By: Petersen D. Walrod and Andrew M. McKinley

Seyfarth Synopsis: On April 23, 2026, the U.S. Department of Labor (“DOL”) published a notice of proposed rulemaking for a new joint employer rule that would set a uniform test for joint employer status for purposes of the Fair Labor Standards Act (“FLSA”), Migrant and Seasonal Workers Protection Act (“MSPA”), and the Family and Medical Leave Act (“FMLA”). This article explains what this test does, how it is different from the previous joint employer rule promulgated by the DOL, and what may happen with it in the future.

Introduction – Federal Rulemaking Is Like a Box of Chocolates

Anyone who has ever plucked a nondescript chocolate from a half-eaten box of candy knows that, sometimes, you just have to pop it in your mouth to know what’s inside. And that is not much different from the reality businesses have long faced with respect to joint employment under the FLSA: set a nationwide strategy and wait until a lawsuit is filed to learn what jurisdiction-specific, multi-factor test may apply—tests that, at times, may lead to contrary results. The DOL’s new joint employer rule, published on April 23, 2026 (the “Proposed Rule”), however, seeks to remedy that problem by setting a common filling throughout the box: the same four Bonnette-style factors that the DOL used in its 2020 joint employer rule (the “2020 Rule”).

But this time, it is the outer coating that has changed. Having learned from the vacatur of the 2020 Rule—its last attempt at rulemaking on joint employment under the FLSA— the DOL has made a number of compromises that make the Proposed Rule less sweet and enticing (i.e., less business friendly) compared to the 2020 Rule, but perhaps more savory (i.e., more likely to be adopted by a court).

Background – The Messy Box of Chocolates that Is the Joint Employer Space

Much like a box of chocolate left out at a party, joint employer jurisprudence is a chaotic patchwork of different inquiries, tests, and factors for businesses and workers to navigate. For example, the 4th Circuit looks at whether the two putative joint employers are “completely disassociated” with one another, while the 2nd Circuit considers whether the putative joint employer has “functional control over workers.” Even where there is agreement on what test to use, different courts use different variants of factors or weigh them differently.

In 2016, the DOL issued subregulatory guidance that attempted to impose an expansive definition of joint employer status, but this guidance was rescinded in 2017. Then, in 2019, the DOL proposed a new joint employer rule, which was finalized as the 2020 Rule. The 2020 Rule adopted the analysis used in the seminal Ninth Circuit case of Bonnette v. California Health & Welfare Agency. But, in the interest of analytical clarity and certainty, it limited consideration of factors that did not bear on control, and it rejected evidence bearing on a worker’s economic dependence on the potential joint employer as irrelevant.

Eventually, on September 8, 2020, the Southern District of New York vacated the 2020 Rule in New York v. Scalia. It found that the 2020 Rule contradicted the text of the FLSA, placed too much emphasis on control in contravention of the FLSA’s more expansive “suffer or permit” language, improperly precluded consideration of economic dependence factors, and failed to adequately explain its change in prior position or to address increased costs to employers and workers.

On July 30, 2021, citing Scalia, the DOL withdrew the 2020 Rule. It did not issued a new joint employer test through notice and comment rulemaking until the Proposed Rule.

Analysis of the Proposed Rule – Filling and Coating

The Filling

For most people, the filling, whether it is nougat, caramel coconut cream, an almond, or simply milk chocolate, is the star of the show. The same is true here: most businesses and workers care about the core joint employer test. Like the 2020 Rule, the Proposed Rule codifies that there are two flavors of joint employment. The Proposed Rule proposes to codify them as: (1) vertical joint employment; and (2) horizontal joint employment.

For vertical joint employment, the Proposed Rule puts forward a test that is, at least with respect to its four primary factors, virtually identical with that promulgated by the 2020 Rule and that are largely based on Bonnette. Those factors are whether the putative joint employer:

  1. hires or fires the employee;
  2. supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
  3. determines the employee’s rate and method of payment; and
  4. maintains the employee’s employment records.

One who bites into the Proposed Rule, however, may notice an important difference in flavor. The Proposed Rule goes on to state that “[n]o single factor is dispositive in determining joint employer status under the FLSA, as the determination will depend on all of the facts in a particular case.” By contrast, the 2020 Rule attempted to limit consideration of this kind of “all of the circumstances” analysis to those that bore on control. This appears to be a compromise by the DOL to “cure” an issue with the 2020 Rule identified by New York v. Scalia.

The Proposed Rule also readopts the supplemental clarifying provisions from the 2020 Rule, including (1) a reasonably circumscribed definition of “employment records”; (2) an acknowledgment of the primacy of actual conduct versus reserved control; (3) clarification of the role of “indirect control” and minimization of situations in which recommendations result in the direct employer making voluntary choices; and clarification of factors that are not relevant, including those that “are primarily probative of a worker’s status as an employee or independent contractor.”

Similarly, under the Proposed Rule, horizontal joint employment will be determined by a test that is nearly the same as that finalized in the 2020 Rule. The key inquiry is whether the putative joint employers are “acting independently of each other and are dissociated with respect to the employment of the employee” or whether they are “sufficiently associated with respect to the employment of the employee.” To determine whether a sufficient level of association exists, the Proposed Rule considers whether: (1) there is an arrangement between them to share the employee’s services; (2) one employer is acting directly or indirectly in the interest of the other employer in relation to the employee; or (3) they share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer. As with the proposed test for vertical joint employment, the Proposed Rule inserts a compromise, explaining that “[s]uch a determination depends on all of the facts and circumstances.”

The Proposed Rule, again like the 2020 Rule, also clarifies the relevance of certain business models and business practices, including that:

  • Operating as a franchise or similar type of business model does not make joint employer status more or less likely;
  • Requiring a putative joint employer to satisfy legal obligations or quality control standards does not make joint employer status more or less likely;
  • The putative joint employer’s practice of providing the employer a sample employee handbook, or other forms, offering an association health or retirement plan, or any similar business practice, does not make joint employer status more or less likely.

Finally, the Proposed Rule, like the 2020 Rule, is sprinkled with examples that explain, clarify and make concrete these analyses. While, as discussed more below, these examples are organized differently, their nougaty substance is similar, other than those conformed to reflect substantive changes made to the Proposed Rule.

The Coating

Everyone has had the experience of eating two chocolates with different coatings, but much to one’s surprise, the same fillings. Here, the Proposed Rule and the 2020 Rule have similar tasting fillings, but with different coatings that fundamentally complement and change the flavor of the filling in different ways.

