Category: Daily News

The Justice Department’s Office of Legal Counsel (OLC) issued an opinion on June 9 concluding that the Equal Employment Opportunity Commission’s longstanding guidelines on disparate-impact liability under Title VII are unconstitutional. The opinion, signed by Assistant Attorney General T. Elliot Gaiser and Deputy Assistant Attorney General Joshua Craddock, asserts that the EEOC’s approach pressures employers into race-based decision-making to avoid liability—and that, properly read, Title VII reaches only practices reflecting “a significant likelihood of intentional discrimination.”

In an unusual move, DOJ announced the opinion jointly with the EEOC. OLC opinions are not court rulings, but they are treated as binding within the executive branch – meaning the EEOC and other agencies are now expected to enforce Title VII consistent with this reading.

Disparate-impact liability holds employers responsible for facially neutral practices that disproportionately burden a protected group, even absent discriminatory intent. Its origin is the Supreme Court’s 1971 decision in Griggs v. Duke Power Co., which held that Title VII bars practices “fair in form, but discriminatory in operation” – in that case, a high-school-diploma requirement and an aptitude test that screened out Black applicants without being shown to predict job performance.

In 1978, the EEOC, DOL, DOJ, and the Civil Service Commission jointly adopted the Uniform Guidelines on Employee Selection Procedures (29 C.F.R. part 1607), which remain in force and require employers to “validate” any selection procedure producing an adverse impact. The Court refined the framework in Wards Cove Packing Co. v. Atonio (1989), tightening the plaintiff’s burden to identify the specific practice causing a disparity. Congress responded in the Civil Rights Act of 1991, codifying the three-step burden-shifting test at 42 U.S.C. § 2000e-2(k): the plaintiff identifies a specific practice causing a disparity; the employer shows the practice is “job related” and “consistent with business necessity”; and the plaintiff may still prevail by identifying an equally effective, less-discriminatory alternative the employer refused to adopt.

Two later decisions – Ricci v. DeStefano (2009) and Texas Department of Housing v. Inclusive Communities (2015) – flagged the “serious constitutional questions” that arise if liability turns on statistical disparity alone, and emphasized that the doctrine needs limiting safeguards to avoid pushing employers toward quotas. Justice Scalia’s Ricci concurrence, that the “war between disparate impact and equal protection” would eventually be waged, is quoted prominently in the new opinion.

Rather than declaring the 1991 statute itself void, OLC deploys constitutional avoidance to reinterpret Title VII narrowly and then finds specific EEOC regulations unlawful. It lays out three limiting principles:

– –  1)  A low business-necessity bar. Employers need only show a challenged practice is “rational, convenient, or helpful” to a valid business purpose. Background checks, aptitude and knowledge tests, SAT scores, high-school-graduation requirements, and blind auditions are deemed presumptively job-related. Only “irrational or arbitrary” practices with no plausible job-relatedness can create liability.
– –  2)  A robust causation requirement. Plaintiffs must show – at the pleading stage and beyond – that the specific challenged practice itself, not external factors, caused the disparity.
– –  3)  A demanding alternative-practice requirement. Plaintiffs must identify a concrete alternative that is both less discriminatory and equally effective, including as to cost and other burdens.

Applying these principles, the opinion concludes that two parts of the EEOC’s framework are independently unlawful: the validation-study requirements in the Uniform Guidelines (which it calls atextual, “labyrinthine,” and improperly burden-shifting), and the Affirmative Action Guidelines (29 C.F.R. part 1608), which it says unconstitutionally encourage racial preferences without an established Title VII violation.

OLC frames the opinion as a response to the Supreme Court’s June 2 per curiam decision in Allen v. Milligan and its companion Louisiana v. Callais, which reread Section 2 of the Voting Rights Act to impose liability “only when the circumstances give rise to a strong inference that intentional discrimination occurred.” OLC imports that logic into Title VII.

