deepfakes to exploit and spread disinformation is a quickly growing and significant threat to society—as we have seen from headlines ranging from the U.S. presidential election to Taylor Swift, to deepfake applications for remote jobs, and scams robbing companies of millions of dollars.

Organizations need to be alive to the commercial and legal dangers that deepfakes present and consider the potential safeguards. Indeed, this is a boardroom issue, with misinformation/disinformation ranking as the # most severe near-term global risk, according to the World Economic Forum’s 2024 Global Risks Report. With that in mind, our panel will tackle top-of-mind questions such as:

  • What are the biggest risks of deepfakes that leaders are tackling on behalf of their organizations and their customers/consumers?
  • How are deepfakes impacting the courtroom and evidentiary rules?
  • What legal frameworks exist to address the misuse of deepfakes and offer protections from disinformation?
  • What are some of the technological solutions and best practices that businesses can employ to stay a step ahead of deepfakes and disinformation?
  • How can we educate our employees and stakeholders about deepfakes?

Don’t miss this opportunity to learn from industry leaders and become a pioneer at the forefront of the profession’s evolution—we invite you to register your attendance.

If you have any questions, please contact Sophia Gomez at sgomez@seyfarth.com and reference this event.

Learn more about Pioneers and Pathfinders, a podcast about the people driving change in the legal industry. You can view past Pioneers and Pathfinders virtual roundtable video recordings here: (1) Navigating Risks, Benefits, and Ethical Considerations in the Age of AI; (2) The AI Technology Landscape in Legal: A Strategic Approach from Selection to Implementation; (3) Unlocking AI’s Potential in Lawyer Development; and (4) Board Leadership in the Era of Artificial Intelligence.

To comply with State CLE Requirements, CLE forms requesting credit in IL or CA must be received before the end of the month in which the program took place. Credit will not be issued for forms received after such date. For all other jurisdictions forms must be submitted within 10 business days of the program taking place or we will not be able to process the request.

Our programming is accredited for CLE in CA, IL, and NY. Credit will be applied as requested, but cannot be guaranteed for TX, NJ, GA, NC and WA. The following jurisdictions may accept reciprocal credit with our accredited states, and individuals can use the certificate they receive to gain CLE credit therein: AZ, AR, CT, HI and ME. For all other jurisdictions, a general certificate of attendance and the necessary materials will be issued that can be used for self-application. CLE decisions are made by each local board, and can take up to 12 weeks to process. If you have questions about jurisdictions, please email CLE@seyfarth.com.

Please note that programming under 60 minutes of CLE content is not eligible for credit in GA. programs that are not open to the public are not eligible for credit in NC.

About the Program: With states and local jurisdictions continuously updating employment laws, the landscape of handbook policy requirements is in constant flux. Employers face the ongoing challenge of keeping up with these changes

Seyfarth’s Handbook & Policy Team is at the forefront of addressing these challenges. Join us for this webinar, where we’ll walk you through the most significant changes to handbook policies for 2025, and explore how Seyfarth is assisting employers in crafting and updating employee handbooks and state-specific addenda tailored to each company’s unique needs.

Topics include:

  • The most pressing policy-related updates of which employers need to be aware as we head into 2025.
  • The implications of recent decisions, such as ongoing NLRB opinions, on handbook policies.
  • Policy trend predictions for 2025 and beyond.
  • The significance of a well-crafted employee handbook and the role of state-specific addenda.
  • Best practices for developing and maintaining employee handbooks and policies.
  • How Seyfarth’s Handbook & Policy Team has successfully supported employers in navigating these challenges.

Cost – There is no cost to attend, however, registration is required.

REGISTER HERE

Thursday, October 31, 2024
1:00 p.m. to 2:00 p.m. Eastern
12:00 p.m. to 1:00 p.m. Central
11:00 a.m. to 12:00 p.m. Mountain
10:00 a.m. to 11:00 a.m. Pacific

Speakers

Chelsea D. Mesa, Partner, Seyfarth Shaw LLP
Jean M. Wilson, Senior Counsel, Seyfarth Shaw LLP
Sara Eber Fowler, Partner, Seyfarth Shaw LLP
Renate M. Walker, Partner, Seyfarth Shaw LLP

Learn more about our Handbooks & Policy Development practice.


If you have any questions, please contact Donna Miskiewicz at dmiskiewicz@seyfarth.com and reference this event.

This program is accredited for CLE in CA, IL, and NY. Credit will be applied as requested but cannot be guaranteed for TX, NJ, GA, NC and WA. The following jurisdictions may accept reciprocal credit with our accredited states, and individuals can use the certificate they receive to gain CLE credit therein: AZ, AR, CT, HI and ME. The following jurisdictions do not require CLE, but attendees will receive general certificates of attendance: DC, MA, MD, MI, SD. For all other jurisdictions, a general certificate of attendance and the necessary materials will be issued that can be used for self-application. Please note that attendance must be submitted within 10 business days of the program taking place. CLE decisions are made by each local board and can take up to 12 weeks to process. If you have questions about jurisdictions, please email CLE@seyfarth.com

Please note that programming under 50 minutes of CLE content is not eligible for credit in NJ, and programming under 60 minutes of CLE content is not eligible for credit in GA. Programs that are not open to the public are not eligible for credit in NC.

