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February 07 2025
On February 5, 2025, the U.S. Attorney General issued a Memorandum (“Memo”) called “Ending Illegal DEI and DEIA Discrimination and Preferences.” The Memo is separated into two parts: (1) a directive to the Civil Rights Division and the Office of Legal Policy to submit a report to the U.S. Attorney General by March 1, 2025, and (2) a directive for the DOJ to work with the Department of Education in issuing directives related to federal funding.
This alert focuses on the first directive relating to private company DEI programs and principles. It is important to note that the Memo cites to the January 21, 2025 Executive Order “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” (“EO”) Check out that EO here. Check out the FAQ here.
March 1, 2025 Report
The U.S. Attorney General is directing that the Civil Rights Division and the Office of Legal Policy submit a report that addresses five topics. We will break it down by each topic. The topics are bolded below and followed by analysis and explanation:
- key sectors of concern within the Department’s jurisdiction.
- What is a Key Sector of Concern? This is a broad directive, and one that will be parsed out in the March 1, 2025
- the most egregious and discriminatory DEI and DEIA practitioners in each sector of concern.
- Who is a Practitioner? It is unclear what or who is deemed a “DEI and DEIA practitioner.” At this juncture it is unclear whether a practitioner is an individual or a company (or both).
- a plan including specific steps or measures to deter the use of DEI and DEIA programs or principles that constitute illegal discrimination or preferences, including proposals for criminal investigations and for up to nine potential civil compliance investigations of entities that meet the criteria outlined in section 4(b)(iii) of Executive Order 14173.
- What is “Illegal Discrimination or Preferences?” In the employment arena, Title VII, the related regulations and case law set out what constitutes discrimination in employment (and thereby illegal). As many employers are aware, there are two general types of discrimination: (1) disparate impact and (2) disparate intent.
Disparate Impact is where there is a facially neutral policy that has a discriminatory impact on a protected class. Disparate Intent is when there is a policy that specifically targets a protected class. In other words, it is not facially neutral. Companies will have to wait for the Report to understand the Department of Justice’s idea of what constitutes “illegal discrimination or preference.”
- DEI and DEIA Programs or Principles. It is worth noting that this directive mentions “DEI or DEIA Programs or principles.” This is in line with the EO that directs an inquiry into DEI programs that are in existence under a different name. In fact, the EO directs each agency to provide a list to OMB of all programs that could be “misleadingly relabeled.” (“Each agency shall…provide the Director of the OMB with a list of all: agency or department DEI, DEIA or ‘environmental justice’ positions, committees, programs, services, activities, budgets, and expenditures in existence [under the previous Administration], and an assessment of whether these positions, committees, programs, services, activities, budgets and expenditures have been misleadingly relabeled in an attempt to preserve their [functions of DEI].”).
- Criminal Investigations. Again the Report will parse out details as to how these criminal investigations will be conducted.
- Civil Compliance Investigations. The Report apparently will include proposals for up to 9 civil compliance investigations as set forth in the EO.
Section 4(b)(iii) of the EO directs the Attorney General to identify up to nine potential civil compliance investigations of certain entities. The EO identifies the following types of entities that would be the target of such civil investigation:
(1) publicly traded corporations
(2) large non-profit corporations or associations
(3) foundations with assets of 500 million dollars or more
(4) state and local bar associations
(5) institutions of higher education with endowments over $1 billion.
- additional potential litigation activities (including interventions in pending cases, statement of interest submissions, and amicus brief submissions), regulatory actions, and sub-regulatory guidance; and
- AG Intervention in Current Litigation. Based on this directive, it seems likely the DOJ will be involved in current litigation. The Report may flesh out precisely how this will look.
- other strategies to end illegal DEI and DEIA discrimination and preferences and to comply with all federal civil-rights laws.
- This is a fairly broad directive. The Report will purportedly provide more guidance.
Analysis
Prudent organizations will stay up to date on developments from the AG. During this time, it behooves organizations to understand the DEI Executive Order. Understanding of the nuances of the Order allow for a company to make an informed risk assessment as to the next steps.
December 05 2024
An issue that has been raised in the courts and in a previous blog is whether professional athletes (working in the United States) are exempt from overtime. As discussed here, Major League Baseball settled a case in the Northern District of California (“Northern District”), on the precise issue of whether minor league baseball players are exempt from overtime.
