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Shortly after taking office, President Trump rescinded Biden’s Executive Order on Safe, Secure, and Trustworthy Artificial Intelligence. Biden’s Executive Order sought to regulate the development, deployment, and governance of artificial intelligence within the US, identifying security, privacy and discrimination as particular areas of concern. Trump signed his own executive order titled “Removing Barriers to American Leadership in Artificial Intelligence,” directing his advisers to coordinate with the heads of federal agencies and departments, among others, to develop an “action plan” to “sustain and enhance America’s global AI dominance” within 180 days.

While we wait to see if and how the federal government intends to combat potential algorithmic discrimination and bias in artificial intelligence platforms and systems, a patchwork of state and local laws is emerging. Colorado’s AI Act will soon require developers and deployers of high-risk AI systems to protect against algorithmic discrimination. Similarly, New York City’s Local Law 144 imposes strict requirements on employers that use automated employment decision tools, and Illinois’ H.B. 3773 prohibits employers from using AI to engage in unlawful discrimination in recruitment and other employment decisions and requires employers to notify applicants and employees of the use of AI in employment decisions. While well-intentioned, these regulations come with substantial new, and sometimes vague, obligations for covered employers.

California is likely to add to the patchwork of AI regulation in 2025 in two significant ways. First, California Assemblymember Rebecca Bauer-Kahan, Chair of the Assembly Privacy and Consumer Protection Committee, plans to reintroduce a bill to protect against algorithmic discrimination by imposing extensive risk mitigation measures on covered entities. Second, the California Privacy Protection Agency’s ongoing rulemaking under the California Consumer Privacy Act will likely result in regulations restricting the use of automated decision-making technology by imposing requirements to mitigate algorithmic discrimination.Continue Reading Passage of Reintroduced California AI Bill Would Result In Onerous New Compliance Obligations For Covered Employers

President Trump has taken quick action to ramp up immigration enforcement in his first days in office. While Trump’s early focus on deportations and border security is not new, the swift and aggressive enforcement approach represents a significant change as compared to prior administrations. These actions have led to arrests and heightened concerns among employers and employees alike.

What do employers need to know?

Since Trump’s inauguration, there has been a significant increase in targeted enforcement measures against individuals present in the United States who are not U.S. citizens who have a criminal record, and also recent arrivals to the United States who do not hold lawful immigration status. The vast majority of immigration enforcement since January 20 has occurred in private residences and public spaces, though there have been immigration enforcement actions at worksites. There have not been reports of wide-scale worksite raids yet, though the focus may shift to worksite inspections in the next wave of enforcement activities.

Worksite enforcement inspections can take a variety of shapes. In particular, employers should be prepared for the following:

  • Fraud audits in relation to employer-sponsored visa holders;
  • Administrative I-9 audits;
  • Arrests of targeted individuals; or
  • Raids based on suspicion of undocumented workers at worksite facility.

Continue Reading The Post-Inauguration Playbook: Spotlight on Immigration Enforcement and Raids

In the first two days of his presidency, President Trump signed a series of executive orders aimed at dismantling diversity programs across the federal government, revoking longstanding DEI and affirmative action requirements for federal contractors, and directing public and private entities to end policies that constitute “illegal DEI discrimination.”

Suffice it to say the orders have left federal contractors, corporations, nonprofits, and other employers in the private sector grappling with what to do next. While the EOs reverberations will be felt for some time and the DEI journey for federal agencies and the private sector is likely to be a circuitous one as challenges are raised in the courts, before Congress and in the court of public opinion, employers do need to gain some traction and start the trip. In this article, we present a roadmap to consider as employers work through the impacts of the EOs on their organizations.

At the starting line: what the EOs do and don’t do

Executive orders are a powerful tool through which the President issues formal directions to the executive branch, agencies and officials on how to carry out the work of the federal government. Historically, EOs mostly addressed administrative matters, but some sought to drive substantial policy changes. While congressional approval is not required for an EO to be effective, judicial review is commonplace and also, EOs can be reversed by later administrations.