As mentioned above, the most important difference between the Proposed Rule and 2020 Rule is that the Proposed Rule does not seek to narrow the inquiry of “other circumstances” to those that bear on control, as the 2020 Rule did. The Proposed Rule also does not exclude—and in fact, expressly acknowledges—the relevance of “[i]ndicia of whether the employee is economically dependent on the potential joint employer,” in contrast with the 2020 Rule’s attempt to exclude such considerations.

Again, these changes are responsive to the court’s criticism in Scalia that the 2020 Rule hewed too closely to the common law test for employee status that the FLSA supposedly has rejected. By making these compromises, the DOL weakens the analytical clarity of the 2020 Rule, continuing a degree of uncertainty for businesses looking for definitive criteria to guide their decision-making. Now, extraneous facts that are not encompassed in the four factors, including those that bear on so-called “economic dependence” may potentially be relevant.  

In an attempt to cover the potential bitterness of this new coating, the DOL adds some clarification, explaining that any “additional factors” are less relevant than the four Bonnette-style factors, and that if the four Bonnette-style factors align, that outcome has a “substantial likelihood” of outweighing the additional factors. One may be forgiven for thinking that they have drawn the chocolaty form of the DOL’s Proposed Independent Contractor Test’s core-factor structure, although this is perhaps not an unwelcome surprise.

Finally, in a development that many might find sweet, the Proposed Rule has an expanded scope, as it also determines joint employer status under the FMLA and MSPA, in addition to the FLSA, whereas the 2020 Rule only covered the FLSA. Given that joint employer issues often are particularly salient for interstate operations that must undergo compliance with all of these statutes, this added uniformity will help increase clarity and certainty.

Overall, businesses and workers may find the Proposed Rule’s new coating slightly less enticing than that of the 2020 Rule. But, importantly, courts may find it more palatable, based on their interpretations of the FLSA and Supreme Court precedent interpreting the FLSA.

Aftertaste

The Proposed Rule is not a final rule. It was published in the Federal Register on April 23, 2026, and it will be open for public comment for sixty days (through June 22, 2026), after which the DOL will review public input and determine what, if any, revisions to include in a final rule. The timeline from proposed rule to final rule can take several months—and likely significantly longer—and the DOL may alter aspects of the proposal in response to comments.

As with chocolates, some courts will pick out the Proposed Rule while others will stick with their preferred flavors. Courts retain ultimate authority to determine who is or is not a joint employer, and whether any court will actually defer to the Proposed Rule—particularly in the face of binding circuit court-level precedent—is far from a certainty. And even then, those many circuit-level tests have proliferated to the analyses of many state-level statutes, which will be wholly unaffected by the Proposed Rule.

The Rule does provide certainty in at least one respect: as the DOL acknowledges in the Proposed Rule, it ensures that, for DOL enforcement personnel, there is a uniform standard being applied to determine whether joint employment relationship exists. That is, while courts may still elect to apply different tests in jurisdiction, the DOL will seek to enforce solely the test articulated in the Proposed Rule nationwide.

And ultimately, while the Proposed Rule perhaps shies further away from definitive criteria than many would have hoped, it is an improvement over the current absence of any rule. It provides an analytically clear and reasonably defensible version of the test that provides guidance for how to interpret the factors and apply them in real world situations.

By: Brett Bartlett and Noah Finkel

As the FLSA landscape continues to evolve, Seyfarth’s national Wage and Hour Litigation Practice Group is pleased to share our observations and analysis of the 2025 FLSA litigation trends as well as our forward looking predictions for 2026.

Wage and hour litigation and enforcement actions increased in 2025 compared to 2024. Private FLSA actions in federal courts increased slightly (5,702 cases versus 5,456 in 2024), and the U.S. Department of Labor recovered more back wages in 2025 than in any year since 2019. Additionally, annual PAGA filings in California remained elevated at 9,343. This elevated PAGA figure represents only a modest drop versus 2024, when filings surged leading up to the PAGA reform that took effect in June 2024. While it is difficult to surmise from the total of all filings which industries were most regularly targeted by wage and hour plaintiffs in 2025, it appears that retail, medical, and professional services firms remained at the top of the list.

The totality of these trends (elevated PAGA activity, an increase in federal FLSA filings, and a marked rise in WHD enforcement recoveries) reflects a broader re‑acceleration of wage and hour activity that had been muted in the immediate post‑pandemic years.

To access the flipbook, please click here. We hope our analysis is of assistance to you and/or your colleagues. Should you have any questions or comments, please reach out to your Seyfarth attorney.

By: Gina Gi

Seyfarth Synopsis: The reach of the FAA’s transportation worker exemption remains heavily litigated, particularly as it applies to last-mile delivery drivers. Federal circuits are currently divided on whether such drivers fall within the exemption. The U.S. Supreme Court is poised to resolve the split soon, with its decision expected to have significant ramifications.

The Federal Arbitration Act (“FAA”) provides that arbitration agreements are “valid, irrevocable, and enforceable,” subject to limited exceptions. One such exception, set forth in Section 1, excludes “contracts of employment” of any “class of workers engaged in foreign or interstate commerce”—commonly referred to as the “transportation worker exemption.” 9 U.S.C. § 1. More than a century after the FAA’s enactment, the scope of this exemption and the FAA’s reach continues to be actively litigated.

Over the past two decades, the U.S. Supreme Court has clarified the scope of this exemption through a series of key decisions. In Circuit City Stores, Inc. v. Adams (2001), the Court rejected the Ninth Circuit’s broad interpretation of Section 1 and limited the exemption to workers actually engaged in the movement of goods in interstate commerce. Later, in New Prime Inc. v. Oliveira (2019), the Court held that independent contractors may fall within the exemption. Then in Southwest Airlines Co. v. Saxon (2022), the Court found that airline ramp supervisors were exempted because they handled cargo traveling in interstate commerce. Finally, in Bissonette v. LePage Bakeries Park St., LLC (2024), the Court confirmed that workers need not be employed in the transportation industry itself to fall within the exemption.

Despite this guidance, the Supreme Court has left substantial room for lower courts to define the exemption’s boundaries. As a result, federal circuits have adopted differing analytical approaches—some focusing on whether goods and passengers are part of a continuous interstate flow, others emphasizing the class of workers’ central duties, and still others applying multifactor tests:

Focus on Flow of Goods and People as a Constituent Part of an Integrated Interstate JourneyFocus on Class of Workers and Their Central DutiesMultifactorTo Be Determined
– 1st Circuit
– 9th Circuit
– 10th Circuit		– 3rd Circuit
– 5th Circuit
– 7th Circuit
– 11th Circuit		– 8th Circuit– 2nd Circuit
– 4th Circuit
– 6th Circuit

Simultaneously over these past two decades, the modern workforce has undergone a significant shift away from traditional employment toward more flexible, on-demand labor. The rise of the gig economy has also produced a growing class of drivers responsible for transporting goods and passengers, making them an increasingly significant segment of the labor market. This shift has intensified the importance of determining which drivers fall within the transportation worker’s exemption.