As of the date of this blog, this athlete exempt issue has not been decided by the courts. With that being said, the Northern District’s Summary Judgement Opinion provides insight on the matter- specifically whether professional athletes are exempt under the Amusement and Recreation Exemption. Now, it is well known that baseball players are exempt from overtime, thanks to the Save America’s Pastime Act. This Act was passed in 2018, and makes professional baseball players exempt from the FLSA (aka- overtime).
This blog focuses on the professional athletes who did not get a congressional carve out. There is a theory that perhaps professional athletes are exempt under the Amusement and Recreation Exemption (“AR Exemption”). This blog digs into the details of this exemption and its relationship with professional athletes.
A Bit of Background
Before we get into the nitty gritty of the AR Exemption, it may be helpful to engage in a quick refresher of the Fair Labor Standards Act (“FLSA”). The FLSA requires that employers pay non-exempt employees a premium rate for any hours worked over 40 in one week (“Overtime”). Employees are entitled to Overtime unless they are exempt under one of the 19 statutory exemptions. Section 213 outlines these exemptions. As discussed above, the Save America’s Pastime Act one of the listed exemptions. Another exemption included in the Act is the AR Exemption. This blog focuses on this exemption and it’s relationship with professional athletes. Let’s get started…
The Amusement or Recreational Establishment Exemption
Some clubs and leagues may seek cover under the AR Exemption to avoid paying athletes overtime. The Exemption reads as follows:
Any employee employed by an establishment which is an amusement or recreational establishment, organized camp, or religious or non-profit educational conference center, [is exempt] if:
(A) it does not operate for more than seven months in any calendar year, (“Seasonal Test”)or
(B) during the preceding calendar year, its average receipts for any 6 months of such year were not more than 33 1/3 [percent] of its average receipts for the other 6 months of such year (“Receipts Test”)…
AR Exemption Three Pronged Test
The AR exemption applies if the following prongs are satisfied:
(1) The Employee is employed by the Establishment; and
(2)The Establishment has an Amusement or Recreation purpose; and
(3) The Establishment satisfies the Seasonal Test or the Receipts Test.
Let’s break down this test and discuss how this fits in with professional athletes. (NOTE: Before we evaluate this exemption, it is crucial that clubs and leagues seek counsel to evaluate their clubs. There are state and local laws that must be considered. This blog focuses on the federal law.)
PRONG #1: Employed by the Establishment
If we are thinking about whether a Professional Athlete is exempt under the RA Exemption, we need to first figure out whether the Athlete is employed by the establishment. Let’s break this down into two parts:
First, what is an establishment?
Second, what is “employed by?”
STEP 1: What is an Establishment? If a Club or League were to make the argument that these Athletes are exempt, then we need to figure out for whom these Athletes work. Is the League considered an “Establishment?” Is the Club considered an “Establishment?” Is the Club considered an “Establishment?” Is the Stadium where matches are played, is that an “Establishment?” (Again, this issue has not been determined by the courts.)
The FLSA regulations define an Establishment as “a distinct physical place of business” not then “entire business or enterprise.” It is worth noting that the regulations make an explicit distinction between “employer” and “establishment.” This definition is difficult to apply to the realities of a Professional Athlete. This definition is related to the “retail exemption” which has since been repealed. However, Courts look to this definition for guidance on the definition of Establishment in the sport context. The eminent Supreme Court case supports the “distinct physical place of business” definition when it found that a chain of grocery stores, plus the separate warehouse and central office were each separate businesses.
But where does that leave us with the Professional Athlete? Is the central hub the League Office? Are the Stadiums each its own Establishment? What about the training facilities? The grocery story comparison is not all that analogous to the sports world. As such, it might be worth looking at the Equal Pay Act (“EPA”) regulations for guidance. (REMINDER: The EPA is in fact part of the FSLA). In fact, the Northern District looked to the EPA regulations for guidance on this exact issue.
The EPA Regulations provide two definitions for “Establishment.” The first definition is the non-helpful definition which is “a distinct physical place of business.” The second definition, is more helpful in that it describes the “unusual circumstance” that requires a bit of nuance. Let’s take a look…
The Unusual Circumstance that may call for two or more distinct physical portions of a business enterprise being treated as a single establishment.
The regulation elaborates explaining scenarios where a “central administrative unit may hire all employees, set wages, and assign the location of employment; employees may frequently interchange work locations; and daily duties may be virtually identically performed under similar working conditions.”
