Registration for H-1B Lottery

U.S. Citizenship and Immigration Services (USCIS) has not yet announced dates, but the annual electronic registration process for H-1B cap-subject petitions should open in March 2025. The USCIS registration fee is now $215.  USCIS will select by random lottery process 85,000 petitions for the H-1B cap (65,000 for the general category and 20,000 for the U.S. advanced degree category). Applicants selected should be notified by March 31 and will have until June 30 to submit the H-1B petition.

Varnum’s immigration attorneys have started to collect information to prepare for the March registration period. Employers with employees on F-1 Optional Practical Training (OPT) or candidates requiring cap-subject H-1Bs should contact us to prepare for the registration.

Navigating the Tariff Landscape: Updates on U.S. Imports from Canada, Mexico and China

Navigating the Tariff Landscape: Updates on U.S. Imports from Canada, Mexico and China

On February 1, 2025, President Trump signed orders imposing a 25% tariff on imports from Canada and Mexico and a 10% tariff on imports from China. The tariffs are set to take effect on Tuesday, February 4.

Following a discussion with Mexico’s President Claudia Sheinbaum on Monday, February 3, President Trump announced a 30-day pause on the tariffs for Mexico. Canadian Prime Minister Justin Trudeau and President Trump announced that they had reached an agreement for a similar 30-day pause later that evening.

History

A president can raise tariffs without congressional approval in certain circumstances, such as if there is a threat to national security, a war or emergency, harm or potential harm to a U.S. industry or unfair trade practices by a foreign country. President Trump is using the International Emergency Economic Powers Act to impose these tariffs. Tariffs saw their first major resurgence since the 1930s during President Trump’s 2017-2020 term, and President Biden continued to use tariffs during his administration.

Tariffs are generally imposed as a percentage of a good’s value or as a fixed amount on a specific item when it crosses an international border. The tariff is paid by the importer. The increase in cost may cause a variety of effects such as:

  1. Importing companies finding alternate sources for the goods,
  2. Importing companies passing the price increase on to consumers,
  3. Exporting companies lowering the product price to maintain the importer’s business, or,
  4. Exporting companies relocating to other jurisdictions to avoid tariffs altogether.

Updated Tariffs

Mexico Tariffs

Following the 30-day pause referenced above, the new tariff will be at a rate of 25% on the value of the good, in addition to any other import fees. The order indicates that tariffs will cover all imported merchandise.

Canada Tariffs

Following the 30-day pause referenced above, the new tariff will be at a rate of 25% on the value of the good, in addition to any other import. The order indicates that tariffs will cover all imported merchandise other than “energy or energy resources” which will be subject to a 10% rate instead.

“Energy or energy resources” includes crude oil, natural gas, lease condensates, refined petroleum products, uranium, coal and critical minerals among other energy sources.

China Tariffs

The new tariff will be 10% on the value of the good, in addition to any other import fees. The order indicates that tariffs will cover all imported merchandise from China.

Client Guidance

The increased costs from tariffs may be challenging for many businesses and the following actions serve as a baseline for navigating the current landscape as you navigate these new tariffs.

  • Notify customers if increased costs of tariffs will be passed down to them and inform them that any tariff-related price hikes will be reflected on invoices. Failure to pay may result in supply disruption.
  • Review contracts with suppliers and customers to determine how the cost of the new tariffs will be allocated. Look for price-adjustment clauses, force majeure language or other relevant terms.
  • Begin negotiations with suppliers or explore sourcing options from different countries.
  • Importers should review import compliance policies.

Varnum’s attorneys continue to monitor these developments. If you have questions regarding tariffs or would like further guidance, please contact a member of Varnum’s Corporate or Tax Teams.

 

Geolocation Data in AI: Lessons from Niantic’s “Pokémon Go”

Geolocation Data in AI: Lessons from Niantic's "Pokémon Go"

The use of geolocation data in AI development is rapidly evolving, with its applications expanding across various industries. In this advisory, members of Varnum’s Data Privacy and Cybersecurity team examine a key AI use case: Niantic’s “Pokémon Go”. This case highlights critical considerations that businesses must address as they leverage vast amounts of data for new applications. These considerations include the protection of children’s data and the compliance requirements necessary to safeguard sensitive information.

What is “Pokémon Go”?

“Pokémon Go”, launched in 2016 by Niantic, is an augmented reality (AR) mobile game that overlays digital creatures on real-world locations. Players interact with the game by traveling to specific geolocated spots to capture virtual Pokémon, participate in battles and explore their surroundings. With over one billion downloads globally, “Pokémon Go” has gathered vast amounts of geolocation data as users traverse real-world environments.