President Trump’s EOs addressing DEI do not change existing discrimination statutes, such as the bedrock prohibitions on discrimination in employment in Title VII of the Civil Rights Act of 1964. The orders do not ban or prohibit any or all private employer DEI programs. Rather, the orders direct federal agencies and deputized private citizens to root out (through investigations, enforcement actions, or False Claims Act litigation) “illegal discrimination and preferences” and, for government agencies, to take particular actions.

Similar to the situation following the US Supreme Court SFFA decision in June 2023, if your DEI programs were lawful before Trump’s inauguration – they still are. What is “illegal” under federal law today is the same as it was before Trump’s presidency. But what’s clearly different is the ferocity of the federal government’s intent and resources dedicated to scrutinizing alleged race- or sex-based preferences in the workplace, and the resulting level of scrutiny applied to DEI programs.Continue Reading A Roadmap to Trump’s DEI Executive Orders for US Employers

The Supreme Court of the United States recently settled a circuit split on the standard of proof required to classify employees as exempt from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime pay provisions. In a unanimous opinion, SCOTUS held in EMD Sales, Inc. v. Carrera that the “preponderance of the evidence” standard–and…

On January 20, 2025, the first day of his second term, President Trump revoked Executive Order 14110 on Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence (the “Biden Order”), signed by President Biden in October 2023. In doing so, President Trump fulfilled a campaign pledge to roll back the Biden Order, which the 2024 Republican platform described as a “dangerous” measure. Then on January 23, 2025, President Trump issued his own Executive Order on AI, entitled Removing Barriers to American Leadership in Artificial Intelligence (the “Trump Order”). Here, we examine some of the practical implications of the repeal and replacement of executive orders by Trump and what it means for businesses.

Overview of the Executive Orders

Building on the White House’s 2022 Blueprint for an AI Bill of Rights, the Biden Order outlined a sweeping vision for the future of AI within the federal government, including seven high-level objectives: (1) Ensuring the Safety and Security of AI Technology; (2) Promoting Innovation and Competition; (3) Supporting Workers; (4) Advancing Equity and Civil Rights.; (4) Protecting Consumers, Patients, Passengers, and Students; (5) Protecting Privacy; (6) Advancing Federal Government Use of AI; and (7) Strengthening American Leadership Abroad.

The Biden Order directed various measures across the federal apparatus –imposing 150 distinct requirements on more than 50 federal agencies and other government entities, representing a genuinely whole-of-government response.

Although the bulk of the Biden Order is addressed to federal agencies, some of its provisions had potentially significant impacts on private sector entities. For example, the Biden Order directed the Commerce Department to require developers to report on the development of higher risk AI systems.  Similarly, the Biden order directed the Commerce Department to establish requirements for domestic Infrastructure as a Service (IaaS) providers to report to the government whenever they contract with foreign parties for the training of large AI models. The Biden Order also open-endedly instructed federal agencies to use existing consumer protection laws to enforce against fraud, unintended bias, discrimination, infringements on privacy, and other harms from AI—a directive various federal regulators actioned under the Biden administration.

Other than the definition of AI, the Trump Order and Biden Order share no similarities (both Orders point to the AI definition from 15 U.S.C. 9401(3), namely: “a machine-based system that can, for a given set of human-defined objectives, make predictions, recommendations or decisions influencing real or virtual environments”). The Trump Order does not contain specific directives (such as those in the Biden Order), but instead articulates the national AI policy to “sustain and enhance America’s global AI dominance in order to promote human flourishing, economic competitiveness, and national security.” The Trump Order directs a few specific roles within the administration to develop an Artificial Intelligence Action Plan within 180 days (i.e., by July 22, 2025) to achieve the policy objective articulated in the Trump Order. The Trump Order directs these same roles within the administration to review the policies, directives, regulations, orders, and other actions taken pursuant to the Biden Order and to suspend, revise, or rescind any such actions that are inconsistent with the Trump Order’s stated policy. In cases where suspension, revision, or rescission of the prior action cannot be finalized immediately, the heads of agencies are instructed to “to provide all available exemptions” in the interim.