By Jennifer L. Mora

Seyfarth Synopsis:  On December 23, 2022, President Biden signed the “James M. Inhofe National Defense Authorization Act for Fiscal Year 2023” which, among many other things, amended Section 19 of the Federal Deposit Insurance Act, 12 U.S.C. Section 1829 (FDIA), to reduce hiring barriers across the financial services sector. As a result of this “Fair Hiring in Banking Act,” the category of crimes for which a financial institution can outright reject a job applicant or terminate an employee has been significantly narrowed. More recently, and as expected, the Federal Deposit Insurance Corporation (FDIC) approved a final rule (2024 Final Rule), effective October 1, 2024, to update its Section 19 regulations to conform to the Fair Hiring in Banking Act’s amendments.

Section 19 in a Nutshell

Section 19 prohibits, absent prior written consent of the FDIC, a person convicted of a crime involving dishonesty, breach of trust, or money laundering from (broadly speaking) working for or otherwise participating, directly or indirectly, in the conduct of the affairs of a FDIC-covered financial institution. Section 19’s prohibition also covers anyone who has agreed to enter a pretrial diversion or similar program in connection with the prosecution of a crime involving dishonesty, breach of trust, or money laundering.

To ensure that a financial institution does not violate Section 19, it must engage in a “reasonable” inquiry of a person’s criminal history to determine whether they have a disqualifying offense. The 2024 Final Rule now requires that financial institutions document that inquiry. What that looks like, however, is left to the discretion of the financial institution, although most order a criminal history background check or require the person to submit to a fingerprint check (or both).

The Amendments to Section 19 and the 2024 Final Rule

Here we discuss the 2024 Final Rule as it relates to the recent Amendments to Section 19:

What is a crime of “dishonesty” or “breach of trust”?

The amendment to Section 19 provides guidance to institutions in determining whether an offense is one of “dishonesty” by including a helpful definition of the term. Specifically, a “criminal offense involving dishonesty” means an offense where the person, directly or indirectly, cheats or defrauds, or wrongfully takes property belonging to another in violation of a criminal statute. It also includes an offense that federal, state, or local law defines as “dishonest,” or for which dishonesty is an element of the offense. The term does not, however, include a misdemeanor criminal offense committed more than one year before the date on which a person files a waiver application, excluding any period of incarceration, or an offense involving the possession of controlled substances. According to the 2024 Final Rule, the one-year period runs from the date of the offense, not the date of disposition of the conviction or program entry. If there are multiple offenses, then the one-year period runs from the “last date of any of the underlying offenses.”

Although the amendment to Section 19 does not include a definition of “breach of trust,” the 2024 Final Rule does, stating that the term refers to “a wrongful act, use, misappropriation, or omission with respect to any property or fund that has been committed to a person in a fiduciary or official capacity, or the misuse of one’s official or fiduciary position to engage in a wrong act, use, misappropriation, or omission.”

Which older offenses no longer require an application?

The Section 19 amendment states that unless the conviction or program entry relates to an offense subject to the “minimum 10-year prohibition period” for certain offenses in 12 U.S.C. 1829(a)(2), an applicant or employee no longer needs a waiver application if:

  • it has been seven years or more since the offense occurred (measured from the date of offense, not the date of disposition); or
  • the person was incarcerated, and it has been five years or more since the person was released from incarceration; or
  • the person committed the offense before age 21 and it has been more than 30 months since the sentencing occurred (which means the date the court imposed the sentence).

Did the 2024 Final Rule update the types of offenses that qualify for the de minimis exemption?

On July 24, 2020, the FDIC issued a Final Rule which, among other things, expanded the de minimis exemption in a number of ways (2020 Final Rule):

  • It increased the number of minor de minimis offenses on a criminal record to qualify for the de minimis exception from one to two;
  • It eliminated the five-year waiting period following a first de minimis offense and established a three-year waiting period following a second de minimis offense (or 18 months if the offense occurred when the person was 21 years of age or younger);
  • It increased the threshold for small-dollar, simple theft from $500 to $1,000 (the same dollar threshold for bad or insufficient funds check offenses);
  • It expanded the de minimis exemption for crimes involving the use of fake identification to circumvent age-based restrictions from only alcohol-related crimes to any such crimes related to purchases, activities, or premises entry.

Amended Section 19 permitted the FDIC to engage in rulemaking to expand the types of offenses that qualify as de minimis, and the 2024 Final Rule did so by:

  • Increasing the requirement that the offense be punishable by a term of one year or less (excluding periods of pre-trial detention and restrictions on location during probation and parole) to three years or less.
  • For “bad check criteria,” increasing the aggregate total face value of all insufficient funds checks across all convictions or program entries related to insufficient funds checks from $1,000 or less to $2,000 or less.
  • Excluding a new category of lesser offenses, including the use of a fake identification, shoplifting, trespassing, fare evasion, driving with an expired license or tag, if one year or more has passed since the applicable conviction or program entry.

What has not changed?

Section 19 still requires that there be a conviction of record or a pretrial diversion or similar program. It does not cover arrests or pending cases not brought to trial, unless there is a program entry. Section 19 does not cover acquittals or convictions that have been reversed on appeal, but does cover convictions that are currently being appealed or convictions that have been pardoned. In addition, an application is not required for expunged, dismissed, or sealed records or for youthful offender adjudications. Finally, convictions or program entries for a violation of 12 U.S.C. 1829(a)(2) (which relate to certain federal offenses) can never qualify as de minimis.

Next Steps for Financial Institutions

As the penalties for non-compliance are substantial (including fines of $1,000,000 per day), FDIC-insured institutions should review their policies and practices to ensure consideration of Section 19 when assessing candidates’ conviction and program entry history. Convictions and program entries that are no longer automatically disqualifying under Section 19 should be evaluated under other state and local so-called “fair chance” or “ban the box” laws and ordinances, along with the Equal Employment Opportunity Commission’s “Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions under Title VII of the Civil Rights Act.”