Philadelphia employers should review their criminal background investigation practices and procedures in light of recent amendments to Philadelphia’s Fair Criminal Record Screening Standards Ordinance (FCRSS) that took effect on January 6, 2026, after being signed into law on October 8, 2025.
Multistate employers also need to keep in mind compliance with varying fair chance or ban-the-box laws in other jurisdictions as well, as many states have enacted some limitations on use of criminal histories in hiring decisions, including California, Colorado, Connecticut, the District of Columbia, Florida, Georgia, Hawaii, Illinois, Iowa, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New Mexico, New York, Oregon, Rhode Island, Texas, Vermont, Washington, and Wisconsin.
Who Is Covered?
The amended FCRSS applies to most private employers. Notably, the ordinance’s protections are not limited to employees and job applicants. Rather, it covers all individuals “employed or permitted to work at or for” a private employer within Philadelphia’s city limits, including individuals engaged as independent contractors, transportation network company drivers, rideshare drivers, and other gig economy workers. Throughout this article, “employee” is used as defined in the FCRSS, which includes all workers and independent contractors.
Key Changes and Requirements
The amendments to the FCRSS include the following significant changes and requirements:
- Notice of Background Checks. If an employer gives notice to prospective applicants of its intention to conduct a background check as part of the hiring process, the notice must indicate that consideration of the background check will be an individualized assessment based on the job’s specific requirements and the applicant’s specific record.
- Reduced Lookback Period. The lookback period for misdemeanor convictions has been reduced from seven years to four years, excluding any periods of incarceration. The lookback period for felony convictions remains at seven years.
- Summary Offenses. Employers cannot consider an applicant’s or employee’s summary conviction record, including minor infractions such as traffic offenses, criminal mischief, and disorderly conduct.
- Expunged or Sealed Records. Employers are prohibited from considering any expunged or sealed conviction record, even if the record appears on a criminal background check.
- Consideration of Rehabilitation. In undertaking an individualized assessment of an applicant or employee, an employer is required to consider credible evidence of the applicant’s or employee’s rehabilitation since conviction, including the person’s completion of a mental health or substance use disorder treatment program, completion of a job training program, completion of a GED or postsecondary education program, service to the community, work history in a related field since the time of conviction or incarceration, and active occupational licensure, commercial driver licensure, or other licensure necessary to perform the specific duties of the job.
- Notification of Provisional Decision and Rebuttal Right. If an employer intends to reject an applicant or employee based, even in part, on the person’s criminal record, the employer must notify the person in writing of the provisional decision and the basis for the decision. The employer also must provide the person with a copy of the criminal record used and a notice that includes: (i) a summary of the applicant’s or employee’s rights under the FCRSS; (ii) a statement that the employer will consider evidence of any error in the record and evidence of rehabilitation and mitigation if provided by the applicant or employee (with a list of the types of evidence that may be considered); and (iii) instructions on how the applicant or employee can provide such evidence or explanation. Before the employer may make a final determination, it must permit the applicant or employee at least 10 business days to provide evidence of an error in the criminal record report or rehabilitation or mitigation evidence.
- Anti-retaliation Clause. Employers are prohibited from interfering with a person’s rights under the ordinance. There is a rebuttable presumption of unlawful retaliation when an employer discharges, suspends, demotes, or takes other “adverse action” against a person within 90 days after the person engages in protected activity (i.e., exercises their rights under the ordinance). The presumption can be overcome if the employer can show that it took the adverse action for just cause and would have done so notwithstanding the protected activity.
- Excessive Supervision. “Adverse action” is defined to include any action that “is intended to harass” an employee in connection with work, “including excessive and unreasonable supervision” because of the employee’s criminal record. For example, employers are prohibited from placing an employee under different or heightened supervision compared to similarly situated employees unless the supervision is justified by an individualized assessment of the specific risks associated with the employee’s criminal history or conduct.