Practical Impacts

The practical effect of the revocation of the Biden Order—and the options available under the Trump Order—will vary depending on the measure. Although there are widespread impacts from the revocation of the Biden Order’s mandates across multiple initiatives and institutions, below are those that are expected to have a significant impact on private sector entities engaged in the development or use or AI.

Reporting requirement for powerful AI models: As noted, the Biden Order directed the Department of Commerce to establish a requirement for developers to provide reports on “dual-use foundation models” (broadly, models that exhibit high levels performance at tasks that pose a serious risk to security, national economic security, national public health or safety). Pursuant to the Biden Order, the Bureau of Industry and Security’s (BIS), a Commerce Department agency, published a proposed rule to establish reporting requirements on the development of advanced AI models and computing clusters under its Defense Production Act authority, but had not issued a final rule prior to the revocation of the Biden Order. It is likely that the new administration will closely scrutinize this reporting requirement and may take action to block the adoption of the final rule if it is found to be inconsistent with the policy statement in the Trump order.Continue Reading AI Tug-of-War: Trump Pulls Back Biden’s AI Plans

The wildfires in Los Angeles County have wreaked devastation in the area, with thousands of homes and other structures, vehicles, and more destroyed by the worst wildfire in L.A. history. In response, on January 8, 2025, President Biden approved a Major Disaster declaration for California, allowing impacted communities and survivors to immediately access funds and resources to jumpstart their recovery.

As it stands, impacted individuals are in need of funds, housing, food, clothing, medical care, and other assistance as they navigate their current circumstances and begin to rebuild.  For employers who want to help, there are various tax-free ways to provide housing, cash, food, and other assistance to those affected by the wildfires that will give employees the resources and flexibility they need to get through these incredibly difficult times.

The various forms of assistance with tax-preferred treatment include “qualified disaster relief payments” under section 139, leave sharing programs, and assistance through employer-sponsored private foundations, donor-advised funds, and public charities. While each of these is beneficial, section 139 is the simplest method of assistance to establish, followed by leave-sharing programs, whereas private foundations, public charities and donor-advised funds will take some time to set up for employers that have not done so previously, and have restrictions as to how much assistance can be provided and to whom. 

Section 139

Under section 139 of the Internal Revenue Code, employers can provide employees with assistance, or “qualified disaster relief payments.” Section 139 provides an exclusion for “qualified disaster relief payments” from any source, including from employers, for reimbursement or payment of individuals’ eligible expenses in connection with a “qualified disaster.”  Qualified disaster relief payments are excluded from gross income, net earnings from self-employment, wages, and compensation subject to tax.

Qualified disasters are defined in section 139 to include a Presidentially declared disaster.  

Qualified disaster relief payments include payments to or for the benefit of an individual for:

  • reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a qualified disaster; and
  • reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence or repair or replacement of its contents to the extent that the need for such repair, rehabilitation, or replacement is attributable to a qualified disaster, to the extent any expense compensated by such payment is not otherwise compensated for by insurance or otherwise. 

Qualified disaster relief payments do not include lost wages or other income replacement or unemployment, and cannot be for expenses that have been otherwise reimbursed, such as by insurance.

It’s important to note that section 139 does not require that any type of policy or plan be in place or that one be established. Moreover, section 139 does not require any tracking or substantiation of the amounts reimbursed to or paid for the benefit of an employee, and does impose any limits on the amount that can be reimbursed to or paid on behalf of an employee as long as the assistance provided is reasonably expected to be commensurate with the amount of unreimbursed reasonable and necessary expenses.  Employees are not required to return amounts or items reimbursed or paid for by their employer for the benefit of the employee.   

Under section 139, the provision of both cash and in-kind benefits is permitted. Accordingly, employers who want to assist employees affected by the LA Wildfires are able to provide cash, as well as temporary housing or hotel stays, medical care, food, clothing and other items employees may need as they face evacuations, smoke and other damage to their homes and possessions.