Ride-Share and Food Delivery Drivers

Circuit Courts have largely reached a consensus when evaluating ride-share and app-based food delivery drivers finding that these workers generally do not qualify for the exemption.

Ride-Share Drivers:

Multiple circuits, including the First, Third, and Ninth—have concluded that ride-share drivers primarily engage in local, intrastate transportation. Even when trips occasionally cross state lines, those crossings are considered incidental rather than central to the drivers’ work. Courts consistently emphasize that the exemption applies only where interstate transportation is a defining feature of the job, not a happenstance of geography. See Capriole v. Uber, 7 F.4th 854, 865 (9th Cir. 2021) (Uber drivers have a fundamentally “intrastate transportation function”); Cunningham v. Lyft, Inc., 17 F.4th 244, 253 (1st Cir. 2021) (Lyft drivers were “primarily in the business of facilitating local, intrastate trips”); Singh v. Uber Technologies Inc., 67 F.4th 550, 560, 557 (3rd Cir. 2019) (“Uber drivers are in the business of providing local rides that sometimes – as a happenstance of geography – cross state borders” and were not a “a central part” of the job).

Food Delivery Drivers:

Similarly, courts evaluating food delivery drivers have found that their work involves distinct local transactions. Once goods arrive at local restaurants or businesses, their interstate journey is considered complete. Drivers then picking up these meals and delivering them to consumers are not participating in interstate commerce. See Immediato v. Postmates, Inc., 54 F.4th 67, 78 (1st Cir. 2022) (Postmates drivers who transported food to customers were engaged in “entirely new and separate” local transactions); Wallace v. Grubhub, 970 F.3d 798, 802 (7th Cir. 2020) (Grubhub drivers primarily delivered meals locally for customers).

The Circuit Split on Last-Mile Delivery Drivers

In contrast, courts are divided on whether “last-mile” delivery drivers—those who transport goods locally in the final leg of their journey to consumers—fall within the exemption.

Circuits Finding Exemption Applies:

The First, Ninth, and Tenth Circuits have generally concluded that last-mile drivers are exempt. These courts reason that goods transported by such drivers remain in a continuous stream of interstate commerce until they reach their final destination. Under this view, it is immaterial that the drivers themselves do not cross state lines; what matters is their role in completing an interstate journey. These courts have applied this reasoning to Amazon Flex drivers delivering packages from local warehouses, as well as drivers transporting goods from regional supply centers to local franchisees. In these cases, the goods are not deemed to have “come to rest,” but instead remain in transit as part of an integrated interstate process. See Rittmann v. Amazon.com (9th Cir. 2020) and Waithaka v. Amazon (1st Cir. 2020), cert. denied (2021) (Amazon Flex drivers making deliveries from local warehouses to customers are exempt); see also Mendoza v. Domino’s Pizza, 73 F.4th 1135 (9th Cir. 2023) (Domino’s drivers delivering pizza ingredients from local supply center to franchisees are exempt).

Circuits Rejecting Exemption:

The Fifth and Eleventh Circuits take a narrower approach, focusing on the nature of the workers’ duties rather than the broader journey of the goods. These courts hold that once goods arrive at a local warehouse and are unloaded, their interstate journey ends. Drivers who subsequently deliver those goods locally are therefore engaged in intrastate activity, even if the goods originally traveled across state lines. Under this view, the exemption applies only where workers play a “direct and necessary role” in moving goods across state or national borders—not where they simply handle goods that previously moved in interstate commerce. See Lopez v. Cintas Corp., 47 F. 4th 428 (5th Cir. 2022) (delivery driver who picked up items at local warehouse and delivered to customers locally was not exempt) and Hamrick v. Partsfleet, LLC, 1 F.4th 1337, 1350 (11th Cir. 2021) (District court erred by focusing on the goods rather than the class of workers).

The Supreme Court Is Set to Weigh in and Resolve the Issue

The Supreme Court is now poised to resolve this circuit split. In Flower Foods, Inc. v. Brock, cert granted, 146 S.Ct. 327 (Mem) (U.S. Oct. 20, 2025), the Court will review a Tenth Circuit decision holding that delivery drivers picking up goods at local warehouses that originated from out of state and delivering them to local retail stores were transportation workers. The Tenth Circuit aligned with the First and Ninth Circuits, emphasizing that the drivers were completing the final leg of an interstate journey and operated within a distribution system controlled by the national baked goods company.

A decision, expected later this year, could significantly reshape the legal landscape. If the Court rules in favor of the driver, then more last-mile drivers—particularly in the gig economy—might be brought within the exemption. This would allow them to potentially bypass mandatory arbitration agreements and pursue claims in court, including class and collective actions. For employers, such a ruling could lead to a surge of such actions that would otherwise be barred by arbitration agreements, increased litigation exposure, higher defense costs, and potentially substantial aggregate liability.

Conversely, a ruling in favor of Flowers Foods would reinforce a narrower interpretation of the exemption and curb its recent expansion. Ultimately, the Court’s decision will shape the balance between enforcement of arbitration agreements and access to courts as well as class and collective remedies for a rapidly growing segment of the workforce.

By: Dena Moghtader

Seyfarth Synopsis: In a misclassification-to-trial case, the Fifth Circuit affirmed a defense verdict because the plaintiff failed to prove the employer had actual or constructive knowledge of alleged overtime, rejected the theory that “no timekeeping system,” standing alone, creates constructive knowledge for the employer, and upheld the Fifth Circuit pattern jury instruction that employees must notify employers when working extra hours.

In this recent decision, Merritt v. Texas Farm Bureau, 166 F.4th 490 (5th Cir. 2026), the Fifth Circuit underscored that even when a plaintiff clears the classification hurdle, the overtime claim may still turn on a separate, dispositive issue: whether the employer knew, or had reason to know, the employee was working overtime.

Jerry Merritt worked for Texas Farm Bureau (“TFB”) as an Agency Manager, where he supervised a team of insurance agents and sold and renewed insurance policies. TFB classified Merritt and other Agency Managers as independent contractors. In his role, Merritt set his own work schedule, was paid by commission rather than hourly, and had no obligation to track or disclose his hours to TFB. TFB did not supervise Merritt’s hours or completion of daily tasks.