Advice for Philadelphia Employers
Employers who hire and employ workers in Philadelphia should evaluate and update their existing hiring and promotion processes and policies to ensure compliance with the amended FCRSS, as well as existing local, state, and federal laws. For example, employers may need to revise job postings, job applications, criminal background check authorizations, and adverse action notifications, as well as career websites. Additionally, employers should consider training recruiters, hiring managers, and other human resources personnel on the amendments to the FCRSS, including training on the permissible inquiries into and uses of an applicant’s or employee’s criminal history and how to conduct and document compliant individualized assessments.
If you have questions about how the FCRSS or any other federal, state, or local background check or fair employment law applies to your organization or need your policies reviewed for compliance, please reach out to your employment counsel.
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Troutman Pepper Locke Spotlight
2025 State AG Year in Review
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State attorneys general (AGs) are among the most active and influential regulators in the U.S., using broad statutory authority, political visibility, and growing technical knowledge to shape policy and enforcement across sectors. In 2025, they asserted their authority to shape the legal and regulatory environment across the U.S. through aggressive and coordinated action. Despite changing regulatory and political priorities, AGs continued to respond quickly to constituent concerns, tested new legal theories, and coordinated across state lines — often stepping in where federal oversight has receded or taken a different course. Their ability to act nimbly at the intersection of law, politics, and public policy ensures that state AGs will remain central players in the regulatory landscape in 2026 and beyond.
Single State AG News
Colorado AG Fines Cannabis Company for Violating Prior Settlement
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On January 5, 2026, Colorado Attorney General (AG) Phil Weiser announced that MC Global Holdings and affiliated persons and entities (collectively, MC) had been fined for allegedly violating the terms of a May 2025 assurance of discontinuance. The defendants, who are engaged in manufacturing, packaging, labeling, distributing, and/or selling industrial hemp products under the brand Vivimu, agreed to a fine of $575,000, of which $500,000 will be suspended as long as they comply with the terms of the new agreement.
Texas AG Settles Lawsuit That Cracked Down on COVID-Era Egg Prices
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On January 15, Texas Attorney General (AG) Ken Paxton announced that the state had settled its long-running lawsuit against Cal-Maine Foods, Inc. over the prices that the company charged for eggs in the first months of the COVID-19 pandemic. Notably, Cal-Maine avoided making any monetary payment as part of the settlement, instead agreeing to donate more than two million eggs to Texas food banks.
South Dakota AG Proposes Legislation to Authorize Seizure of Digital Currency
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On January 6, South Dakota Attorney General (AG) Marty Jackley announced a package of proposed legislation to modernize various aspects of the state’s criminal statutes. Among the proposals is a bill that would expressly authorize law enforcement to seize cryptocurrency as part of a criminal investigation. The measure reflects a growing concern that digital currency occupies a central role in much criminal activity and that legislation may be necessary in some jurisdictions to address those concerns.
AG of the Week
Raúl Torrez, New Mexico
Raúl Torrez is the 32nd attorney general (AG) of New Mexico, sworn in on January 1, 2023. Born and raised in Albuquerque, Torrez attended Harvard University, the London School of Economics, and Stanford Law School. He began his legal career in New Mexico, serving as an assistant district attorney, assistant attorney general, and later as Bernalillo County district attorney from 2017 to 2022. Torrez also served as a federal prosecutor and was appointed as a White House fellow and senior advisor in President Barack Obama’s Department of Justice, where he worked on reducing border violence, combating drug cartels, and addressing violent crime and domestic abuse in Indian Country.
As AG, Torrez has focused on fighting crime, protecting consumers, defending constitutional rights, and advocating for children. He has led efforts to increase transparency in the criminal justice system, including making police misconduct information public and piloting programs for demographic transparency. Torrez has filed numerous lawsuits to protect New Mexicans, including actions against corporate polluters, defending reproductive rights, and launching the state’s first Cold Case Unit to deliver justice for families. He has also taken on tech companies for enabling online abuse and led a bipartisan effort to modernize consumer protection laws.
Torrez resides in Albuquerque with his wife, Nasha, and their two children.