Employers may provide qualified disaster relief payments to employees directly, or via employer-sponsored private foundations or donor-advised funds, as discussed below. 

Practically, while section 139 does not require that a written plan be in place nor that employers obtain any type of substantiation, it’s suggested that employers communicate that any assistance being provided is intended to be qualified disaster relief under section 139. It’s further suggested that employers obtain some sort of confirmation that employees receiving the assistance are affected individuals and that the expenses have not otherwise been reimbursed or paid for by insurance or otherwise.

Section 139 payments are deductible to the same extent as if they were includable in income.

Leave Sharing

While cash and in-kind assistance such as temporary housing, hotel stays, clothing and food are critical, the flexibility that additional leave, or paid time off, provides is often just as necessary as it permits employees to not have to choose between working to get paid, or taking unpaid time off during a period when they are dealing with mounting expenses, required evacuations, and rebuilding, sometimes from scratch. As such, leave-sharing programs are another excellent resource for employers to provide employees affected by the wildfires.

Pursuant to Notice 2006-59, employers can establish leave sharing plans that permit employees to donate a portion of their accrued leave to a pool, which can then be used by employees who have been affected by a declared disaster and need additional leave (beyond what they have individually accrued). If the leave-sharing plan meets certain requirements, the leave donor employee is not taxed on the donated leave, and the leave recipient employee is able to use the extra paid time off (which is taxed as wages to them), as needed.

Notice 2006-59 provides the following requirements in order for the donated leave to not be taxable to the leave donor employee:

  • The plan must be in writing;
  • The plan must permit leave donors to deposit accrued leave in an employer-sponsored leave bank for use by other employees who have been adversely affected by a major disaster (defined to include employees for whom the disaster has caused severe hardship to the employee or a family member of the employee that requires the employee to be absent from work).
  • The plan may not permit a leave donor to deposit leave for a specific employee.
  • The plan must limit the amount of leave that may be donated by a leave donor in any year so that it does not exceed the maximum amount of leave that an employee normally accrues during the year.
  • The plan must allow a leave recipient to receive paid leave at their normal rate of compensation from the leave bank, which leave must be used for purposes related to the disaster.
  • The plan must specify a period with a reasonable limit, based on the severity of the disaster, after the major disaster occurs during which leave may be deposited and received.
  • The plan may not permit leave recipients to convert leave received into cash in lieu of using the leave, though a leave recipient may use leave received to eliminate a negative leave balance resulting from taking advanced leaved as a result of the disaster, or use leave received in lieu of leave without pay.
  • The employer must make a reasonable need-based determination as to how much leave each employee may receive.
  • Leave deposited on account of one major disaster may be used only for employees affected by that major disaster, and other than de minimis amounts, any leave deposited that is not used by leave recipients by the end of the period specified above must be returned to leave donors in proportion to the leave donated within a reasonable period of time so that the donor will be able to use the leave. (If leave donor employees have terminated, the employer may choose to return leave only to currently employed employees.)

Setting up a leave-sharing program that complies with the requirements of Notice 2006-59 is relatively simple. Employers who either have a plan or want to set one up should communicate the plan to employees so that employees who wish to donate, or who are in need of leave, are familiar with the program and can take advantage of it. In practice, senior and other employees with significant amounts of accrued leave that is unlikely to be used, particularly if there are any “use or lose” restrictions on accruing leave, are generally happy to donate to employees affected by disasters.

Leave-based Charitable Donation Programs

Another potential option that is dependent on IRS guidance is to set up a leave-based charitable donation program. Under leave-based charitable donation programs, employees can elect to forgo vacation, sick or personal leave in exchange for cash payments that the employer makes to IRC Section 170(c) charitable organizations, as instructed by IRS guidance.

While the IRS has not yet issued guidance with respect to the current LA Wildfires, it would be normal course for such guidance to be issued.  If so, it would generally permit employers to set up leave-based donation programs, but rather than donating leave to other employees, the employer would make contributions to charities benefitting victims of the LA Wildfires.  The IRS issued similar guidance in Notice 2017-70 with respect to the 2017 California wildfires.  Once guidance is released, employers may want to consider this as an option, particularly if the company’s employees have not been directly affected.  