The opinion is also the latest step in a sequence that began with President Trump’s April 2025 Executive Order 14281, Restoring Equality of Opportunity and Meritocracy, directing agencies to eliminate disparate-impact enforcement. That was followed by the EEOC pausing disparate-impact investigations in 2025 and DOJ’s December 2025 rule rescinding Title VI disparate-impact regulations. EEOC Chair Andrea Lucas, who formally requested the opinion in February, welcomed it as providing “clarity” on the constitutional limits of the doctrine; Acting Attorney General Todd Blanche said it would let businesses “hire based on performance.”

Theoretical practical takeaways for employers and their counsel to consider at this early stage.

– –  Enforcement posture has shifted, but the statute has not. The 1991 codification of disparate impact remains on the books, and courts – not OLC – decide what Title VII requires. Plaintiffs can still sue in federal court, and the private bar has signaled it will continue bringing disparate-impact claims regardless of EEOC inaction.
– –  Expect agency charges to get harder to win. The EEOC is unlikely to pursue impact-only theories, and the validation and affirmative-action regulations are now treated as unenforceable within the agency.
– –  Selection tools are on firmer footing – at the federal level. Tests, background checks, and similar screens face a lighter justification standard under this reading. But state and local fair-employment laws (and their own disparate-impact provisions) are unaffected and remain a live source of exposure.
– –  DEI-style “voluntary affirmative action” carries fresh risk. The opinion’s hostility to race-conscious “goals and timetables” reinforces the post-SFFA, post-Ames trend against preference programs.

Critics, including former Civil Rights Division attorneys, argue the opinion contradicts Supreme Court precedent and will lead to “a sharp increase in unchecked discrimination.” Because an OLC opinion binds the executive branch but not the judiciary, the doctrine’s ultimate fate will turn on litigation now likely to accelerate – and, eventually, on whether the Supreme Court takes up the question Justice Scalia flagged sixteen years ago.

NOTE: This summary is for informational purposes and is not legal advice. Employers should consult counsel about how these developments interact with applicable federal, state, and local law.

Private self insurers are required to file Self Insurer’s Annual Reports by March 1 each year. Each private Self Insurer’s report is required to include paid, estimated future, and total incurred claims costs for each of the past five calendar years (claims reported from January 1 through December 31 for each year), as well as paid, estimated future, and total incurred claims costs for any claims still open from earlier reported years.

California private self-insured employers reported fewer workers’ compensation claims in 2025, driving private, self-insured claim frequency to a 5-year low, but initial data show signs of rising claim costs according to a new California Workers’ Compensation Institute (CWCI) analysis of first-report data from the state Office of Self-Insurance Plans (OSIP).

The latest data show private self-insured employers in California covered nearly 2.22 million employees in 2025, down 1.5% from the prior year. Despite the slight reduction in the covered workforce, private self-insured wages and salaries totaled nearly $152.5 billion, up 1.1% from the prior year. At the same time, the number of reported claims in the private self-insured sector fell for the third year in a row, declining 2.7% to 84,996 claims. That total is 18.5% below the 2022 peak, when thousands of COVID-19 cases pushed the private self-insured claim count up to 104,278.

Overall, private self-insured claim frequency edged down from 3.88 claims per 100 employees in 2024 to 3.83 claims per 100 employees last year, the lowest level since 2020. The Institute notes that both indemnity and medical-only claim frequency have fallen since the pandemic-era spike in COVID-related claims, with the decline in indemnity frequency contributing just slightly more to the overall reduction in private self-insured claim frequency.

Despite the declines in private self-insured claim volume and frequency, comparing the initial loss data from all 2024 and 2025 claims (medical-only and indemnity) show total paid losses remained essentially unchanged at $352.4 million. At the same time, total incurred losses (paid benefits plus reserves for future payments) rose 4.8% to $979.2 million, reflecting increases in expected claim costs, as the average incurred loss per claim increased 7.7% last year, driven largely by growth in medical reserves.

