If you manage a workforce that includes foreign national employees, you are likely aware that the employment authorization document (EAD) compliance landscape has changed fundamentally over the past year. This article focuses on what those changes mean for your I-9 obligations and day-to-day workforce management.

Key Legal Changes

On October 30, 2025, Department of Homeland Security (DHS) published an interim final rule ending automatic EAD extensions for timely filed renewals.^[1] Anyone who filed or files to renew on or after October 30, 2025, gets no automatic extension of work authorization.^[3] Employees who filed to extend work authorization before October 30, 2025, remain eligible for 540 days of automatic extension as they awaits issuance of the new EAD.^{[4] [5]}

Separately, U.S. Citizenship & Immigration Services (USCIS) reduced maximum EAD validity from five years to 18 months for refugees (EAD category: A03), asylees (EAD category: A05), withholding of removal (EADS category: A10), pending asylum applicants (EAD category: C08), adjustment of status applicants (EAD category: C09), and cancellation of removal/NACARA applicants (EAD category: C10).^{[7] [8]}

The One Big Beautiful Bill Act (H.R. 1), signed July 4, 2025, caps Temporary Protected Status (TPS) EADs at shorter of one year or the TPS designation period.^{[14] [12]} USCIS interpretive guidance, issued March 13, 2026, applies this cap partially retroactively: even pre-July 22, 2025, TPS filers get no more than one year of automatic extension after July 22, 2025.^[23] For those filers, the extension ends at the earliest of: 540 days after the previous EAD’s expiration, July 21, 2026, or the end of the country’s TPS designation.^{[22] [24]} We recommend not relying on the receipt notice and instead calculating the date yourself.

Finally, USCIS Policy Memorandum PM-602-0194 — which is an internal agency policy, not statute or regulation — places an adjudicative hold on pending benefit applications for nationals of 39 countries identified in Presidential Proclamations 10949 and 10998.^{[51] [53]} Pending EAD applications for affected nationals will not be approved while the hold is in place.^[59] Combined with the elimination of automatic extensions, employees from these countries face potential loss of work authorization with no regulatory backstop.^[61] See the full country list in the reference table below.

How Each Category of Employee Is Affected

The following table summarizes where things stand for each major category of EAD dependent employee.

Employee Category (EAD Code)	Pre-Oct. 30, 2025 Filers	Post-Oct. 30, 2025 Filers	Additional Considerations
TPS Beneficiaries (A12/C19)	Automatic extension capped at 1 year or TPS duration (whichever is shorter) per H.R. 1, even if receipt shows 540 days.[29]	No general automatic extension; however, TPS specific Federal Register notices or individual notices may still provide extensions by law.	One year EAD validity cap under H.R. 1 applies.[16] Country specific court orders may extend validity.[30] New $560/$280 fees apply.[21]
Pending Asylum Applicants (C08)	Up to 540-day automatic extension remains valid.[31]	No automatic extension.	EAD validity reduced to 18-month max.  New $550 initial/$275 renewal fee under H.R. 1. [17] [32] [33]
Asylees (A05)	Up to 540-day automatic extension remains valid.	No automatic extension.	EAD validity reduced to 18-month max.
Refugees (A03)	Up to 540-day automatic extension remains valid.	No automatic extension.	EAD validity reduced to 18-month max.
Adjustment of Status Applicants (C09)	Up to 540-day automatic extension remains valid.	No automatic extension.	EAD validity reduced to 18-month max.  Affects both employment-based and family-based green card applicants.
H-4 Dependent Spouses (C26)	Up to 540-day auto extension remains, but cannot exceed I-94 end date.[34] [35]	No automatic extension.	Must present unexpired I-94 alongside EAD and receipt notice.[36] Processing delays create high risk of work authorization gaps.[37]
L-2 Dependent Spouses (A18)	Up to 540-day auto extension remains, but cannot exceed I-94 end date.	No automatic extension for EAD renewals.	L-2 spouses with I-94 annotated as “L-2S” may be authorized to work incident to status and may not need a separate EAD. Must present unexpired I-94.[38]
E Spouse Dependents (A17)	Up to 540-day auto extension remains but cannot exceed I-94 end date.	No automatic extension for EAD renewals.	E-2S/E-1S/E-3S spouses may be authorized to work incident to status with an annotated I-94.
DACA Recipients	DACA renewal processing continues under court orders.[39]	DACA is governed by separate regulations; no new DACA applications are being processed.[40][41]	Current grants and related EADs remain valid until they expire.[42] USCIS recommends filing renewals 120 to 150 days before expiration.[43] Fifth Circuit ruling may affect work permits.[44]
Parolees (C11)	CHNV parole EADs have been revoked following DHS termination of parole grants.[45]	No automatic extension. EAD validity capped at 1 year or parole period under H.R. 1.[46]	Facially valid C11 EADs may no longer be valid.[28]
VAWA Self-Petitioners (C31)	Up to 540-day automatic extension remains valid.[47]	No automatic extension.[48]	Sensitive category requiring careful handling.
F-1 STEM OPT Students	180-day automatic STEM OPT extension is unaffected.[49]	180-day automatic extension continues under separate regulations.	Cap gap extensions also remain in place.[50]