In general, under these programs, cash payments made pursuant to these programs will not be treated as wages or otherwise be included in the donating employees’ gross income if the payments are made to the IRC Section 170(c) charitable organizations for victims, as specified in IRS guidance, and paid to the IRC section 170(c) organization by the deadline set in IRS guidance.

Cash payments made pursuant to IRS guidance under these programs are not be included in Box 1, 3 (if applicable), or 5 of Form W-2 for the donating employee. In addition, employees may not claim a charitable contribution deduction under IRC Section 170 for the value of forgone leave.

Employers may deduct these cash payments in accordance with IRC Section 170 or IRC Section 162 if they otherwise meet the respective requirements.

As noted, these programs are dependent on IRS guidance so we will need to wait and see.

Private Foundations

Like public charities, employer-sponsored private foundations can make need-based distributions to victims of disasters or to members of a charitable class, though they tend to have more restrictions than public charities because of the control the employer has.  However, employer-sponsored private foundations can make qualified disaster relief payments to employees or their family members under section 139, as long as certain safeguards are in place to ensure that such assistance is serving charitable purposes, rather than the business purposes of the employer.

In general, the IRS will presume that section 139 qualified disaster relief payments made by a private foundation to employees (or their family members) of an employer that is a disqualified person (such as a company that is a substantial contributor or manager of the foundation) are consistent with the foundation’s charitable purposes if:

  • the class of beneficiaries is large or indefinite (a charitable class),
  • the recipients are selected based on objective determinations of need, and
  • the selection is made using either an independent selection committee (where the majority of the members are persons who are not in a position to exercise substantial influence over the affairs or the employer) or adequate substitute procedures to ensure that any benefit to the employer is incidental and tenuous.

If these requirements are met, then the foundation’s payments in response to a qualified disaster are treated as made for charitable purposes, do not result in taxable compensation to the employees pursuant to section 139, and do not result in prohibited self-dealing merely because the recipient is an employee (or a family member of an employee) of the employer-sponsor. However, the presumption described above does not apply to payments that would otherwise constitute self-dealing, such as payments made to (or for the benefit of) individuals who are directors, officers, or trustees of the private foundation or members of the private foundation’s selection committee. Such payments would be fully taxable to such individuals and may cause the individuals and managers of the foundation who approved the payments to be subject to the highly punitive self-dealing excise taxes.

To the extent employers would like to utilize a private foundation to assist employees affected by wildfires, it’s suggested that advice be sought to confirm that the payments are excludable and do not subject the foundation’s management and disqualified employees (employees who are substantial contributors to the foundation or serve in a management role at the foundation) to any excise tax.

Donor-advised Funds

While donor-advised funds cannot generally make grants to individual persons, as with private foundations, there is an exception for certain employer-related funds or accounts established to benefit employees and their family members who are victims of a section 139 qualified disaster.

Specifically, a donor advised fund or account can make grants to employees and their family members in the following circumstances:

  • the fund serves the single identified purpose of providing relief from one or more section 139 qualified disasters,
  • the fund serves a charitable class,
  • recipients of grants are selected based upon an objective determination of need,
  • the selection of recipients of grants is made using either an independent selection committee (where a majority of its members consists of persons who are not in a position to exercise substantial influence over the employer’s affairs) or adequate substitute procedures to ensure that any benefit to the employer is incidental and tenuous,
  • no payment is made from the fund to or for the benefit of any director, officer, or trustee of the sponsoring community foundation or public charity, or members of the fund’s selection committee, and,
  • the fund maintains adequate records to demonstrate the recipients’ need for the disaster assistance provided.

To the extent employers wish to provide assistance through a donor-advised fund, it is essential to note that while section 139 does not have substantiation requirements, in order for amounts to remain tax-free to the recipient employees, the fund itself must maintain adequate records to demonstrate the recipients’ need for the disaster assistance provided. It’s suggested that advice be sought to confirm that the payments are excludable and meet the relevant requirements.