The Institute also found that both average paid and average incurred losses on private self-insured claims have been trending up for several years. Comparing first-report loss payments on all private self-insured claims from recent years, the Institute found that the average paid loss rose 2.5% to $4,147 in 2025, marking the third consecutive annual increase. Since bottoming out at $2,983 in 2022, the average paid loss has increased 39.0%. Meanwhile, the average incurred loss climbed to $11,520 last year, up 48.1% since 2022. Higher indemnity and medical losses both contributed to these increases, but rising medical losses have been the key cost driver, as the first report data from 2022 and 2025 show the average paid medical loss per claim increased 48.4% and the average incurred medical loss per claim increased 55.2%; so even with the 18.5% reduction in claim volume, total paid medical losses increased 20.9%; and total incurred medical losses increased 26.5%.

OSIP’s newly released data summary provides the first look at California private self-insured workers’ compensation experience for calendar year 2025 and includes updated experience for claims reported from 2021 through 2024. OSIP has posted its latest summary, along with those from the previous 24 years.

In 2022, Kevin Wrenne was a crew member at a Taco Bell at 1220 Market Street in Redding, operated by J.A. Sutherland, Inc. and Andrew Hennan, Sr. Nielsen Motor Co. owned the property and leased it to the franchisee. On the evening of March 28, 2022, Wrenne clocked out for a 30-minute unpaid meal break, walked to the restaurant’s parking lot, and sat down on the curb. A transient named Brent Close approached and stabbed him five times in the neck and chest. Wrenne died; Close was arrested and convicted of murder.

In March 2024, Wrenne’s parents and his estate sued J.A. Sutherland, Nielsen Motor Co., Taco Bell Corp., and Hennan, pleading two causes of action, premises liability (dangerous and defective condition of property) and negligence. The theory was that the attack was foreseeable and preventable: the restaurant sat in a high-crime area, and defendants allegedly failed to provide adequate lighting, security guards, surveillance cameras, and safe resting areas for staff. The complaint alleged more than 1,000 calls for service to the Redding Police Department over the prior decade, including 282 in the preceding three years, 99 of them placed by Taco Bell employees.

The defendants demurred. J.A. Sutherland and Hennan argued the claims fell within the exclusive jurisdiction of the workers’ compensation system because Wrenne was killed on his employer’s premises during the course and scope of his employment; Taco Bell Corp. and Taco Bell Franchisor, LLC filed a parallel demurrer on the same ground. Both leaned on the “premises line rule.” After the court struck the punitive damages allegations against Nielsen Motor and plaintiffs declined to amend, the demurrers were refiled and opposed.

In October 2024, the trial court sustained the demurrers without leave to amend. It found the case factually analogous to Jones v. Regents of University of California (2023) 97 Cal.App.5th 502, where a university employee’s tort claims were barred after she was injured on campus shortly after leaving her workstation. Like the plaintiff in Jones, the court reasoned, Wrenne had begun his workday, remained on his employer’s premises without leaving, and was uncompensated when the incident occurred. The exclusivity rule therefore barred the tort claims, and judgment was entered for defendants.

The Court of Appeal Affirmed in the unpublished case of Wrenne v. JA Sutherland, Inc. -C102531 (June 2026) Reviewing the demurrer ruling de novo, the Court of Appeal “saw no error” and upheld dismissal of the entire complaint. It also affirmed the denial of leave to amend, and awarded respondents their costs on appeal.

The injury was work-related. Under the Workers’ Compensation Act (Lab. Code, § 3200 et seq.), workers’ compensation is the sole remedy for injuries – including death – “arising out of and in the course of” employment. The court emphasized the Act’s unusually forgiving causation standard: employment need only be a contributing cause, not the sole one. Because Wrenne would not have been in the parking lot but for his shift at Taco Bell, his death was causally linked to the employment.

The claims were derivative. Drawing on Kuciemba v. Victory Woodworks, Inc. (2023) 14 Cal.5th 993, the court explained that a third party’s claim – such as an heir’s wrongful death action – is barred when it is “collateral to or derivative of” the employee’s workplace injury. The family’s claims derived directly from Wrenne’s compensable injury and thus fell inside the compensation bargain.