What Did Niantic Do with This Data?

Recently, Niantic revealed that it has been leveraging data collected from “Pokémon Go” to develop a large-scale geospatial AI model. This model uses anonymized and aggregated location data to better understand geographic patterns and improve AR experiences. According to Niantic, the model not only aids in enhancing its existing products but also paves the way for broader applications in geospatial intelligence, urban planning and beyond. Niantic’s efforts underscore the value of real-world data in building sophisticated AI systems, potentially revolutionizing industries ranging from gaming to infrastructure.

Why Is This Valuable for Companies?

The integration of real-world geolocation data into AI systems offers significant advantages:

  1. Enhanced AI Models: Access to extensive geospatial data allows companies to train AI systems that better understand spatial relationships and human movement patterns.
  2. Improved Customer Experiences: Applications powered by such AI models can offer personalized and context-aware services, leading to increased user engagement and satisfaction.
  3. New Revenue Streams: Companies can monetize insights derived from location data across industries such as retail, real estate and logistics.

Special Considerations for Children’s Data

The ability to use data collected from a globally popular app highlights the potential for gaming companies and other businesses to pivot into data-driven AI innovation. However, leveraging such data raises critical privacy considerations. For example, when leveraging a mobile gaming application, companies should be cognizant of the fact that the game may be largely used by younger audiences, increasing the likelihood that the company will be collecting children’s data and be subject to regulations such as the Children’s Online Privacy Protection Act (COPPA). As such, companies must address several key issues to ensure compliance with privacy regulations and maintain public trust:

  1. Transparency: Companies should clearly disclose how geolocation data is collected, processed and used. For example, concise and accessible privacy policies tailored to both parents and children can help end users better understand how the company is leveraging the data collected through the use of the app and foster better understanding and trust.
  2. Consent: In many cases, companies should obtain explicit parental consent before collecting or processing data from children. This step is crucial to comply with regulations in the United States and similar laws globally. For example, COPPA not only mandates that a company obtain verifiable parental consent before collecting personal information from minors, but also requires that the parent is given the opportunity to prohibit the company from disclosing that information to third parties (unless disclosure is integral to the site or service, in which case, this must be made clear to parents).
  3. Opt-Out Mechanisms: Companies should give parents the opportunity to prevent further use or online collection of a child’s personal information. Providing users, especially parents, with the ability to opt out of data collection or usage for AI development ensures greater control over personal information.
  4. Protections and Guardrails: Companies should implement safeguards to prevent misuse or unauthorized access to children’s data. This includes anonymizing datasets, restricting data sharing and adhering to data minimization principles. Companies should also have mechanisms in place to allow parents access to their child’s personal information to review and/or have the information deleted.

As companies increasingly leverage tracking technologies, such as geolocation data or online behavior, to enhance their AI models, it is imperative to address privacy concerns proactively. Sensitive data, particularly information related to children, must be handled with care to comply with regulatory requirements and uphold ethical standards.

Niantic’s use of “Pokémon Go” data serves as a compelling example of how innovative applications of real-world data can drive advancements in AI. However, it also emphasizes the need for organizations to prioritize transparency, consent and robust data protection. By doing so, businesses can unlock the potential of cutting-edge technology while safeguarding user trust and meeting their legal obligations.

Varnum’s Data Privacy and Cybersecurity Team is well-equipped to help companies navigate these challenges, ensure compliance with evolving privacy laws and safeguard the rights and safety of younger users.

Unlocking Transparency: New DOL Guidance Clarifies Gag Clause Prohibition Rules Helping Health Plans Secure Their Claims Data

New DOL Guidance on Gag Clause Prohibition Rule

On January 14, 2025, the U.S. Department of Labor (DOL), Health and Human Services (HHS) and Treasury Department jointly issued new guidance in a FAQ format (Guidance) regarding compliance with certain provisions of Title I (No Surprises Act) and Title II (Transparency) of the Consolidated Appropriations Act, 2021. 

This Guidance provides important clarifications on the Gag Clause Prohibition rules that will help group health benefit plans ensure that the federal government’s transparency mandates are complied with and that requests for claims data from health insurance carriers are obeyed.

Background

The Gag Clause Prohibition, enacted under the Consolidated Appropriations Act of 2021 (CAA), includes a set of federal regulations and rules that were designed to promote transparency in the employee benefit and healthcare insurance industries. These regulations prohibit group health benefit plans and health insurance carriers from entering into contracts that restrict access to critical claims data and cost or quality information, or otherwise prevent group health benefit plans or insurance carriers from disclosing such claims data and information to plan participants, beneficiaries, or enrollees; plan sponsors (e.g., employers); or to a plan’s business associate, such as a third-party administrator (TPA) or vendor, consistent with applicable privacy regulations. 