New Mexico AG in the News:
- Torrez announced proposed landmark legislation, the Artificial Intelligence Accountability Act (AI2A), which would create New Mexico’s first comprehensive framework for generative AI and synthetic media. It would require digital markers and provenance tools, empower the AG to enforce violations and impose civil penalties and enhanced sentencing, and aims to increase transparency and protect individuals from AI-enabled harm while preserving free speech and innovation.
- Torrez has sued three individuals and their network of companies for allegedly using shell corporations and bankruptcy to evade legal obligations to plug and remediate hundreds of inactive oil and gas wells in New Mexico, causing significant methane pollution, health risks, and costs to taxpayers.
- Torrez joined a coalition of AGs in suing the Trump administration to block Acting Consumer Financial Protection Bureau (CFPB) Director Russell Vought’s effort to completely defund the CFPB by refusing to request Federal Reserve funding, a move that would shut down the agency.
Upcoming AG Events
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January: AGA | Human Trafficking Training | Virtual
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February: RAGA | Victory Fund Retreat | Big Sky, MT
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February: DAGA | Policy Conference | San Francisco, CA
For more on upcoming AG Events, click here.
Troutman Pepper Locke’s State Attorneys General team combines legal acumen and government experience to develop comprehensive, thoughtful strategies for clients. Our attorneys handle individual and multistate AG investigations, proactive counseling and litigation, and manage ancillary regulatory issues. Our successful approach has been recognized by Chambers USA, which ranked our practice as a leader in the industry.
Our Cannabis Practice provides advice on issues related to applicable federal and state law. Marijuana remains an illegal controlled substance under federal law.
Generic and branded drug manufacturers may soon have long-awaited answers from the Supreme Court regarding skinny labeling practices. On January 16, the Supreme Court granted a generic company certiorari in Amarin Inc. v. Hikma Pharm. USA, Inc. following the U.S. solicitor general’s submission of its brief on skinny labeling.
Skinny labeling — the practice of carving out patented indications in an attempt to avoid inducing infringement — is a core issue in the case. Since last fall, industry players have been waiting with bated breath for the case to potentially provide clarification regarding the impact of advertising and other marketing activities on a generic manufacturer’s use of a skinny label to avoid induced infringement of method-of-treatment patents.
The Solicitor General’s Brief
The solicitor general’s brief emphasized the balance Congress struck in enacting the Hatch-Waxman Act: promoting access to affordable generic drugs, while ensuring that patent rights are protected. Consistent with the carve-out prescribed in 21 U.S.C. 355(j)(2)(A)(viii) (skinny labeling or section viii carveout), the solicitor general stressed that generic manufacturers should be able to market products for nonpatented indications without the threat of patent infringement liability.
The solicitor general urged the Supreme Court to grant certiorari and reverse the Federal Circuit’s decision denying the generic manufacturer’s motion to dismiss, arguing the complaint failed to identify specific, affirmative steps that a generic manufacturer took to induce health care providers to use the generic drug for the patented cardiovascular indication. The solicitor general argued the complaint was deficient because: (1) the label content is consistent with a lawful section viii carve-out, (2) advertising statements regarding bioequivalence and AB-rating statements informed health care providers of substitutability for approved indications, and (3) other marketing-type statements were in the context of press releases directed primarily at investors, not health care providers. According to the solicitor general, these statements alone do not satisfy the pleading standard for inducement.
In its response brief, the branded manufacturer maintained that it met the applicable pleading standard at the motion to dismiss stage and contended that the Federal Circuit’s decision poses no threat to section viii carve-outs. The brand manufacturer framed the issue as a factual question of intent based on marketing and advertising that went beyond the skinny labeling, arguing that there is no legal question warranting Supreme Court review and that its allegations must be accepted as true at the motion to dismiss stage.
Conclusion
Now that the Supreme Court has granted certiorari, we may get clarification on the effect of a generic manufacturer’s use of the skinny labeling procedure and how other marketing and advertising impact the inducement analysis.