The premises line rule applied. This rule draws a “sharp, objective” line: employment begins when the employee enters the employer’s premises and continues until departure, and the premises include the parking lot (General Ins. Co. v. Workers’ Comp. Appeals Bd. (1976) 16 Cal.3d 595; Schultz v. Workers’ Comp. Appeals Bd. (2015) 232 Cal.App.4th 1126). Wrenne was indisputably on those premises when he was killed.

The unpaid break did not change the result. Relying on Gutierrez v. Petoseed Co. (1980) 103 Cal.App.3d 766, the court reaffirmed that injuries on the employer’s premises during a regular lunch break arise in the course of employment as incidental to it – even when the break is unpaid and the employee is not under the employer’s control. That the WCA must be liberally construed in favor of awarding compensation (not permitting civil litigation) reinforced the outcome.

Plaintiffs’ authorities were distinguished. The court rejected the argument that Wrenne was merely an “off duty” employee “loitering” for personal reasons – noting that word never appeared in the complaint. Makins v. Industrial Accident Com. (1926) 198 Cal. 698 and McIvor v. Savage (1963) 220 Cal.App.2d 128 were inapposite because they concern employees commuting to or from work who unreasonably delay or loiter; Wrenne was neither arriving nor leaving. The court likewise found plaintiffs’ remaining cases materially distinguishable, as each involved off-premises injuries or off-duty conduct (such as voluntary recreation) not present here.

No abuse of discretion in denying amendment. Because plaintiffs never sought leave to amend below and offered no showing on appeal of facts that could cure the defect, the court found no abuse of discretion in dismissing without leave to amend (Blank v. Kirwan (1985) 39 Cal.3d 311; Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074).

This is a published attorney-discipline order arising out of an immigration appeal. The underlying petitioners (identified as Malkeet Lnu, Sunita Rani Lnu, and Jaivin Lohan) sought review of a Board of Immigration Appeals decision dismissing their appeal from an immigration judge’s denial of asylum, withholding of removal, and protection under the Convention Against Torture. The merits are not the focus of the order; the discipline concerns the conduct of their two attorneys, Mike Singh Sethi and William Rounds of the Sethi Law Group in Orange County, California.

Sethi filed an opening brief containing two cases that do not exist — “Eduardo v. Garland” and “Lay v. Holder” — and twice attributed quotations to real opinions (Kamalthas v. INS (9th Cir. 2001) 251 F.3d 1279 and Avendano-Hernandez v. Lynch (9th Cir. 2015) 800 F.3d 1072) in which the quoted language never appeared. The reply brief and the attorneys’ briefs in other pending cases contained additional fabricated citations and gross misrepresentations of real authority. The court later learned that the firm used unlicensed law-school graduates (“Brief Writers”) to draft legal arguments and identify authority, that no licensed attorney read the cited cases, and that the errors were almost certainly the product of unauthorized generative-AI use, despite a purported firm policy against it.

This was an original disciplinary proceeding by the Ninth Circuit itself rather than an appeal from a lower court. After the court denied a joint motion to submit the case on the briefs, Sethi filed a “Motion to Correct,” recharacterizing the two nonexistent cases as “typographical errors” and substituting two real but unrelated cases (Udo v. Garland (9th Cir. 2022) 32 F.4th 1198 and Lai v. Holder (9th Cir. 2014) 764 F.3d 1098) that did not support the propositions asserted. At oral argument, Rounds (appearing in Sethi’s place) attributed the errors to “copy and paste” mistakes and three times categorically denied that generative AI was used — only later conceding under questioning that AI use was “possible.” The court then issued an Order to Show Cause why the attorneys should not be sanctioned, suspended, or disbarred. The attorneys’ Response ultimately conceded it was “more likely than not” that the errors resulted from unauthorized AI use by their Brief Writers.