These regulations are a bit more on point. Could the League be the administrative unit that hires all the athletes? After all, some leagues have standard player contracts with the league. These athletes move from stadium to stadium to play matches. Even more, footballers perform the same job in similar working conditions (on the pitch).
In the MLB case, the League pushed the argument that the AR exemption applies because all activities related to baseball (training and playing) fit under this “unusual circumstances” definition. The League wanted the “Establishment” to be stadiums, training facilities and the like. The Northern District did not agree. The Court agreed that the stadiums in which the athletes played games, were in fact Establishments. This makes sense, because the athletes all play the same sport at the same time in the same place. The Court did not grant summary judgment on whether training facilities were included in that definition, as the Clubs are not run in an identical way. So, the athletes are not performing an identical job back home at their respective clubs. The Court believed this issue would be decided at trial.
As you can see, courts have not concluded one way or the other on this issue. While the MLB matter got the summary judgment stage, the case ultimately settled. Prudent Clubs and Leagues will carefully assess this issue before concluding the Athletes fit the RA Exemption.
STEP 2: Is the Athlete EMPLOYED BY the Establishment?
Even if the Club/League gets through the hurdle of the Establishment issue, there is still the crucial piece of employment. Is the Athlete employed by the Establishment? Is the Athlete employed by the Stadium? Is the Athlete employed by the League? Is the Athlete employed by the Club? Remember, for the AR Exemption to apply, the Athlete must be employed by the Establishment (which is currently undefined).
It must be noted that there is a distinction between “working in” and “employed by.” Check out the regulation here. The FLSA sets out the test for employment and it is broad. The statute defines Employer as “any person acting directly or indirectly in the interest of an employer in relation to an employee.” This is a fact intensive inquiry. Check out this helpful Cheat Sheet from the DOL.
PRONG #1 TAKEAWAYS
Remember, the exemption only applies to employees who are EMPLOYED BY an ESTABLISHMENT.
Establishment Definition is Unclear. At this juncture, it is unclear what is considered an Establishment. While the Northern District found that a Stadium is considered an Establishment, it is unclear whether training facilities, classroom/office facilities would be considered an Establishment.
Employed by the Establishment is Unclear. As discussed above, even if we confirm the definition of Establishment, it is still unclear as to whether the Athlete is EMPLOYED BY that Establishment.
Let’s move on to the second prong….
PRONG #2- The Establishment has an Amusement or Recreation Purpose.
Even if we get through the first prong, we still need to assess whether the Establishment is used for an Amusement or Recreation Purpose (“AR Purpose”). The FLSA defines an establishment with such purpose as one that is (1) frequented by the public, (2) for amusement or recreation. The DOL issued a helpful Opinion Letter on this topic. Among other things, the DOL explains that the crux of the inquiry is not the work performed at the Establishment, rather the nature of the employer’s business at the Establishment.
PRONG #2 TAKEAWAYS
Based on the above definition, it seems certain a stadium is an Establishment with an AR Purpose. With that being said, this definition brings into question whether a training facility is in fact an Establishment with an AR Purpose. Sure, baseball spring training games are open to the public and could be deemed AR Purpose. But what about film session? What about weight training? What about recovery sessions? Are these open to the public? Is this a recreation purpose? At best, this is questionable. Cautious Clubs and leagues will consult with counsel to vet this issue.
PRONG #3- The Establishment satisfies the Seasonal Test or the Receipts Test.
As mentioned above, there are two tests:
[The Establishment] does not operate for more than seven months in any calendar year, (“Seasonal Test”) or
During the preceding calendar year, its average receipts for any 6 months of such year were not more than 33 1/3 [percent] of its average receipts for the other 6 months of such year (“Receipts Test”)…
First, the Receipts Test is a fact intensive, accounting question.
Second, the Seasonal Test requires some local knowledge. Circuits come down differently on this test. For instance, the 6th Circuit, in Bridewell v. Cincinnati Reds, focused on whether a team operated for more than 7 months out of the year- NOT whether it provided amusement or recreation for its customers for more than 7 months per year. Meanwhile, the 11th Circuit, in Jeffrey v. Sarasota White Sox, Inc., focused on the revenue producing operation for the teams activities for 7 months out of the year.