The Treasury Department is entering 2026 with a more assertive and coordinated posture on both inbound and outbound capital. The administration’s first presidential divestment order of the year, the push to strengthen scrutiny of foreign ownership of U.S. agricultural land (with implications for infrastructure sited on farmland), and the codification and expansion of the outbound investment regime collectively underscore a more far-reaching national security framework for cross‑border investment. Taken together, these developments underscore the importance of incorporating Committee on Foreign Investment in the United States (CFIUS) and related national security reviews into a transaction from the outset.
#3: Agricultural Foreign Investment Disclosure Act (AFIDA) Rulemaking Sharpens Efforts to Promote National Security
Agriculture has become a recurring flashpoint in the national security debate, including at the state level, where several legislatures have proposed or enacted restrictions on land purchases by certain foreign buyers. Policymakers are increasingly focused on who ultimately owns or controls U.S. land located near military installations, critical infrastructure, and strategic food and energy assets.
Against this backdrop, on December 29, 2025, the U.S. Department of Agriculture (USDA) issued a proposed rule under 7 C.F.R. Part 781, Agricultural Foreign Investment Disclosure Act: Revisions to Reporting Requirements, to update reporting obligations under AFIDA. The proposal would expand USDA’s information collection in several key ways: (i) requiring more detailed disclosure of indirect foreign ownership, particularly in complex organizational structures; (ii) revisiting and potentially broadening the definition of a reportable “interest” to capture, for example, certain security interests and leases of less than 10 years; and (iii) enhancing the level of detail required to describe the property, including its location and characteristics, to ensure more accurate and actionable data.
The proposed rule does not change AFIDA’s underlying statutory definitions or core legal obligations. Foreign “persons” — including foreign individuals, foreign entities, foreign governments, and certain U.S. entities in which foreign persons hold a “significant interest or substantial control” — must still report when they acquire, transfer, or hold an interest in U.S. agricultural land. That obligation continues to apply to land used, or intended to be used, for forestry, or that is currently used or has been used within the past five years for farming, ranching, or timber production. Small parcels of land (10 acres or less) that generate no more than $1,000 per year in gross agricultural receipts remain outside AFIDA’s reporting requirements.
For CFIUS purposes, the implications extend well beyond traditional farming and timber assets. Enhanced AFIDA data is intended to support national security reviews and deepen USDA’s coordination with CFIUS, particularly in cases involving land near sensitive military, energy, and infrastructure sites. Foreign investors, especially those involved in energy transactions, are squarely implicated: utility‑scale solar and wind projects, transmission corridors, battery storage sites, pipelines, LNG facilities, and other major infrastructure investments all typically rely on long‑term property interests — fee ownership, leases, and easements — over significant tracts of land. As AFIDA reporting improves the government’s visibility into who ultimately controls that land, foreign‑backed energy and infrastructure projects located near bases, grid nodes, ports, and other critical facilities can expect closer scrutiny of both the property rights involved and the foreign investor profile, with CFIUS more likely to ask not just “who owns the company?” but “how trustworthy are these investors and what are their plans for this real estate?”
#2: A New Year, a New Presidential Divestment
On January 2, President Trump ordered HieFo Corporation, a Delaware company specializing in optical semiconductor chips, to divest certain semiconductor assets it acquired from EMCORE Corporation, following a CFIUS review that identified unresolved national security risks related to sensitive chip technology and potential foreign access to critical know‑how and supply chains. This divestment is not President Trump’s first since taking office last year. On July 8, 2025, he also ordered the unwinding of the acquisition of Jupiter Systems, a U.S. provider of display and visualization products used in sensitive environments, by Chinese-owned Suirui International Co., Limited.
Although HieFo is a U.S.-incorporated company, the divestment order finds that it is “controlled by a citizen of the People’s Republic of China” and therefore qualifies as a foreign person for CFIUS purposes. The transaction occurred in April 2024, when HieFo acquired certain EMCORE assets related to chips, including wafer fabrication capabilities, for only $2.9 million. The parties did not file the transaction with CFIUS, which came to CFIUS’s attention through its non‑notified monitoring team. HieFo must divest all interests and rights in the EMCORE assets, “wherever located,” within 180 days of the January 2 divestment order, unless CFIUS grants an extension.