I-9 Compliance: How Each Scenario Plays Out

All of these changes converge on a single obligation that has not changed: complete Form I-9 within three business days of a new hire’s start date, and reverify employment authorization when it expires.^[62]

Pre-October 30, 2025, filers: Accept the facially expired EAD plus I-797C receipt notice.^[6] Enter the auto extended expiration date in Section 2 (540 days from the “Card Expires” date, or 365 days for TPS categories under H.R. 1) and note “EAD EXT” in Additional Information.^[63] For H-4, L-2, and E spouse employees (A17, A18, C26), the extension cannot exceed the I-94 end date… use whichever date is earlier.^[64]

TPS renewals filed on or after July 22, 2025: The expiration date is the shorter of one year from the “Card Expires” date or the TPS designation end date.^[65] Check the USCIS TPS page for country specific court orders that may extend validity.^[66]

Post-October 30, 2025, filers (all other categories): No automatic extension. If the EAD expires while the renewal is pending, the employee must present different acceptable documentation, or they cannot continue working.^[67][68] No grace period. No workaround.

Employees from PM-602-0194 countries: Pending EAD applications may be held indefinitely.^[69] You cannot continue employing someone whose authorization has lapsed, regardless of the reason for the delay.

Cuba, Haiti Nicaragua and Venezuela (CHNV) parole EADs (EAD category: C11): Even facially valid C11 EADs may have been revoked.^[70] E-Verify employers should monitor the status change report.

Reverification: Required when any automatic extension or EAD validity period ends, using Supplement B of Form I-9.^[71] Do not use E-Verify for reverification.

Anti-discrimination: Under INA § 274B, you cannot request specific documents or refuse valid, unexpired documents because of national origin or citizenship status. Employees from PM-602-0194 countries may still hold perfectly valid work authorization.

What HR Teams Should Do Now

• Audit your workforce. Catalog every EAD dependent employee by category, expiration date, and whether they filed before or after October 30, 2025.^[72]
• Set up tracking. Automated reminders at 180, 150, 120, and 90 days before each expiration…USCIS allows filing for an EAD extension 180 days before an EAD expires.^[73]
• Distinguish TPS from parole EADs. For CHNV nationals, confirm whether the EAD is TPS based (A12/C19) or parole based (C11).^[74] The category code is dispositive.
• Monitor TPS litigation. Country specific court orders are shifting frequently. Bookmark the USCIS TPS page and check it regularly.^[75]
• Train your I-9 team on the elimination of automatic extensions, the TPS one year cap, and the grandfathering cutoff.^[76][77]
• Plan for workforce gaps, especially for employees from PM-602-0194 countries whose adjudications may be held indefinitely.
• Use premium processing where available to avoid authorization gaps.
• Get immigration counsel involved early. The interplay of statutes, regulations, policy memoranda, and court orders is extraordinarily complex.^[79][80][81]

References

In a major positive development for employers facing biometric privacy litigation under the Illinois’ Biometric Information Protection Act (BIPA), the Seventh Circuit Court of Appeals unanimously held that the 2024 legislative amendments to BIPA’s damages provisions apply retroactively to pending cases. This decision dramatically curtails potential billion-dollar exposure for Illinois employers and represents the definitive end of so-called “per-scan� damages.