PRONG #3 TAKEAWAYS
Again, prudent Clubs and Leagues will consult with counsel on this third prong. This analysis is a circuit dependent and one that must be addressed carefully.
BOTTOM LINE
Clubs and leagues must heed the warnings of these cases, and the acts of congress. The fact that there is an explicit carve out for baseball players to be exempt from overtime sends a strong message that other athletes may not be exempt. After all, if they were exempt, they would have been included in the statute. Since they are not included explicitly in the exemption, it is crucial that the Clubs and League implement the above analysis when figuring out pay structure.
August 13 2024
Amanda Fugazy, head of EGS’ Labor & Employment Law Group, was quoted in an article featured in today’s Law360 Employment Authority – 4 Tips for Employers Taking Gratuities on Credit Cards.
Click here to read the article.
March 15 2024
Women In SPACs (WinS) Panel Discussion & Networking Evening
Ellenoff Grossman & Schole LLP hosted an in-person Women in SPACs (WinS) networking evening which discussed the latest developments in the legal, insurance, finance and auditing areas of SPACs.
Our wonderful panelists were:
YELENA DUNAEVSKY
SVP & Partner, Woodruff Sawyer
(Insurance)
MEREDITH LAITNER
Partner, Ellenoff Grossman & Schole LLP
(Legal)
DISHA PATEL
Partner, Withum
(Audit)
TINA PAPPAS
Managing Director, Jefferies LLC
(Finance)
February 01 2024
Partners Linda Guthmann Krieger and Lawrence R. Cagney Bring
Decades of Experience in California Employment LawLos Angeles, Calif. (February 1, 2024)– Ellenoff Grossman & Schole LLP (EGS) today announced the addition of a four-lawyer labor and employment team from Krieger & Kreiger and the opening of the firm’s second California office. Based in Los Angeles County and led by partner Linda Guthmann Krieger, the addition gives EGS’s clients coast to coast coverage for labor and employment issues.
In addition to Ms. Krieger, the team includes partner Lawrence R. Cagney; associates Creighton-Elizabeth R. Boggs and Justin D. Lee; and three legal assistants Amber Diaz Cooke, Alice Irey and Mike Jacoby. Krieger & Kreiger will wind down as its lawyers and staff join EGS. EGS will operate from the former Kreiger location at 249 East Ocean Blvd. The firm’s other California office is in Orange County.
“Expanding our presence in California with additional labor & employment lawyers has been a priority of ours for a few years,” said EGS Founder Douglas S. Ellenoff. “Attracting lawyers with the depth of experience and community involvement that the Krieger group brings only helps to service our clients, and theirs, while enhancing our firm’s profile on the West Coast.”
Collectively the four-lawyer team has decades of experience representing clients in labor and employment matters including wrongful termination, discrimination, harassment, and other issues arising out of the termination or discipline of employees. They also advise employers on such issues as wage and hour law, harassment complaints, Cal. CRD (formerly DFEH) and EEOC compliance, and other issues focusing on prevention of employer/employee disputes. They have a significant knowledge of contract law, both in drafting employment contracts and in litigating breach of contract claims.
“EGS is excited to have the knowledgeable and skilled attorneys from Krieger & Krieger join the team,” said Amanda Fugazy, leader of the firm’s Labor & Employment Practice Group. “The opening of EGS’ Los Angeles office will expand our capability to provide our California employer clients and other employers doing business in California with the highest level of guidance in dealing with California’s challenging employer landscape.”
“We are excited to be joining this great group of lawyers and believe our clients will benefit from efficiencies of scale and the depth of resources at EGS,” said Linda Guthmann Krieger. “As we expand EGS’s capabilities in California, we are excited that we will now be able to offer our clients access to a full-service network of highly skilled attorneys in a wide variety of fields.”
Bios of Ellenoff Grossman & Schole’s California New Labor & Employment Practice Group Members
EGS’ partner Linda Guthmann Krieger has extensive experience representing clients at trial, and in arbitration and mediation, and has a long record of successful outcomes. She acts as corporate counsel for several small to medium sized businesses, advising them on day-to-day employment issues.
Ms. Krieger is a long-time member of the Settlement Officer Panel for U.S. District Court, Central District of California. In addition, she has been Chair of the Federal Nominations Committee and Chair of the Work and Family Issues Committee for Women Lawyers of Los Angeles.