Despite the clear mandates of the Gag Clause Prohibition rules, for the last four years, some health insurance carriers have repeatedly obstructed or refused to adequately comply with the federal transparency mandates. Specifically, some health insurance carriers who own healthcare provider networks and who essentially rent such networks to group health benefit plans have continuously refused to share a complete and accurate set of health claims data either with the plan sponsor or the plan’s business associates. 

Likewise, if a group health benefit plan engaged its own independent TPA with the expectation that they would separately contract with the health insurance carrier who owns the provider network the plan wants access to, the health insurance carrier would refuse to allow the TPA to share a complete and accurate set of health claims data either with the plan sponsor or the plan’s business associates.

In both instances, health insurance carriers would justify their refusal on the basis that their separate “downstream” agreements with their participating provider networks took precedence over the federal Gag Clause Prohibition rules. In essence, they argued their private contractual rights, and confidentiality or data restriction provisions stated therein, allowed them to sidestep the transparency obligations imposed by the federal government.

As a result, group health benefit plans, their sponsors, TPAs and vendors have been advocating for additional guidance or clarification on the federal transparency rules.  Some group health benefit plans and plan sponsors have even initiated lawsuits against carriers who refused to provide the plan and plan sponsor their claims data. See e.g., Trustees of the International Union of Bricklayers and Allied Craftworkers Local 1 Connecticut Health Fund et al v. Elevance, Inc. et al, Docket No. 3:22-cv-01541 (D. Conn. Dec 05, 2022); Owens & Minor, Inc. et al v. Anthem Health Plans of Virginia, Inc., Docket No. 3:23-cv-00115 (E.D. Va. Feb 13, 2023).

Updated Guidance

The new Guidance provides the following clarifications:

  1. All separate “downstream agreements” that restrict a group health benefit plan or health insurance carrier from providing, electronically accessing, or sharing critical claims data and cost or quality information with a plan sponsor, its participants or beneficiaries, or the plan’s business associates are prohibited.
  2. Likewise, owners of provider networks cannot use discretionary language or self-serving contractual provisions (e.g., only allowing de-identified claims data to be shared at “its discretion”) in their agreements with group health benefit plans, providers, TPAs or other service providers which have the practical effect of preventing disclosure of critical claims data, and cost or quality information data, to a plan sponsor or a plan’s business associates, consistent with applicable privacy regulations.
  3. Health insurance carriers and provider networks cannot place any limitation on the “scope, scale or frequency of electronic access to de-identified” claims data when requested as part of an audit or claims review.
  4. Lastly, most group health benefit plans are likely aware of the Gag Clause Prohibition through compliance with the annual attestation requirement. The Guidance makes clear that plan sponsors, when submitting their annual attestation of compliance, can essentially report any other vendor or carrier who refuses to remove a gag clause in any separate “downstream” agreements if the plan sponsor has taken steps to ensure their own compliance, including requesting the gag clause be eliminated.

Action Steps

In light of the new Guidance, group health benefit plans, plan sponsors and plan vendors should consult counsel to assist with obtaining plan claims data and cost or quality information from carriers, healthcare providers, TPAs or others with control over that data.  They should also review their contracts with those entities to help identify and eliminate gag clauses or other restrictive provisions that run afoul of the federal government’s transparency rules.

To the extent any group health benefit plan or plan sponsor receives pushback from a carrier or provider, this new Guidance can be leveraged to challenge the restrictive practices in place and refute any arguments by such insurance carriers and/or providers who may be attempting to sidestep the federal transparency rules. 

If you have any questions on how the new Guidance may affect your business, or if you need assistance in navigating these updates, ensuring compliance and/or enforcing your rights under the Gag Clause Prohibition rules, please contact your Varnum attorney.

SECURE 2.0: Guidance on Roth Catch-Up Contributions

The long-awaited guidance on the provisions of the SECURE 2.0 Act of 2022 (SECURE 2.0) impacting catch-up contributions has been issued and answers questions plan practitioners have been asking. SECURE 2.0 added a requirement that employees who made $145,000 or more in the previous year must designate any catch-up contributions as Roth (after-tax) deferrals.