As we previously discussed, the Illinois Supreme Court’s 2023 ruling in created an untenable outcome for Illinois employers in holding that BIPA violations accrued each time an employer collected an individual’s biometric information without complying with BIPA’s notice and consent requirements. Cothron meant that employers could incur damages (ranging from $1,500 to $5,000) every time they collected employees’ biometric information without adequate notice and consent. For example, if an employee working five days per week used unlawfully collected biometric data to scan in and out four times per day (i.e., to start/end the shift and to take a lunch break), their employer could be liable for damages ranging from $1,500,000 to $5,000,000 per employee per year.

Following the Cothron ruling, the Illinois General Assembly passed, and Governor J.B. Pritzker signed, in August 2024 that eliminated these “per-scan� damages and replaced them with “per-person� damages, such that repeated non-compliant collections of the same person’s biometric information via the same method only amounted to a single BIPA violation.

The that the 2024 BIPA amendments apply retroactively to any pending litigation filed before the amendments’ enactment. This decision may signal the proverbial “death knell� for smaller, individual BIPA claims, as the Seventh Circuit emphasized both the discretionary nature of BIPA damages as well as the potential impact on subject matter jurisdiction for pending cases that may no longer satisfy the amount-in-controversy threshold of $75,000. Although the Seventh Circuit’s decision does not eliminate employer exposure under BIPA, it provides more predictability for employers navigating ongoing litigation and settlement negotiations and further deflates the once-ballooning exposure for employers under BIPA.

With the rise of biometric-related technologies in employment, including some artificial intelligence systems, Illinois employers that currently use or are planning to use these tools to collect employee biometric information should immediately draft and implement a BIPA-compliant notice and consent policy. Though the BIPA threat may be diminished, it has not been altogether eliminated, so BIPA compliance remains a must.

On March 19, 2026, the U.S. Equal Employment Opportunity Commission (EEOC) announced that Planned Parenthood of Illinois, an affiliate of the Planned Parenthood Federation of America, would pay a $500,000.00 settlement to end the EEOC’s investigation into allegations of discrimination stemming from the organization’s Diversity, Equity, and Inclusion (DEI) practices. The settlement — reached through the EEOC’s administrative conciliation process — marks the first EEOC settlement involving DEI-related practices since President Trump took office in January 2025 and potentially signals the EEOC’s enforcement objectives going forward.

In its on the settlement, the EEOC contends that it had reasonable cause to find that Planned Parenthood of Illinois held mandatory, weekly “‘affinity caucuses’ that were segregated by race, in which employees of other races were not allowed to participate.� Moreover, the EEOC states that these DEI-related training sessions “involved repeated harassing and derogatory statements targeting white employees[.]�

EEOC Chair Andrea Lucas also noted in the press release that “Title VII guarantees equal treatment for every employee and prohibits race discrimination in America’s workplaces. Those protections equally apply to white workers. There is no DEI exception to Title VII’s requirements.� Lucas’ comments echo similar EEOC from March 2025 and suggest that the agency will continue to focus on what it calls “DEI-related discrimination� and “unlawful� DEI programs.

To that end, this settlement comes less than one month after Lucas issued a to large U.S. employers regarding the EEOC’s stance on Title VII compliance related to DEI initiatives. With the EEOC’s eye on workplace DEI policies in the private sector, employers should ensure that their DEI efforts comply with the requirements of applicable federal antidiscrimination. Critically, employers should:

• Ensure that events and opportunities are open to employees regardless of protected class;
• Train leaders on compliance with applicable anti-discrimination laws; and
• Audit and review existing DEI policies or programs with experienced counsel.

Moreover, employers should, of course, continue to maintain workplaces free of discrimination and harassment.

Employment-based noncompete agreements are void and unenforceable as of June 30, 2027, under the recently passed HB1155 (the Act). The Act applies retroactively to all agreements challenged in proceedings that commence on or after June 30, 2027.