In 2019, Merritt sued TFB alleging he was misclassified and sought unpaid overtime under the FLSA. The district court ruled on summary judgment that he should have been classified as an employee, and concluded he was owed at least 816 hours of overtime. This left one issue for trial: whether TFB had actual or constructive knowledge of Merritt’s overtime work.

At trial, the jury found TFB lacked both actual and constructive knowledge of Merritt’s overtime. Merritt filed a Rule 50 motion for judgment as a matter of law and alternative Rule 59 motion to vacate and grant a new trial. The district court denied Merritt’s motions. Merritt appealed.

Fifth Circuit: It is a plaintiff’s burden to show the employer had actual or constructive knowledge that overtime was worked.

Merritt made three arguments on appeal. First, he argued that because TFB permitted him to work unlimited hours, TFB’s knowledge of his overtime work was irrelevant. The Court denied his argument and held that a plaintiff claiming entitlement to overtime pay is required to prove the employer’s actual or constructive knowledge of the overtime work.

Second, Merritt argued that TFB had constructive knowledge of the overtime because TFB made no effort to maintain a timekeeping system or to record Merritt’s time. The Court denied this argument too, reiterating that it is Merritt’s burden to show that TFB knew he worked overtime and the “absence of a timekeeping system, standing alone, does not establish constructive knowledge,” especially when the worker is not required to report hours, operates autonomously, and works off-site.

Finally, Merritt argued that the jury was given a misleading instruction that Merritt had a duty to notify TFB he was working overtime. The Court again denied this argument, holding that the jury charge was modeled after the Fifth Circuit’s pattern jury instructions, and Merritt cites no authority to support his argument that the jury charge misstates the law.

This opinion highlights some practical points:

  1. There is another hurdle in a case where classification is contested. Even if a court rules that the worker should be classified as an employee and is owed overtime hours, a plaintiff must still prove that their putative employer knew or should have known overtime was being worked.
  2. On these facts, a missing timekeeping system by itself is insufficient to show constructive knowledge, and the court declined to treat that absence as shifting the burden to the employer.
  3. Merritt reinforces the deference given to pattern-based jury charges.

Merritt reinforces that it is the obligation of a plaintiff seeking entitlement to overtime pay to show that the employer had actual or constructive knowledge of the overtime they worked.

By: Petersen D. Walrod & Kyle D. Winnick

Seyfarth Synopsis: The U.S. Department of Labor has proposed a new independent contractor rule that would guide courts, companies, and workers in their determinations of who must be paid as an employee and who can be treated as an independent contractor under the FLSA and two other statutes.

After much anticipation, the Department of Labor (DOL) has published a Proposed Rule defining independent contractors as opposed to employees under the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA) (the “Proposed Rule”). As expected, the Proposed Rule largely mirrors the DOL’s earlier 2021 Rule. The Proposed Rule would replace the Biden administration’s 2024 rule and is intended to provide clarity as to the definition of who is an independent contractor under the FLSA, FMLA, and MSPA. Notably, the Proposed Rule:

  • Embraces the same “core factor” approach used in the 2021 Rule, recognizing the significant weight courts give to “the right to control the manner and means by which services are performed” factor and “the opportunity-for-profit-or-loss” factor;
  • Uses the same three non-exhaustive factors as “additional guideposts,” including: the amount of skill required for the work, the degree of permanence of the working relationship, and whether the work is part of an integrated unit of production; and
  • Weighs key issues similarly to the 2021 Rule, including by minimizing the probative value of unexercised control; consolidating the investment and opportunity-for-profit-or-loss  factors; expressly stating that compliance with specific legal obligations, health and safety standards, customer deadlines, and insurance minimums does not demonstrate employee‑type control; and rejecting the relevance of comparing the relative investment levels of putative employers to those of workers.

Background

As explained here, the 2021 Rule was the DOL’s first-ever attempt, via rulemaking, to formally define independent contractors versus employees under the FLSA. It was issued against the backdrop of the growing gig economy and evolving work arrangements. In synthesizing decades of case law, the DOL concluded that the “core” control factor and the opportunity-for-profit-or-loss factor exerted an outsized influence on judicial outcomes. The 2021 Rule also addressed other key issues, such as minimizing the weight given to unexercised control and excluding from the analysis any control exercised solely to comply with certain laws.

Following the change in administration, however, the DOL rescinded the 2021 Rule and eventually promulgated a new rule in 2024. The 2024 Rule rejected the “core factor” framework in favor of a six‑factor test. It relied on an ambiguous totality‑of‑the‑circumstances analysis and reframed several factors in ways that increased the likelihood that workers would be classified as employees rather than independent contractors. The 2024 Rule was subsequently challenged in court, and in 2025 the DOL directed agency investigators to cease applying it and instead rely on sub-regulatory articulations of the test. 

The “Core Factor” Analysis, Restored

The Proposed Rule adopts the same “core factor” test used in the 2021 Rule: namely, that the control factor and the opportunity-for-profit-or-loss factor are the most reliable indicators of whether a worker is operating an independent business. If these two factors point in the same direction, “there is a substantial likelihood that this is the accurate classification for the individual.”

If the core factors of control and opportunity-for-profit-or-loss do not point in the same direction, the following factors should then be considered:

  • The amount of skill required for the work;
  • The degree of permanence of the working relationship between the individual and the potential employer; and
  • Whether the work is part of an integrated unit of production.

The Proposed Rule also provides that “additional factors” other than these five may be relevant but “only if the factors in some way indicate whether the individual is in business for him- or herself, as opposed to being economically dependent on the potential employer for work.”

The Proposed Rule Readopts the 2021 Rule’s Positions on Key Issues

The Proposed Rule also, like the 2021 Rule, provides guidance that clarifies grey areas for employers. These include:

  • Requirements that a worker comply with specific legal obligations; satisfy health and safety standards; carry insurance; meet contractually agreed‑upon deadlines or quality‑control standards; or adhere to similar terms are not probative of control;
  • A worker’s opportunity for profit or loss is not evaluated relative to that of the putative employer’s opportunity, and the opportunity for profit or loss need not arise from initiative or investment;
  • Clarification of the “integrated unit” factor by explaining that it concerns whether the worker is part of an integrated unit of production, and distinguishing it from the “importance or centrality” of the individual’s work to the potential employer’s business; and
  • Confirmation that actual practice is more relevant than what is theoretically or contractually possible.