The panel imposed discipline. It sanctioned Sethi and Rounds $2,500 each, suspended both from practice before the Ninth Circuit for six months, ordered them to notify clients, opposing counsel, presiding judges, and every attorney in their firm, required a perjury-backed AI-disclosure-and-verification statement in all future filings for two years, and directed the Clerk to forward the order to the State Bar of California.

In the published case of Lnu, et al. v. Blanche, Acting Attorney General, (U.S. Court of Appeals, Ninth Circuit, June 3, 2026) No. 24-4790, the 9th Circuit did not sanction the attorneys merely for using generative AI, which is not inherently unethical. (See Noland v. Land of the Free, L.P. (2025) 114 Cal.App.5th 426.) The rules, the court explained, are violated not at the point of research and drafting but at the point of signing and filing. Whether a fabricated citation comes from an AI tool or “his own natural intelligence,” the procedural and ethical rules apply with equal force.

Sethi’s signing and filing of briefs with nonexistent cases, misattributed quotations, and gross misrepresentations violated the requirement that contentions be supported by citations to authority (Fed. R. App. P. 28(a)(8)(A)), his duties of competence and diligence (Cal. R. Prof. Conduct 1.1, 1.3), and his duty to present only meritorious claims (Cal. R. Prof. Conduct 3.1(a)(2)). The court emphasized that a signature is an attestation that the signer has personally reviewed and is responsible for the filing’s accuracy, an obligation that cannot be delegated to subordinates or AI. It relied heavily on Noland, which held that attorneys must personally read and verify every citation, and noted that a fabricated opinion is not “existing law.” (Citing Mata v. Avianca, Inc. (S.D.N.Y. 2023) 678 F. Supp. 3d 443.) It rejected the excuses that other real cases might support the same propositions and that the citations went to minor points, observing that it is counsel’s job — not the court’s — to find supporting authority.

The more serious failing, and the reason for the suspension, was the repeated lack of candor (Cal. R. Prof. Conduct 3.3(a)(1)). The court found that no plausible typographical or copy-paste error could transform the real cases into the hallucinated citations, and inferred that the attorneys knew the “typographical error” explanation was false as early as the Motion to Correct. Rounds’s flat denials of AI use at oral argument, followed by his concession that AI use was “possible,” supported an inference of actual knowledge of falsity; the court stressed that candor requires admitting uncertainty, not just disclosing known facts. The court also faulted Sethi for a later “Notice of Errata” in another case that swapped out fabricated citations without disclosing that the originals were hallucinations. The duty of candor, the court held, requires an attorney who discovers a hallucination to promptly alert the court and opposing counsel, describe the nature of the error, and disclose its source. Had the attorneys done so candidly at the outset, lesser sanctions might have sufficed; the gravity of the discipline was owed to their repeated failure of candor.

In explaining the risks, the court drew on empirical research showing that even legal-specific AI tools from Westlaw and Lexis produced hallucinations — including subtle “inaccuracies” that misstate holdings rather than outright fabrications — in a significant share of queries, warning that inaccuracies may prove more dangerous because they are harder to detect. (Citing Magesh et al., Hallucination-Free? Assessing the Reliability of Leading AI Legal Research Tools (2025) 22 J. Empirical Legal Stud. 216.)

This case concerns the reach of the Federal Arbitration Act’s (FAA) exemption for transportation workers. While the FAA generally requires courts to enforce private arbitration agreements, Section 1 (9 U.S.C. § 1) provides that “nothing” in the statute may be used to compel arbitration in disputes involving the “contracts of employment” of “seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”

Flowers Foods, Inc. — one of the nation’s largest producers of packaged baked goods, with bakeries in 19 states — distributes its products in part through franchisees who buy distribution rights for specific geographic territories. Angelo Brock is one such franchisee serving the Denver area. He picks up Flowers’s products from a warehouse in Colorado and delivers them to local stores entirely within the state, never crossing state lines and never interacting with vehicles that do.

In 2022, Brock sued Flowers in federal district court, alleging the company had underpaid him and other distributors in violation of federal and state law. Brock had signed a distribution agreement promising to arbitrate any disputes, so Flowers moved to compel arbitration.