Plans That Do Not Currently Permit Roth Contributions

The guidance does not require a plan to allow Roth deferrals. However, if the plan does not allow Roth deferrals, the limit on catch-up contributions for those who made $145,000 in the prior year is $0. To pass testing, a highly compensated employee (HCE) who is not subject to Roth catch-up contributions may need to be precluded from making catch-up contributions. This could happen if the top-paid group election is made for the definition of HCE or if a participant is an HCE because the employee is a 5% owner.

Compensation Limit

The guidance specifies that the $145,000 compensation limit is determined based on Federal Insurance Contributions Act wages (FICA wages) for the previous year. This excludes self-employment income, which is not FICA wages. The compensation limit is determined without prorating wages for employees hired midyear. Only wages paid by the common law employer responsible for the employee’s compensation are considered, regardless of whether employers are aggregated under the controlled group rules.

Deemed Roth Elections

After a participant is required to make Roth catch-up contributions, the plan may deem the participant’s pre-tax deferral election to be a Roth deferral election; the plan is not required to obtain a new deferral election. The participant must still be provided the opportunity to change the participant’s deferral election if the participant no longer wants to defer. If a participant makes Roth deferrals during the year equal to the catch-up limit, but before the participant’s deferrals have reached the catch-up limit, the plan may count the amount of the Roth deferrals toward the required amount of Roth catch-up contributions.

Roth Elections for All Participants

If Roth elections are permitted for some participants, they must be permitted for all participants. A plan may not require all catch-up contributions to be Roth contributions. Participants must have a choice between designating deferrals as pre-tax or Roth.

Correction Methods

The guidance provides correction methods for failure to follow the Roth catch-up contribution rules accurately. To follow the correction methods, the plan must have practices and procedures in place to prevent failures, including providing for deemed Roth election at the time catch-up contributions start for affected participants or when deferrals exceed the Code §415(c) limit. The methods and deadlines for correction vary depending on the failure.

Effective Date

For plans that are not collectively bargained, the rules apply for contributions in taxable years that begin more than 6 months after the final regulations are issued. If final regulations are issued before the end of 2025, the rules would apply beginning January 1, 2027. However, plans are permitted to apply these rules to taxable years beginning after December 31, 2023.

For collectively bargained plans, the deadline is extended to the first taxable year beginning more than 6 months after the final regulations are issued or, if later, the first taxable year beginning after the termination of the last collective bargaining agreement related to the plan that is in effect on December 31, 2025, excluding any extensions.

If you have a catch-up contribution failure or questions regarding catch-up contributions, please contact a member of Varnum’s Employee Benefits Team.

Michigan Flow-Through Entity Tax Election Deadline Extended

Michigan's Flow-Through Entity Tax Election Deadline Extended

For tax years beginning on or after January 1, 2024, eligible Michigan taxpayers who wish to make the flow-through entity (FTE) tax election now have until the last day of the ninth month after the end of their tax year. For example, a calendar year FTE must file the election with the department on or before September 30, 2025, for the 2024 tax year. 

Before the amendment in House Bill 5022, the same entity would have had to file its FTE tax election by March 15, 2024.

Taxpayers who make or have made the FTE tax election, and reasonably expect to owe tax for the year, are required to file quarterly estimated returns and make payments. House Bill 5022 includes the following situations in which elective taxpayers will not be subject to penalties and interests:

Penalties and interest will not be assessed for tax years beginning on or after January 1, 2024, as long as the taxpayer submits four equal payments that total:

  1. 90% of the taxpayer’s current-year liability, or
  2. 100% of the taxpayer’s previous year’s liability.

Penalties and interest will not be assessed for tax years 2022 and 2023 as long as:

  1. The preceding year’s tax liability was $20,000 or less, and
  2. The taxpayer submitted four equal payments totaling the immediately preceding tax year’s tax liability.

Penalties and interest will not be assessed for any quarterly estimated payment due before the taxpayer makes the FTE tax election for that tax year.

A member may claim credits on their personal or corporate tax returns for FTE payments. Under House Bill 5022, for tax years beginning after January 1, 2024, the member’s share of FTE tax is creditable if the payment was made before the filing date of the annual return. This is an extension from the previous cutoff of the 15th day of the third month after the close of the FTE’s tax year.

Varnum’s Tax Planning, Compliance and Litigation Team is available to assist and answer any questions about the FTE tax election.

 

Eleventh Circuit Invalidates FCC’s One-to-One Consent Rule

Eleventh Circuit Invalidates FCC's One-to-One Consent Rule

Varnum Viewpoints:

The Federal Communications Commission’s (FCC) proposed one-to-one consent rule under the Telephone Consumer Protection Act (TCPA) was recently invalidated by the 11th Circuit Court of Appeals. This ruling was issued immediately after the FCC announced a delay in the rule’s implementation until January 2026, or until the 11th Circuit completed its judicial review. For businesses involved in direct-to-consumer marketing, the future of the rule remains uncertain, with its timing and potential enforcement dependent on the regulatory direction of the new Administration’s FCC.