This guidance also helps address specific concerns and ambiguities that the economic realities independent‑contractor test presents when applied to specific work relationships, industries, and sectors.

The Proposed Rule’s Illustrative Examples

To further provide predictability, clarity, and certainty, the Proposed Rule includes examples of how the above factors should be applied in specific circumstances. These include:

  • It is not probative for the control factor that a logistics company requires an individual who performs logistics services for it to comply with federally mandated transportation safety rules.
  • It is not probative for the opportunity-for-profit-or-loss  factor that a company that provides a software app has invested millions of dollars into the app, whereas an individual who provides services using the app has invested substantially less.
  • The skill factor weighs in favor of employee status where a roofing worker develops roofing skills on the job, but did not start with them because the business did not require them to have those skills at the start. In contrast, the skill factor weighs in favor of independent contractor status where a roofer is required to possess skills as a prerequisite to qualification for the opportunity.
  • The integrated unit factor weighs in favor of employee status where a remote newspaper editor is involved with the entire production process of the newspaper, and does the same work as newspaper employees, even though they are not physically at the newspaper’s office.
  • The integrated unit factor weighs in favor of independent contractor status where a journalist works on specific articles, and their work is separate from the newspaper’s other processes.

The DOL also adds further regulatory text explaining that the purpose of the independent contractor test is to determine whether a worker is economically dependent on an employer for “work.” This is a helpful change as it will help courts find a rationale for embracing the DOL’s proposed approach.

Takeaway

The Proposed Rule is not a final rule. The Proposed Rule was published in the Federal Register on February 27, 2026 and it will be open for public comment for sixty days (through April 28, 2026), after which the DOL will review public input and determine what, if any, revisions to include in a final rule. The timeline from proposed rule to final rule can take several months—even longer than a year—and the DOL may alter aspects of the proposal in response to comments.

Any final rule will be treated by a reviewing court as interpretive guidance. Courts retain ultimate authority to determine who is an employee and who is an independent contractor, and they give DOL interpretations such as this one Skidmore deference—that is, weight proportional to the guidance’s persuasive power. In addition, every federal circuit already applies its own standard for distinguishing independent contractors from employees, and district courts are likely to continue following circuit precedent.

Nonetheless, if finalized, the Proposed Rule will be welcome news for employers and workers, as it provides to courts the regulatory agency’s interpretation of the economic realities test, including a modern, well-balanced, clear analysis that gives greater weight to the two core factors and interprets all factors in an even-handed manner consistent with decades of case law.

Seyfarth attorneys are closely monitoring the DOL’s rulemaking in this area and are available to provide guidance on how the Proposed Rule impacts businesses and workers.

By: Noah A. Finkel and Cassandra M. Ficano

Seyfarth Synopsis: It has long been established that, to be enforceable, a release of a FLSA claim must be approved by either the Department of Labor or a court. While courts in the Second and Eleventh Circuits have consistently adhered to this precedent, in recent years, a growing number of courts in other jurisdictions like the Ninth Circuit have begun to take a different view. The U.S. District Court for the Western District of Washington can now be added to that growing list with its summary judgment decision upholding the enforcement of a private separation agreement as a valid release of FLSA claims.

In a scenario familiar to many employers, AGC Biologics Inc. (“AGC”) and former hourly employee Eufronio Lomibao voluntarily entered into a separation agreement following the termination of his employment in which Lomibao received money and job placement services in exchange for a broad release of all claims arising out of his employment. The general release explicitly accounted for any claim brought under the FLSA. The parties did not obtain, or attempt to obtain, approval from a court or the Department of Labor.

About nine months after signing that agreement, Lomibao initiated a class and collective action against AGC, claiming the company failed to compensate him for all hours worked in violation of the FLSA and Washington wage-hour law.

AGC moved for summary judgment before discovery on the basis that Plaintiff’s individual FLSA and state law claims were barred by the parties’ separation agreement. The Court agreed, granting AGC’s motion and dismissing the action in its entirety with prejudice.

Underscoring the lack of clarity on this issue, Judge John H. Chun started his analysis in Opinion and Order by noting that “caselaw regarding waiver of FLSA rights is hardly perspicuous.” Indeed, even within the Ninth Circuit, where the Western District of Washington sits, courts have diverged on whether judicial or Department of Labor approval is always required for a valid waiver of FLSA rights. Against that backdrop, Judge Chun framed his analysis around three key questions: (1) whether FLSA rights can ever be waived by contract; (2) if so, under what circumstances should an agreement waiving FLSA rights be considered valid; and (3) if the Court does not invalidate the agreement on FLSA waiver grounds, whether any genuine issues of material fact existed that would preclude summary judgment.

In addressing the first issue, Judge Chun declined to hold, as a matter of law, that an employee can never waive FLSA rights through a contractual agreement. Taking a textualist approach, he noted that neither binding precedent nor the plain language of the FLSA supports a bright-line prohibition on such waivers. In light of that absence – and mindful of “prudential concerns and other public policies,” including longstanding principles favoring the enforcement of contracts according to their terms – Judge Chun explained that he was “not inclined to recognize a categorical ban on waiver of FLSA rights via contract.”

Second, Judge Chun determined that a bona fide dispute existed between the parties at the time the separation agreement was executed regarding potential FLSA coverage and liability. He emphasized that Lomibao was aware during his employment, and, moreover, before signing the agreement that he believed AGC had failed to compensate him for all hours worked. The Court squarely rejected Lomibao’s contention that no “active dispute” existed at that time, correctly pointing out that an “active dispute” is not the applicable standard. Rather, the law requires only the existence of a bona fide dispute between the parties.

The Court acknowledged but ultimately declined to adopt the approach followed by the Eleventh and Second Circuits, which always require Department of Labor or judicial approval for any enforceable waiver of FLSA rights. Instead, having already concluded that the parties’ separation agreement was not invalid for lack of a bona fide dispute, the Court found no remaining basis on which to invalidate the release of Lomibao’s FLSA claims.

Because Lomibao challenged the validity of the separation agreement solely on legal grounds – namely, the argument that FLSA waivers require approval to be valid and enforceable – the Court found he failed to identify any genuinely disputed or missing facts suggesting the parties did not form a valid contract. Unlike the cases Lomibao cited in opposing summary judgment, it was undisputed here that he signed an agreement expressly releasing his right to bring any FLSA claim against AGC. The Court highlighted several undisputed facts underscoring the agreement’s validity: the employee had 45 days to review the agreement; he signed it after 21 days; he was advised to consult with an attorney before executing it; he did not revoke his acceptance within the seven‑day revocation period; and AGC fully performed its obligations under the agreement, including issuing the severance payment and providing job‑placement services.