The Act defines prohibited noncompete agreements broadly, to include covenants or provisions:

• that prohibit or restrain an employee or independent contractor “from engaging in a lawful profession, trade, or business of any kindâ€�;
• that prohibit the acceptance or transaction of business with a customer (sometimes called “no-acceptâ€� agreements); and
• that impose forfeiture for competition penalties.¹ 

The Act does not apply to the following agreements:

• Non-solicitation agreements (however, such agreements must be limited in time to 18-months after termination and limited in scope to current or prospective clients, customers, or patients with whom the employee “established or substantially developed a direct relationshipâ€�);
• Confidentiality agreements;
• Agreements preventing the disclosure of trade secret information;
• Agreements to repay out-of-pocket education expenses, if the agreement expires within 18 months of the date the employee started employment, limits repayment to the pro rata portion of the remaining time of the 18-month period, and releases the employee from the obligation to repay if the employee terminates the employment relationship for “good causeâ€� (defined ); and
• Agreements entered by a franchisee, subject to the franchise sale meeting certain legal requirements.

The Act also includes a sale-of-business exception, but the exception only applies if the person signing the noncompete “purchases, sells, acquires, or disposes of an ownership interest representing one percent or more of the business.â€� 

Reminiscent of California’s recent noncompete legislation, the Act requires employers to affirmatively notify individuals about void noncompete agreements. Specifically, by October 1, 2027, employers must notify all current and former employees and independent contractors whose noncompete agreements are still effective that the noncompete provisions in those agreements are void and unenforceable.

The Act will replace Washington’s current noncompete law, which prohibits noncompete agreements for low- and middle-income workers. The current law has a threshold of $126,859 for employees and $317,147 for independent contractors.  

With the Act’s passage, employers should take the following steps to ensure they are in compliance:

• Take note of which Washington-based employees have executed existing noncompete agreements and will need to receive notice by October 1, 2027;
• Consider which employees need to enter into new agreements; and
• Review and revise all existing form agreements to ensure compliance going forward.

Â鶹´«Ã½ is here to help you navigate these issues. Please reach out to your Â鶹´«Ã½ attorney with any questions.

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Although California’s Senate Bill 7 did not become law and California’s Assembly Bill 1018 is currently inactive, both bills preview the types of disclosure, documentation, and oversight obligations that California lawmakers have been considering in connection with employers’ use of automated tools in employment decisions.

Many employers are already using automated tools to screen applicants, evaluate performance, and support hiring and disciplinary decisions. In some cases, however, the people using those tools do not understand them well. For example, employers may not know what inputs the tool relies on, how it generates outputs, or how the tool applies those outputs in “decision-making.� That gap creates compliance risk under existing law because the employer may not be able to explain or substantiate how a particular employment decision was made.

Since October 1, 2025, California employers have been operating under the state’s Civil Rights Council’s automated-decision-system regulations, which clarify how existing anti-discrimination law applies when employers use artificial intelligence, algorithms, and other automated tools in employment decisions. Those regulations reinforce that employers remain responsible for the use and outcomes of these tools.

Against that backdrop, the California Legislature’s two recent AI-related proposals are best understood as addressing a related issue: not only whether an automated system produces a discriminatory result but whether the employer can demonstrate how that system is used, what it relies on, and what controls govern its use.

First, the now-failed Senate Bill 7, sometimes referred to as the “No Robo Bosses Act,� would have directly regulated employer use of automated decision systems in employment by requiring notice to applicants and employees, imposing recordkeeping obligations, and restricting reliance on automated outputs in making certain employment decisions.

Second, the now-inactive Assembly Bill 1018 would have taken a broader approach by imposing requirements on both developers and users of automated decision systems used in consequential decisions, including employment decisions, such as impact assessments, disclosures, governance controls, and opportunities for human review.

Although Senate Bill 7 did not become law and Assembly Bill 1018 has not been enacted, both reflect a consistent focus on disclosure, documentation, and oversight.

For employers, the significance of these proposals is not that they proposed a new theory of liability but that they identify a potential emerging consensus on compliance expectations. The key questions are practical: can the employer explain what tools are being used, what those tools do, what data they rely on, and how their outputs are incorporated into employment decisions? Where the answer is unclear, the employer may face exposure because the employer cannot substantiate how the “employer� (through an AI tool) made an employment-related decision.