On January 24, 2024, FCC delayed the effective date of the TCPA one-to-one consent rule until January 26, 2026, or until the Eleventh Circuit concludes its judicial review of the rule and—if the court upholds the rule—the FCC issues a Public Notice specifying a sooner date (within 90 days of the court’s decision).

Hours later, the Eleventh Circuit issued its ruling, invalidating the rule on the grounds that the FCC had exceeded its statutory authority in its interpretation of “prior express consent.” The TCPA requires companies to obtain “prior express consent” before robocalling consumers. However, the FCC’s 2023 one-to-one consent rule expanded this requirement by mandating entity-specific consent and requiring that the subject matter of each call be logically and topically related to the interaction that prompted the consent. In striking down the rule, the Eleventh Circuit noted: “Rather than respecting the line that Congress drew, the FCC stepped right over it.”

The practical implications of this decision remain pending, as the FCC must now determine whether to appeal the ruling, substantially revise the rule, or pursue an alternative approach. Notably, the current FCC appears to have adopted a distinct regulatory posture from its predecessor. In its delay order, the Commission emphasized the substantial implementation burden on industry stakeholders while acknowledging limited public interest harms associated with postponement.

Presently, the one-to-one consent rule will remain ineffective until at least January 2026, or until the FCC issues a Public Notice addressing the rule’s effective date—in the event that the rule withstands additional legal challenges. The FCC is expected to announce its intended course of action in the near future, whether that involves pursuing an appeal, undertaking rule revision, or withdrawing the initiative altogether.

Contact a member of Varnum’s Data Privacy and Cybersecurity Practice Team to discuss how these changes impact your business and how to help ensure compliance.

Michigan’s Earned Sick Time Act – Legislative Update

Michigan’s Earned Sick Time Act – Legislative Update

There are only 36 days before the Earned Sick Time Act (ESTA) takes effect on February 21, 2025. Presently, both the state House and Senate have introduced bills to amend the ESTA. The House acted quickly convening a committee to hear testimony on House Bill 4002 and proposed amendments to the minimum wage law (HB 4001). Varnum’s Labor and Employment team has been closing monitoring the progress of these amendments.

Varnum attorney Ashleigh Draft testified before the House Select Committee on Protecting Michigan Employees and Small Businesses in support of House Bill 4002. To date, the Senate has not yet convened a committee to discuss the Senate Bill. A summary of both the House and Senate bills follow:

House Bill (HB 4002)

The House Bill includes crucial amendments to make the Act more workable for both employees and employers, including:

  • Clarifies the definition of employees eligible for the benefits of the ESTA. Independent contractors, out of state employees, seasonal workers (working 25 weeks or less in a year), part-time employees (working 25 hours or less per week) and variable hour workers are not eligible for benefits under the Act.  
  • Exempts small businesses (employers with less than 50 employees) from ESTA.
  • Employers may limit increment of use to 1 hour.
  • Retains the accrual method of 1 hour for every 30 hours worked, with usage capped at 72 hours per year, and limiting carryover to 72 hours.
  • Recognizes that employers that frontload 72 hours per year are in compliance with the Act and do not need to carryover time from one benefit year to the next.
  • Permits employers to provide a single PTO bank that can be used for all purposes including ESTA. 
  • Allows employers to require employees to take ESTA time concurrently with FMLA, ADA or any other applicable law.

Senate Bill (SB 15)

The bill pending in the Senate proposes the following amendments:

  • Defines small business as an employer with fewer than 25 employees.
  • Allows small businesses to frontload 40 hours of paid and 30 hours of unpaid earned sick time at the beginning of the year.
  • Employers may limit increment of use to 1 hour.
  • Retains the accrual method of 1 hour for every 30 hours but permits frontloading of 72 hours as an alternative to the accrual method, while retaining the carryover from year to year. 
  • The amount of accrued sick time that an employee may carry over from year to year may be limited to 144 hours if the employer pays the employee the value of the employee’s unused sick time before the end of the year. If the employer does not pay out the value of the employee’s unused sick time, carryover may be capped at 288 hours.

Varnum’s Labor and Employment Team continues to monitor action on the ESTA. If you would like to support HB 4002, or otherwise voice your opinion on the Earned Sick Time Act, the Michigan Chamber of Commerce provides a link to help connect with your elected representatives.