Judge Chun’s decision underscores that, unlike some other circuits, the Ninth Circuit has not embraced a universal rule. Generally, the appropriate course for each employer depends on the jurisdiction and the specific factual circumstances surrounding the agreement. The most risk‑averse approach remains obtaining judicial or DOL approval for any release of FLSA claims. Many employers, however, may elect to proceed without approval – particularly in situations like this one, where it is undisputed that a valid contract was formed between the parties, the contract expressly provides for the release of FLSA claims and the jurisdiction does not have a hard-fast rule requiring approval.

By: Ralph Culpepper III and Kevin M. Young

Seyfarth Synopsis: In one of its final rulings of 2025, the Eleventh Circuit in Villarino v. Pacesetter Personnel Services, Inc. affirmed summary judgment in favor of a staffing agency, rejecting minimum wage and compensation claims tied to optional van transportation and pre- and post-shift activities. The court held that deductions for use of employer-provided vans did not violate the FLSA or Florida law because the vans were optional and primarily benefited the employees. The court also applied a clear, textual reading of the Portal-to-Portal Act, finding that time spent commuting to a project site, waiting on an optional employer-provided van, and collecting tools were not compensable. The decision offers welcome clarity for employers, particularly those operating in the Southeast.

In 2020, an individual named Shane Villarino filed a hybrid FLSA collective and Florida Minimum Wage Act (FMWA) class action against his former employer—a staffing agency that assigns temporary workers to client sites across the Southeast. Roughly 300 individuals joined the case, challenging two core practices: (i) wage deductions for using optional, employer-provided transportation, and (ii) exclusion of certain time—such as travel to work sites and tool collection—from compensable hours.

The plaintiffs, all temporary workers, could choose whether, when, and where to accept assignments. On days they chose to work, they reported to a central hub, signed into a portal, and received a ticket with the worksite location, report time, and recommended tools.

To get to the job site, the employees had several options: personal vehicle, public transportation, carpooling with coworkers, or using a company-provided van. Use of the van was entirely optional. If chosen, the agency deducted $3.00 per day ($1.50 each way); those who volunteered to carpool coworkers received $3.00 per passenger.

The plaintiffs raised two primary claims. First, they alleged the deductions for using employer-provided vans brought their wages below the minimum wage, resulting in violations of the FLSA and FMWA. Second, they argued they should be compensated for time spent (i) traveling from the central hub to the worksite; (ii) waiting for the agency’s vans to arrive, and (iii) retrieving and returning tools.

The staffing agency moved for summary judgment, which the district court granted. The workers appealed. On December 5, 2025, the U.S. Court of Appeals for the Eleventh Circuit affirmed for the employer.

On the wage deduction issue, the Eleventh Circuit reiterated a core principle: while employers cannot shift business expenses that drop workers below minimum wage, not all deductions are unlawful. The court explained: “[T]he rule is not that expenses can never be deducted from wages—it is that expenses cannot be shifted to employees when they are for the employer’s benefit.”

Because the van rides were optional and offered primarily for employees’ convenience, the court found the deductions permissible. Employees were responsible for getting to work on time and had multiple options for doing so, none of which were mandated.

The panel also rejected the claim for compensating pre-shift time. The court’s analysis of the argument turned heavily on the Portal-to-Portal Act, which amended the FLSA in 1947 to clarify that time spent commuting to and from work, as well as other activities that are preliminary or postliminary to an employee’s “principal” work activities, are not compensable. Through the lens of the PTPA, “the fact that workers need to get to their jobs in order to do them is not enough—if mere causal necessity were sufficient to constitute a compensable activity, all commuting would be compensable… And that would make the PTPA a dead letter.”

Similar principles governed time spent collecting tools. The tools were generic (hard hats, gloves, vests), not always required, sometimes supplied at the jobsite, and employees could bring their own. Even arriving without tools did not necessarily prevent the employee from working. Under these facts, collecting and returning tools was not an indispensable part of the employees’ duties, and thus not compensable.

A similar analysis applied for the employees’ claims concerning waiting time. The court explained that workers were not required to wait—they could use alternate transportation—and those who waited could use the time for personal pursuits, such as drinking coffee, reading/watching the news, or taking a nap. Under these circumstances, again, the time was not an integral and indispensable part of the employees’ duties.

Takeaways for Employers

The Eleventh Circuit’s decision is a win for employers operating in Florida, Georgia, and Alabama. It reinforces the viability of optional transportation policies and the continued strength of the PTPA’s protections for employers. The court’s emphasis on employee choice and benefit is a useful lens for assessing current transportation-related practices and potential future challenges.

That said, the ruling is fact-specific. Seemingly small differences—like whether a tool is required, how workers spend wait time, and what transportation options are made available to employees—can materially impact the analysis and potentially change the outcome.

The ruling provides a useful reminder for employers in a number of areas:

  1. Keep Written Policies Up to Date. Clear, consistent communication is key. In this case, the agency’s ability to prove that van use was entirely optional played a key role in the outcome.
  2. Train for Consistency. Relatedly, managers should communicate policies in a way that mirrors the written guidance. Misalignment between policy and practice is breeding ground for litigation risk.
  3. Be Mindful of the PTPA. The decision hinged heavily on the PTPA. While the PTPA is, of course, part of the federal wage-hour analysis, employers should keep in mind that some state wage-hour laws do not recognize or incorporate the PTPA—and the outcome could be different in those states.

If you have any questions, please do not hesitate to reach out to your favorite Seyfarth wage-hour lawyer or the blog authors.

[New York employers should expect heightened scrutiny of their wage-and-hour policies in 2026.]

As we kick off 2026, it is an important reminder for employers that New York is a hotbed for wage-hour issues.  The Eastern and Southern Districts of New York consistently see more cases asserting claims under the Fair Labor Standards Act (FLSA) than any other federal court.  See here.  In 2025 alone, more than 600 wage-and-hour cases were filed in New York State courts.  While the New York Labor Law (NYLL) and its implementing regulations mirror the FLSA in certain respects, they differ in important ways. Below are some of the most frequent wage-and-hour issues employers should keep in mind.

Minimum Wage and Overtime Exemptions

Minimum wage is set at $7.25 per hour under the FLSA.  As explained here, New York requires that non-exempt employees be paid at least $17.00 per hour for those based in New York City, Long Island, or Westchester, and $16.00 per hour for employees in the rest of the state. 