Charities

An employer can establish an employer-sponsored public charity to provide assistance programs to respond to disaster or employee emergency hardship situations, subject to restrictions on employer control over the organization. To ensure the program is not impermissibly serving the related employer, the following requirements must be met:

  • the class of beneficiaries must be large or indefinite (a “charitable class”),
  • the recipients must be selected based on an objective determination of need, and,
  • the recipients must be selected by an independent selection committee (where the majority of the members of the committee consists of persons who are not in a position to exercise substantial influence over the affairs of the employer) or adequate substitute procedures must be in place to ensure that any benefit to the employer is incidental and tenuous.

If these requirements are met, the public charity’s payments to the employer-sponsor’s employees and their family members in response to a disaster or emergency hardship are presumed to be made for charitable purposes, and are not taxable to the employees.

Given the restrictions, employers are not able to direct a charity to provide aid to specific employees, and employees would need to seek assistance under normal course. 

Takeaways

  • Now that President Biden has declared the LA Wildfires a disaster, it is possible to provide employees, contractors, and others impacted by the wildfires with non-taxable disaster relief under section 139. 
  • Section 139 relief can be implemented through various vehicles.
  •  Direct section 139 qualified disaster relief payments programs are simplest to set up, as they require no written plan and no substantiation, and permit employers to provide assistance such as cash, housing, food, medical care, and clothing immediately as long as it is reasonable to do so.
  •  Other vehicles, such as assistance through private foundations, require more planning and set up to ensure that payments made through them remain excludable and meet the relevant requirements.

Regardless of the vehicle(s) used, given the destruction wrought by these wildfires and the long road affected employees will face in rebuilding and recovering what they’ve lost, both materially and emotionally, assistance and support from employers in helping employees move forward will have a positive impactContinue Reading How Employers Can Help Employees Affected by the Wildfires Tax-Free

Here’s your go-to guide for annual filing and reporting requirements for global employee share plans.

It is almost the end of the calendar year and time for multinational companies to consider the necessary tax and regulatory filings for global share plans triggered by the close of 2024 (or by the end of a local…

2024 was a ‘super year’ for elections. Half of the world’s population – some 4.7 billion people – went to the polls in 72 countries. Political shifts often lead to significant changes in employment laws. We’re here to help you prepare for the changes ahead and to stay ahead of the curve on employment law developments…

Companies with a US workforce can expect material changes to employment laws under the Trump administration, with impacts felt across their business operations. President-elect Trump’s first term, his campaign platform, and the typical shifts in a Democratic to Republican transition provide clues about what’s to come: federal agencies, policies and rules will become more business-centered and many of the Biden-era worker-focused protections will be rolled back.

Below are four major shifts we anticipate:

(1) Significant shifts in US Department of Labor policy

The end of the DOL’s 2024 final overtime rule. On November 15, 2024, a federal judge in Texas blocked implementation of the DOL’s final rule in its entirety, thereby preventing the agency from instituting increases to the salary thresholds for the “white collar” overtime exemptions under the Fair Labor Standards Act. While the government may appeal the judge’s order before the change in administration, any such appeal is likely to be short-lived come January 2025.

Accordingly, employers can halt plans to change their compensation levels or exempt classifications in response to the now-blocked rule. If such changes have already been made, employers should consult with counsel on how best to unwind undesirable changes, if any.

A lower burden for employers to classify workers as independent contractors under federal law. Trump will likely reverse Biden’s worker-friendly contractor classification efforts, making it easier for businesses to classify workers as independent contractors, and pivoting away from the Biden administration’s 2024 DOL independent contractor rule.

Notwithstanding this easing at the federal level, employers must remember that, under US and state law, there is no single test for independent contractor classification. Many states have their own tests, which are often more stringent than federal law and that apply to state wage and hour claims. Moreover, even within the same states, different tests will apply to unemployment claims, workers’ compensation, wage and hour, and taxation.Continue Reading Back to Business: Trump’s Second Term and the Four Major Shifts Employers Should Expect