These abstract issues can arise in concrete ways. If an automated screening tool excludes a category of applicants, the employer should be able to explain what criteria drove that result and why those criteria are job-related. If a productivity or monitoring tool evaluates employee conduct, the employer should be able to show that the tool’s outputs are reviewed in context and not applied mechanically. If a hiring or disciplinary decision relies on a score, ranking, or recommendation generated by a system, the employer should be able to explain how that output was generated and whether it was independently evaluated before action was taken. These documentation and oversight issues directly affect the employer’s ability to explain (and therefore defend) its decisions under existing anti-discrimination law.

Viewed through that lens, these recent legislative proposals point toward a framework centered on three core requirements:

1. Disclosure. Employers should expect increasing pressure to disclose when automated tools are used in ways that materially affect hiring, discipline, promotion, compensation, or other employment decisions.
2. Documentation. Employers should be able to identify what systems are in use, what those systems are designed to do, what data they rely on, and how their outputs are determined. This includes maintaining records sufficient to explain how a given tool factored into a specific employment decision.
3. Oversight. Employers should ensure that automated outputs are subject to meaningful human review, including the ability to evaluate and, where appropriate, override system-generated results rather than relying on them as determinative.

Practically, many organizations are not structured around these requirements. Automated tools are often deployed across different functions, including recruiting, performance management, scheduling, and operations — without centralized visibility. Vendors may control key aspects of system functionality, while employer-side documentation about how the tool operates and how it is used remains limited. Managers may rely on outputs without understanding their generation or any system limitations. That lack of coordination can compound compliance risk.

Addressing that risk does not require waiting for new legislation. Employers should conduct an internal inventory of automated tools used in employment decision-making, identify where those tools influence specific decisions, and ensure that their use is documented in a way that can be explained and supported. Employers should also assess whether there is meaningful human review before taking adverse action and whether vendor relationships provide sufficient information about how systems function, including any limitations or assumptions built into them. Finally, employers should evaluate whether they could clearly articulate, if required, how a particular tool was used in a particular employment decision.

The fact that Senate Bill 7 did not become law and Assembly Bill 1018 is currently inactive does not diminish their relevance. They provide a clear indication of where California is focusing its attention: not only on outcomes but on whether employers can demonstrate control over the tools they use. Employers that align their practices around disclosure, documentation, and oversight will be better positioned to meet those expectations under existing law and under whatever framework comes next.

The California Labor and Workforce Development Agency (LWDA) announced proposed regulations for the Private Attorneys General Act of 2004 (PAGA), which are open for public comment until March 23, 2026. The proposed regulations aim to standardize PAGA notice requirements, increase the opportunity for employers to cure PAGA violations, increase LWDA involvement in PAGA settlements, curb boilerplate notices, and govern high-volume filers.

These proposals build on and are consistent with the recent 2024 legislative reform to PAGA, which marked the first major reform of the law since its inception in 2004. The 2024 reforms instituted a standing requirement for all underlying Labor Code violation claims, expanded the types of violations that can be “cured� before or soon after litigation, and strengthened the LWDA’s oversight role.

What’s in the Proposed Regulations?

Requiring Standardized, Detailed PAGA Notices

The LWDA noted in its that the PAGA notices it receives “in many cases fail to satisfy the purpose of the statutory notice requirement.� To address these common shortcomings, the proposed regulations would standardize the notice for employees or their counsel to submit claims to the LWDA. This form notice would include several key categories: the employee’s job duties; the Labor Code sections the employee is alleging the employer violated; a “short and plain� statement of facts and theories; and the penalty section under which recovery is sought. Requiring this information would allow the LWDA to determine the allegations or do further investigation and would preclude problematic notices that merely “repeat the same or similar allegations in a conclusory, boilerplate, or frivolous manner.�

Reining in High-Frequency Filers

The Notice of Proposed Rulemaking also identified the issue of “high-frequency� and “vexatious� PAGA filers, citing that, from July 1, 2024, through June 30, 2025, just five law firms filed almost one-quarter of PAGA notices, with three law firms filing on average more than one PAGA notice per day.