Moreover, the divestment order imposes stringent interim controls — including restrictions on access to nonpublic technical information, facility and IT audits, and weekly compliance certifications to CFIUS. The case underscores CFIUS’s non‑notified enforcement posture: even relatively small, completed deals in sensitive technology areas like specialized chips can be forced to unwind post‑closing.
This recent action illustrates the importance of conducting a thorough CFIUS risk analysis pre-closing, at the earliest stage possible. Even U.S.-incorporated entities controlled by foreign nationals will be treated as foreign persons and subject to CFIUS jurisdiction. This action is part of a broader pattern of heightened scrutiny around semiconductors and advanced manufacturing, with strong emphasis on IP protection, supply chain security, and continued U.S. access to key technologies.
#1: Beyond CFIUS: The COINS Act and Outbound Investment Controls
Rounding out the landscape, Congress has now anchored outbound investment screening in statute. The FY 2026 National Defense Authorization Act (NDAA) incorporates the Comprehensive Outbound Investment National Security Act of 2025 (COINS Act), which codifies and amends the Department of the Treasury (Treasury)’s existing outbound investment rule found at 31 CFR Part 850 and first implemented via Executive Order 14105. We discuss the current rule here, as well as the Trump administration’s signaling early last year that it intended to expand this regulatory framework into new sectors here.
The existing outbound investment rule requires the Treasury Department to prohibit, or require notification of, certain investments involving U.S. persons and semiconductors, artificial intelligence, supercomputers, quantum information systems, quantum sensing, or quantum communications or networking technologies, when those investments involve “covered foreign persons” with a nexus to a “country of concern.” This existing regulatory framework was established by executive action under the President’s general authorities pursuant to the International Emergency Economic Powers Act (IEEPA).
The COINS Act codifies the outbound investment framework under the Defense Production Act and broadens its reach in some respects, while also expanding some of the exceptions. Perhaps the most significant change is that the new statute authorizes the definition of “covered foreign person” to be expanded beyond China, Hong Kong, and Macau to also encompass Cuba, Iran, North Korea, Russia, and Venezuela (the Maduro regime). While very little covered technology activity occurs in those countries or by their companies globally, this expansion will nonetheless require companies and investors to consider this broader scope in diligence, agreement terms, etc. The COINS Act also expands the types of foreign entities that are covered to include those that may be less than 50% owned by covered persons, but are nonetheless subject to their “direction or control,” presenting less of a clear line and a potential diligence challenge. Furthermore, it extends the existing rule to reach U.S. persons’ “knowingly directing” (e.g., as an officer or director, or senior employee) notifiable transactions by non-U.S. persons, adding to the current prohibition on U.S. persons’ knowingly directing prohibited transactions. On the technology side, the COINS Act authorizes an expansion of coverage, subject to executive branch policy determinations, to include hypersonic systems. The Act also calls for new exceptions to be added, including for de minimis activities (to be defined by Treasury) and secondary transactions (such as temporarily acquiring equity solely for the purpose of providing underwriting services). The COINS Act authorizes the creation of a nonexhaustive list of covered foreign persons that are subject to these investment restrictions (as well as a channel to seek removal from that list). Finally, it requires Treasury to set up a process to request nonbinding, confidential guidance about transactions that are envisioned, which will be a great relief for certain investors seeking clarity in unusual situations. There is other language in the statute that largely repeats what is already in the regulations, as well as some language that differs from the current regulations, but many have questioned whether these may have been congressional drafting errors. For now, the current regulations remain in force, and Treasury has 450 days from the enactment of the COINS Act to issue amended regulations.
Together with CFIUS, COINS signals a two‑way gate: inbound and outbound capital flows in critical technology sectors will be regulated as complementary national security tools.