The New York Department of Labor (NYDOL) has also set the salary threshold for the executive and administrative exemptions at $1,275 per week for employees in New York City, Long Island, or Westchester, and $1,199.10 per week for employees elsewhere in the state.  Currently, New York does not impose a salary threshold for the professional exemption, leaving the FLSA’s requirement of $684 per week in place.

While New York recognizes many of the FLSA’s exemptions to overtime, there are important exceptions.  For example, the Second Circuit has held that New York does not recognize the Motor Carrier Exemption, which provides an overtime exemption for certain employees who drive or operate motor vehicles weighing over 10,000 pounds. 

Pay Frequency

New York also regulates how frequently employees must be paid—for example, “manual workers” must be paid weekly.  As discussed here, New York has seen a surge of litigation seeking damages on behalf of classes of manual workers who were paid biweekly instead of weekly.  In May 2025, New York amended the NYLL to sharply limit damages for these pay-frequency violations. Challenges to the constitutionality of this amendment are currently pending.  

Overtime and Regular Rate of Pay

As under the FLSA, employers must pay overtime premiums to all non-exempt employees for hours worked beyond 40 in a workweek. Like the FLSA, New York calculates overtime pay at 1½ times the employee’s “regular rate of pay.”

For employers covered by New York’s Miscellaneous Wage Order—the default Wage Order that applies to most employers—the regular rate of pay is determined by adding the employee’s pay for the workweek and all other earnings (except certain statutory exclusions) and dividing that total by the number of hours worked during the week.

In contrast, under New York’s Hospitality Industry Wage Order, which applies to restaurants and hotels, the regular rate is calculated by dividing the employee’s total weekly compensation by the lesser of 40 hours or the actual hours worked (if fewer than 40). This method necessarily increases the regular rate of pay and, correspondingly, the overtime rate.

Tips and Gratuities

New York also deviates from the FLSA with respect to tips and gratuities. Generally, New York only permits employers in the hospitality industry to take a tip credit.  As discussed here, New York eliminated the tip credit for employers subject to the Miscellaneous Wage Order, which includes workers in nail salons, car washes, and hairdressing establishments.    

For employers that may take a tip credit, New York follows the 80/20 rule: employers of service employees and food service workers cannot take a tip credit for any day in which the employee spends more than 20 percent—or two hours, whichever is less—of the workday performing non-tipped duties.

Administrative fees for banquets and other special events are presumptively considered tips that must be paid to tipped employees. To rebut this presumption, the employer must provide customers with notice that complies with the Hospitality Wage Order requirements. 

Spread of Hours and Split Shifts

The NYLL requires employers, in certain circumstances, to provide additional pay to employees whose workday exceeds ten hours or whose hours are “split” (non-consecutive). For employers covered by the Miscellaneous Wage Order, this means the employee must receive at least one additional hour of pay at the basic minimum hourly wage rate for each spread-of-hours or split shift worked during the workweek.

Courts and the NYDOL have held that this regulation does not apply if the employee’s total daily compensation exceeds the New York State minimum wage multiplied by the number of hours worked, plus one additional hour at the minimum wage. In other words, these regulations do not apply if the employee is paid sufficiently above the minimum wage.

In contrast, under the Hospitality Industry Wage Order, covered employees who work a spread of hours exceeding ten hours or a split shift are entitled to an additional hour of pay at their regular rate of pay—even if they earn above the minimum wage.  

Uniform Maintenance Pay

An increasing number of wage-and-hour lawsuits in New York have involved claims for uniform maintenance pay (UMP). New York requires employers to provide employees with an additional fixed weekly sum, depending on the size of the employer and the number of hours worked.

According to the NYDOL, this regulation applies to employers subject to the Miscellaneous Wage Order only if requiring employees to launder or maintain a uniform would reduce their hourly wage below the minimum wage.

Under the Hospitality Wage Order, UMP is not required when uniforms: (1) are made of “wash and wear” materials; (2) can be routinely washed and dried with other personal garments; (3) do not require ironing, dry cleaning, daily washing, commercial laundering, or other special treatment; and (4) are furnished to the employee in sufficient quantity to match the average number of days worked per week.    

Independent Contractors

The New York State Freelance Isn’t Free Act and the New York City Freelance Isn’t Act provide protections to “freelance workers”—defined as any natural person or any organization composed of no more than one natural person that is hired as an independent contractor (i.e., sole proprietors)—including contractual requirements and a formal enforcement process for unpaid compensation.  

In New York City, certain workers who perform delivery and couriers services through third-party applications, and who are classified as independent contractors, must be paid $21.44 per hour.  For more information on this law, see here.  

New York City also has several laws scheduled to take effect on January 26, 2026 (pending current legal challenges) that regulate the use of gig workers:

  • Local Law 113 of 2025, which requires delivery services to pay their contracted delivery workers no later than 7 calendar days after the end of a pay period.
  • Local Law 108 of 2025, which requires third-party food delivery services and third-party grocery delivery services that offer online ordering to solicit gratuities for food delivery workers and grocery delivery workers before or at the same time an online order is placed.  
  • Local Law 107 of 2025, which requires third-party food delivery services and third-party grocery delivery services to provide an option to pay gratuity that is at least 10 percent of the purchase price on each food or grocery delivery order.

NYC Mayor Zohran Mamdani has stated that his administration will target the alleged misclassification of app-based delivery workers as independent contractors. We therefore anticipate additional regulations governing the use of app-based workers.

The bottom line: New York employers should expect heightened scrutiny of their wage-and-hour policies in 2026.

By: Alison Silveira and Natalie Costero

Seyfarth Synopsis: The University of Georgia Athletic Association (“UGAA”) recently filed an application in Georgia state court to compel arbitration against former Georgia defensive end Damon Wilson II. UGAA seeks $390,000 in liquidated damages after Wilson ended his NIL agreement early and transferred to Missouri. This case offers one of the first public looks at how NIL contracts, the transfer portal, and revenue-sharing rules intersect. 

Background 

Wilson signed an NIL agreement with Classic City Collective in December 2024, worth $420,000 over 14 months, plus bonuses. The agreement also included a liquidated damages clause requiring Wilson to pay Classic City all remaining licensing fees that would otherwise have been payable to Wilson under the agreement if he withdrew from the team or entered the transfer portal. 

One month later, Wilson announced his transfer to Missouri. Previously, NCAA transfer rules required university approval and affected eligibility for future seasons. The 2024 updates removed these restrictions, provided athletes meet GPA and credit-hour requirements. As a result, Wilson has started all 11 games for Missouri this season, and become one of the top pass-rushers in the SEC.  