For “high-frequency filers� (defined as any attorney or law firm filing 200 or more PAGA notices in a 12-month period), these proposed requirements include that the attorney or firm must attach a special cover letter to each notice disclosing high‑frequency status and that the employee must personally certify they reviewed and agree with the allegations.

For “vexatious filers� (defined as any person or attorney who has repeatedly filed PAGA notices that do not comply with legal requirements, including filing notices without sufficient facts), the proposed requirements include a pre-filing screening order — meaning that the LWDA will review each proposed PAGA notice filed by the vexatious filer, determine whether it complies with applicable statutory and regulatory requirements, and then provide notice by certified mail as to the determination. A filer would have notice and opportunity to be heard before receiving a designation as “vexations� and may petition to have the designation removed, but only after at least six months of the designation.

Clarity for Cure Procedures

The proposed regulations provide clarity and additional framework for the small employer and wage claim cure processes. For the small employer cure process, the proposed regulations clarify the timeline for and contents of cure proposals, describe the records and notice required for a cure conference and instruct employees how to dispute the sufficiency of a cure completion determination. The regulations also provide guidance for wage statement cures, including describing the information an employer must include with a wage statement cure notice.

Settlement Oversight and Notice

The proposed regulations would change how PAGA suits are settled. Of particular note, the proposed regulations would prohibit adding any alleged PAGA violations to a PAGA notice during the settlement process or after the parties have reached a settlement. The employee must submit a notice of the settlement to both the LWDA and all other PAGA claimants with actions pending against the same employer. Employees in overlapping cases could object to the settlement to the LWDA after the notice from the settling employees. The settling employer must verify the list of overlapping actions identified by the settling employee. The notice to the LWDA must provide the LWDA at least 45 days to review the settlement before any approval hearing.

What’s Next

The proposed regulations are open for public comment through March 23, 2026. A public hearing, which will accept written and oral comments, has been requested but not yet scheduled. We will monitor next steps as they arise.

Things just got much more expensive for Illinois employers! On Thursday, March 19, 2026, the that the Illinois Minimum Wage Law does not incorporate the federal ’s to compensable work requirements. That is, even if employees undertake activities before their shift start time (or after their shift end time) that are neither necessary nor indispensable to their work duties and responsibilities, the time spent conducting these pre- and post-shift activities must be included as “work time� and compensated so long as the employee is “required� to be on the employer’s premises.

As a quick refresher, the Portal-to-Portal Act (PPA), which amended the Fair Labor Standards Act (FLSA), excludes from “compensableâ€� work time so-called “preliminary or postliminaryâ€� activities that employees may be required to perform before clocking-in for the start of their shift or after clocking-out at the end of their shift. Such preliminary or postliminary activities often include things like commuting (walking from the facility entrance to the time clock), changing clothes, security screenings, and donning and doffing certain work-related protective equipment. These kinds of activities, although ancillary to performing compensable duties, are not compensable under the PPA (and therefore under the FLSA) unless they are “integral and indispensableâ€� to the employee’s principal duties. 

The (Wage Law) and its take a different approach. The Wage Law specifically requires that “all the time an employee is required to be on duty, or on the employer’s premises, or at other prescribed places of work, and any additional time the employee is required or permitted to work for the employer� is compensable time. Unlike its federal counterpart, the Wage Law does not contain express exceptions for preliminary or postliminary activities. The Illinois Supreme Court’s close reading of the Wage Law, its regulations, and its legislative history led it to conclude that, while Illinois courts may look to the FLSA and the PPA for interpretive guidance where those laws are “parallel� to the Wage Law, where there are “marked differences in their respective statements and exceptions,� the Wage Law and its regulations stand on their own.