Ms. Krieger received her J.D. from UCLA and graduated Phi Beta Kappa with a B.A in Sociology from the University of Illinois. She has completed training by the Straus Institute for Dispute Resolution from Pepperdine School of Law and has been a mediator for cases in both state and federal courts. Ms. Krieger is also a third-party neutral investigator assisting employers with workplace complaints.
EGS’ Partner Lawrence R. Cagney has over thirty years’ experience in employment and business litigation including complex class actions. Mr. Cagney represents contractors in both public and private construction settings. He has successfully litigated matters ranging from labor compliance issues to multi-million-dollar public works disputes with State and local agencies as well as school and university districts. Mr. Cagney advises construction industry clients regarding contract drafting and interpretation. Mr. Cagney has also served as lead appellate counsel in numerous matters.
Mr. Cagney received his J.D. from Loyola Law School in Los Angeles and has deep roots in Long Beach, having attended Cal. State Long Beach. He enjoys sailing and fitness training and is a former member of the Ball/Hunt/Schooley Inn of Court, Lambda Legal, and the Long Beach LGBTQ Attorneys and Allies chapter of the Long Beach Bar Association.
EGS’ associate Creighton-Elizabeth R. Boggs focuses on representing employees with claims of workplace discrimination and harassment, retaliation, wrongful termination, and wage and hour violations. She was previously an associate at a boutique environmental and energy law firm in Virginia. She previously served on the Board of Governors for the Environmental Law Section of the Virginia State Bar and has valuable experience in a variety of regulatory matters.
Ms. Boggs graduated from the South Carolina Honors College at the University of South Carolina in 2016 magna cum laude and earned her J.D. from the University of Richmond in 2019. At the University of Richmond, she was a Lead Articles Editor and Manuscript Editor for the Public Interest Law Review. She also studied international law at the University of Cambridge through the Richmond Summer Law Program at Emmanuel College.
EGS’ associate Justin D. Lee focuses on representing employers in cases involving workplace discrimination, harassment, retaliation, wrongful termination, and wage and hour violations, as well as providing legal advice to businesses on day-to-day employment issues.
Mr. Lee graduated from the University of California, Riverside with a B.A. in Sociology and earned his J.D. from Santa Clara University School of Law. During his time at Santa Clara University, he actively contributed to the Asian Pacific American Law Students Association as a board member and served as a Senior Editor for the Santa Clara University Journal of International Law. He also earned a CALI Excellence for the Future Award for his work at Santa Clara University’s Entrepreneurs’ Law Clinic. Mr. Lee was born and raised in Los Angeles County.
Prior to joining the firm, Mr. Lee was an associate at a boutique employment firm, as well as corporate counsel for a residential construction company. Mr. Lee is also proficient in Mandarin Chinese.
About Ellenoff Grossman & Schole LLP
Ellenoff Grossman & Schole LLP is a corporate focused law firm comprised of over 125 professionals, offering its clients legal services in a broad range of business-related matters. Founded in 1992, the Firm specializes in many areas of commercial law: Corporate, Securities, Real Estate, Broker-Dealer Regulation, Private Investment Funds, Intellectual Property, Litigation, Labor, Employment, ERISA, Executive Compensation, Tax and Estate Planning.
The philosophy of the Firm is to provide the highest quality legal advice and counsel, dedicating consistent, personalized attention to each client at a reasonable price. Due to our Firm’s significant experience and expertise in the areas of practice in which we specialize, we believe that we provide greater efficiency of service and, consequently, reduce actual and time expense to our clients.
Learn more about Ellenoff Grossman & Schole LLP at www.egsllp.com.
January 11 2023
Employment Law Basics for Restaurant Operators & Managers
Join the Labor & Employment Lawyers from Ellenoff Grossman & Schole LLP for an in-person complimentary breakfast event where we will review employment law basics critical to restaurateurs.
Click here to register.
March 15 2021
Client Alert: New York Mandates Paid Leave for COVID-19 Vaccination
On March 12, 2021, Governor Cuomo signed a bill providing both private and public employees with paid time off to receive the COVID-19 vaccine (“Vaccine Leave Laws”).
Click here to read the alert.
March 12 2021
Client Alert: $28.6 Billion Restaurant Revitalization Fund Signed Into Law!
President Biden’s landmark $1.9 trillion stimulus package, known as the American Rescue Plan, was approved by the U.S. House of Representatives yesterday and has just been signed into law.
Click here to read the alert.