Classic City terminated the agreement and demanded payment of liquidated damages, consistent with the terms of the contract. It also assigned its rights under the agreement to UGAA, a private, non-profit corporation that manages athletics for the University of Georgia. While still part of the University system (the UGA President and Provost serve as Chair and Vice Chair of the Board, respectively), UGAA oversees all aspects of sports and athletics for the university. When Wilson ignored arbitration demands, UGAA filed in court. 

Why This Matters for Universities 

This case highlights critical compliance and operational risks for universities, intertwined with the assignment and enforcement of NIL rights: 

  • Revenue-Sharing Compliance: Under House, universities face a $20.5M cap on revenue sharing. NIL deals entered into between collectives and athletes fall outside this cap, providing an avenue by which student athletes may earn more for licensing of their NIL based on their own fair market value. Maintaining separation between collectives and universities is imperative for university compliance with House, as the punishments for exceeding the $20.5M revenue share cap, administered by the College Sports Commission, may include anything from significant fines to bans from postseason play to reductions in future scholarship counts and/or roster limits.  
  • Employment Risk: A contract between a collective and an athlete may contain clauses that would be unadvisable in a revenue sharing agreement between a university and its student-athlete.  For example, Wilson’s contract with Classic City was invalidated the minute he decided to stop playing football for UGA. Such a clause in a revenue-sharing agreement, tying eligibility for the funds to continued participation (or, potentially, specific performance metrics) could be challenged as impermissible “pay for play.” Revenue sharing agreements between universities and student-athletes are also already under scrutiny as potential evidence of an employment relationship, which remains a viable and pending legal issue in Johnson v. NCAA. Contracts between collectives and athletes do not face the same scrutiny, lessening concern over terms that could be interpreted as indicia of control, like the prohibition at issue in Wilson against entering the transfer portal.  
  • Roster Stability: The liquidated damages clause in Wilson’s agreement was, presumably, Classic City’s attempt to strengthen the ties between NIL sponsorships and the athletes, with the hope of leading to roster stability. Through these types of provisions, collectives are trying to avoid exorbitant payments for short term commitments followed by rapid exits, while also balancing athlete free agency and the potential for antitrust claims. While the liquidated damages provision did not restrict Wilson from transferring, it functioned like a clawback provision used in corporate compensation packages: a mechanism designed to protect the Classic City’s investment and introduce stability into a system where athletes can move freely with a single transfer portal entry. Universities, who must comply with the NCAA’s transfer portal rules, should closely consider whether similar clauses may be enforceable. 
  • Title IX Exposure: Consolidating NIL funding under the university could trigger Title IX obligations.  Because collectives are privately run corporations, they are not subject to the same Title IX obligations facing universities. Assignment of rights under a collective agreement to a university – where an estimated 80-90% of beneficiaries of collective agreements are male athletes – could raise questions of fund allocation and potential exposure for university beneficiaries.   

Checklist: Before Accepting Assignment of NIL Rights 

If UGAA prevails against Wilson (which the public may never know, as UGAA is requesting that the case proceed to private arbitration consistent with the contract), UGAA could recover significant funds which, presumably, it will use to fund future revenue sharing deals with its athletes.  However, before accepting assignments, universities should consider whether that potential receipt of funds could create inadvertent risk, including: 

  • Does this assignment risk exceeding the House revenue-sharing cap? 
  • Could the agreement resemble “pay-for-play” or employment? 
  • Are liquidated damages enforceable under state law? 
  • Does this create Title IX compliance obligations? 

Looking Ahead 

  • Donor Relations: NIL instability is increasingly frustrating both donors and coaches.  Miami’s Mario Cristobal, for example, has stressed that he is not looking for “one-year subcontractors”—he wants players who care about the University of Miami and invest in the long-term culture of the program. Individual donors are expressing similar frustration, including Troy Aikman who was quoted in a recent New York Times article saying “I’m done with NIL. I mean, I wanna see UCLA be successful, but I’m done with it.”[1] The current influx of money into college sports by donors sponsoring collectives is likely not sustainable, without some long-term return on investment. Contractual devices like liquidated damages are one vehicle by which donors and collectives are trying to align financial commitments with that kind of stability, without in fact prohibiting athlete mobility. Adequate notice provisions could provide similar protections. What’s clear is that careful – and creative – drafting is imperative.
  • Collective Bargaining: Athletes.org has released the first-ever framework of terms of a Collective Bargaining Agreement (CBA), representing the first serious step toward organizing college players around a labor model. How the NCAA and universities will respond remains uncertain. If collective bargaining – for all sports or just certain sports – were to be the next step in the evolution of college sports, key questions need to be answered around who is at the table and what items the parties are willing to bargain – including what types of compensation may be the subject of bargaining. As both institutions and athletes formalize their positions on these subjects, details like assignability of NIL deals with collectives, arbitration of claims, notice provisions, and liquidated damages take on increased significance, along with questions around revenue sharing and – potentially – the future of the transfer portal. Each dispute becomes a preview of what the next era of contracting in college sports will look like. 

Bottom line: With the College Football Playoffs approaching and the transfer portal reopening January 2, 2026, expect more cases like Wilson as universities and collectives navigate athlete compensation and investment protection. Careful drafting and thoughtful planning to navigate potential exposure risks are essential.  

[1] Deitsch, Richard, “Aikman’s guiding principle for ‘Monday Night Football’:  ‘I try to be fair,”’ The New York Times, Dec. 9, 2025.

By: Phillip J. Ebsworth and Sofya Perelshteyn

Seyfarth Synopsis: Second Appellate District affirmed the ruling in a PAGA bench trial finding that the employer’s pay plan was lawful and that the PAGA notice did not include the facts and theories that plaintiffs pursued at trial.

The bench trial focused on the pay plan by which the employer car dealership paid its mechanics. Plaintiffs were paid minimum wage for all hours worked but also received a “flag bonus” if they performed certain jobs or tasks quicker than average. The plaintiffs argued that the “flag bonus” amounted to piece rate pay and therefore violated Labor Code section 226.2. Following a bench trial, the trial court found that the employer’s pay plan was lawful and did not violate the “no borrowing rule” and issued a decision in the employer’s favor.

The Second District affirmed the trial court’s decision and held there was an independent basis for affirming the decision on the PAGA claim. The Second District noted that the plaintiffs’ primary theory of liability was not included in the PAGA notice submitted to the LWDA which provided an independent basis to find in favor of the employer on the PAGA claim. The Second District also emphasized that while the plaintiffs introduced pay records as evidence at trial, they did not meet their evidentiary burden to demonstrate any Labor Code violations.