For Illinois employers, this distinction is critically important, because certain activities that may not be compensable under the FLSA will, by contrast, be compensable under the Wage Law. The Illinois Supreme Court ruled that the Wage Law “explicitly encompass[es] all time that an employee is required to be on an employer’s premises.â€� This maxim holds true irrespective of the reason for needing to be on the premises. As one can imagine, this interpretation of the Wage Law opens the proverbial flood gates of wage and overtime claims related to security checks, logging in to computers, donning/doffing, walking from the entrance to the time clock, and the like, unless the Illinois legislature undertakes some “correctiveâ€� action with respect to this determination.¹

Employers should make efforts now to review their timekeeping procedures to ensure they know exactly when non-exempt employees may arguably be required to be on premises before or after a shift so that they are appropriately compensated for time spent performing any preliminary or postliminary activities. The Illinois Wage Law has a three-year statute of limitations, so fixing any existing problems now will help reduce liability going forward.

Massachusetts employers should take a closer look at how they structure employee bonus plans. A recent state court ruling in . serves as a cautionary tale. Vague or poorly defined bonus terms can result in those payments being considered “wages� under the Massachusetts Wage Act — a mistake that can carry mandatory treble damages and attorneys’ fees.

By way of background, the Massachusetts Wage Act (the Act) is known for its strict requirements for payment of “wages� and its automatic treble damages and payment of plaintiff’s attorney fees for violations. “Wages� generally include an employee’s earned salary, hourly pay, and certain commissions — amounts that are due in exchange for the employee’s regular labor or services. By contrast, contingent or discretionary compensation typically falls outside the purview of the Act, particularly where payment is conditioned on clearly defined criteria or continued employment through a specific date. But as Pres illustrates, simply labeling a bonus as contingent on “measured objectives� is not enough to keep it out of Wage Act’s purview.

Bonuses Without Clear Contingencies or Conditions May Be “Wages�

Pamela Pres was hired by Sensys Gatso USA, Inc. (SGU) in April 2021 as a Senior Accountant. Her written offer letter included an annual salary plus “four bonus payments totaling $9,000, against measured objectives.� SGU never defined “measured objectives� nor paid Ms. Pres any quarterly bonuses while she was employed. SGU nonetheless maintained that Ms. Pres’ bonuses were contingent and, therefore, were neither owed nor considered wages under the Massachusetts Wage Act.

The court concluded that, because SGU never defined the “measured objectives� tied to the bonuses, no clear contingency was ever created. Without such a condition, the bonuses were not discretionary — they were part of her regular compensation. In short, the unpaid quarterly bonuses constituted “wages� owed to Ms. Pres.

In reaching its conclusion, the court referenced the Massachusetts Supreme Judicial Court’s recent decision in Nunez v. Syncsort, Inc., which clarified the definition of “wagesâ€� under the Massachusetts Wage Act. In that case, the court held that the retention bonuses at issue were not “wagesâ€� because they were not paid solely in exchange for the employee’s regular labor or services. Rather, the bonuses represented additional compensation contingent upon the employee remaining employed through specific dates set by the company. 

By contrast, in Pres, the court found that Ms. Pres’s quarterly bonuses were “akin to ordinary payment from an employer to an employee in exchange for labor or services,� as the bonuses did not depend on any requirement beyond the work she performed in her regular role. Accordingly, the court found that these quarterly bonuses fell squarely within the definition of “wages� as articulated in Nunez and as protected under the Massachusetts Wage Act.

Lessons for Massachusetts Employers

The decisions from Pres and Nunez highlight several important considerations for employers in the Commonwealth drafting bonus provisions.

First, be clear about contingencies. Provisions of contracts are often construed against the drafter, so, if bonuses are intended to be contingent, employers should clearly define and communicate — both verbally and in writing — the specific conditions that must be satisfied for the bonus to be awarded. References to “measured objectives� without detailing the specifics can create a risk that the bonuses would be considered owed and thus “wages� under the Wage Act. For contingent bonuses to fall outside the definition of “wages� under the Massachusetts Wage Act, the contingencies must be clear and tied to quantifiable targets or articulated performance standards, so that the reasons for awarding (or withholding) the bonus are defensible.

Second, employers should not shy away from offering discretionary bonuses, provided that they are truly discretionary. Discretionary bonus plans should be drafted in a manner that avoids any implication that payment is owed unconditionally.

Employers should consult with legal counsel to assess their risk and ensure compliance.