The federal district court denied Flowers’s motion to compel arbitration. The Tenth Circuit Court of Appeals affirmed the district court in Brock v. Flowers Foods, Inc. (10th Cir. 2024) 121 F.4th 753, resting its decision on Section 1. It reasoned that Brock belonged to a class of workers engaged in interstate commerce, so the court lacked authority to compel arbitration. Although the court acknowledged Brock neither crossed state lines himself nor interacted directly with those who did, it held those facts were “not dispositive.” What mattered was that Brock’s intrastate route formed a constituent part of the interstate journey of Flowers’s goods from out-of-state bakeries to their retail destinations.

Flowers petitioned the United States Supreme Court for certiorari on a single question: whether a worker can qualify under the Section 1 exemption if he never crosses state lines and never interacts with vehicles that do. The Supreme Court granted review.

The Supreme Court affirmed the Tenth Circuit’s judgment in a unanimous opinion delivered by Justice Gorsuch in Flowers Foods, Inc. v. Brock, No. 24-935 (May 2026). It held that a worker who transports goods on an intrastate leg of an interstate journey can qualify for the Section 1 exemption without crossing state lines or interacting with vehicles that do. The Supreme Court rejected Flowers’s proposed bright-line rule — that a worker must either cross state lines or interact with a vehicle that does — on three grounds.

Statutory text. When the FAA was enacted in 1925, to “engage” meant to take part in, be employed in, or be involved in something, and “interstate commerce” was understood to include transporting goods “between points in one state and points in another state.” That definition encompasses intrastate activity: a continuous carriage may begin in one state and end in another even though much of the journey occurs within a single state. Nothing in those terms requires crossing state lines or touching a border-crossing vehicle. The Court illustrated the point with a hypothetical involving three drivers relaying a shipment across a state border — under Flowers’s rule, only the driver who physically crossed the line would be covered, even though each played a direct and necessary part in moving the goods between states.

Historical precedent. The Court drew on a line of older cases interpreting the meaning of being “engaged in commerce between the States.” In The Daniel Ball (1871) 77 U.S. (10 Wall.) 557, the Court held that a steamer operating entirely within Michigan was engaged in interstate commerce because it carried goods destined for, or arriving from, other states; the use of several independent agencies, some operating entirely within one state, did not change the character of the transaction. The Court cited similar authority in Rearick v. Pennsylvania (1906) 203 U.S. 507, Rhodes v. Iowa (1898) 170 U.S. 412, and Norfolk & Western Railroad Co. v. Pennsylvania (1890) 136 U.S. 114.

Consistency with recent precedent. The Court placed the case as the fourth in a recent line broadly construing Section 1: New Prime Inc. v. Oliveira (2019) 586 U.S. 105 (the exemption covers independent contractors, not just employees); Southwest Airlines Co. v. Saxon (2022) 596 U.S. 450 (a cargo loader qualified despite not flying planes or crossing state lines); and Bissonnette v. LePage Bakeries Park St., LLC (2024) 601 U.S. 246 (a worker need not be in the “transportation industry” so long as the work plays a direct and necessary role in the flow of goods across borders). The Court reaffirmed that “engaged in” interstate commerce requires a direct, necessary, and active role, but held that such participation can occur without crossing state lines.

The Court acknowledged that its older precedents interpreted the Constitution’s Commerce Clause rather than Section 1, and clarified that the two are not coterminous — Section 1 reaches only transportation workers, a narrower category. (See Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105.) Still, cases using language identical or close to Section 1’s offered probative evidence of the statute’s original meaning.

Finally, the Court noted that Flowers had hinted at other reasons Brock might not qualify — that Flowers contracts with an independently operated company Brock owns, and that Brock takes title to the goods before reselling them, facts some lower courts have found relevant. But because Flowers staked its entire case on the cross-or-tag rule and did not ask the Court to decide the significance of those other facts, the Court declined to address them and confined its holding to rejecting the bright-line rule Flowers proposed.