Moving Forward in the New Year
For companies seeking foreign capital — particularly from investors with ties to countries of concern or in sensitive sectors (including certain investments in agricultural land) — these developments collectively raise the bar on diligence, structuring, and compliance.
At the same time, the COINS Act signals that outbound investment regulation is here to stay, with an enduring statutory framework, and that the direction of travel is an expanding regulatory scope. Going into the new year, deal parties should consider careful regulatory analysis when foreign parties are involved.
A recent federal indictment in United States v. Smith, et al. alleged a multiyear point‑shaving and illegal sports betting scheme involving dozens of current and former Division I men’s basketball players from at least 17 National Collegiate Athletic Association (NCAA) programs across multiple conferences.
Players are alleged to have accepted bribes — often in the range of tens of thousands of dollars per game — to intentionally underperform, particularly in the first half of games, while co-conspirators placed large wagers on their teams’ spreads at regulated sportsbooks. The indictment provides a detailed playbook of how fixers approach student‑athletes, how they move money, and how they exploit institutional blind spots. Colleges whose teams are named in the indictment are already navigating the fallout, but many others should treat this as a warning shot.
Smaller athletic programs and those at mid-major conferences may be especially vulnerable. The indictment repeatedly emphasizes that the bribes would “meaningfully supplement or exceed” athletes’ legitimate name, image, and likeness (NIL) opportunities. Players at programs with limited NIL support may be especially susceptible targets for fixers to approach about participating in these schemes. As a result, all schools, and particularly those in non-Power Five conferences, must have robust compliance programs and detailed plans for how to respond when these investigations arise.
Deploy an appropriate response team and conduct internal fact-finding.
Schools implicated in the Smith case or related investigations should quickly engage the appropriate stakeholders, including the office of general counsel, athletic department leadership, information technology and records management, communications, and campus police or public safety. Given the media attention on these cases, schools should establish a single point of contact for external inquiries, but ensure that only the general or outside counsel interface with law enforcement. Only counsel should receive and manage subpoenas, interview requests, and other inquiries from law enforcement, regulators, or the NCAA. While schools should avoid ad hoc statements by its employees, coaches and athletic‑department personnel should be equipped with approved talking points provided by counsel.
Schools should also issue litigation and records-hold notices to relevant coaches, administrators, and any potentially implicated players. Schools may need to preserve emails, texts, and other messaging app communications to the extent they are accessible under institutional policies and law. Law enforcement may also seek travel and expense records, ticket lists or practice access logs, and any betting integrity alerts received from the NCAA or third-party vendors during the relevant time period.
Schools also should conduct an internal investigation to assess the scope of any misconduct, and determine whether the institution should or must self‑report any potential violations of law, NCAA, or conference policy. Those efforts should be coordinated with the timing and scope of any ongoing law enforcement investigations, and careful attention must be paid to protect the institution’s privilege and confidentiality.
Under counsel’s direction, interviews of coaches, staff, and relevant players, as well as review of key communications and game film, may be necessary. As part of an internal investigation, the school should assess whether any student‑athletes are facing threats, coercion, or financial pressure from gambling associates, which can help identify and mitigate any ongoing or future issues. Schools also should ensure appropriate resources are provided to students and players, and provide additional safety measures for teams and athletes implicated, as necessary.
Implement proactive risk mitigation strategies.
Beyond the immediate crisis response, the indictment points to concrete steps that institutions can take to reduce their risk of being caught up in point‑shaving or illegal betting schemes.
Colleges should ensure their leadership — including the president, board, and athletic director — treat sports betting integrity as a core risk that could result in legal proceedings and criminal investigations. As Smith and the recent cases involving Major League Baseball (MLB) and National Basketball Association (NBA) gambling show, these are not just NCAA or league compliance issues, but an active enforcement priority for federal prosecutors.
As a result, schools should ensure their written policies include a clear and total prohibition on sports wagering by student‑athletes, coaches, and covered staff. That prohibition should specifically include a ban on providing inside information or influencing game outcomes, even if the player is not receiving compensation or personally benefiting from providing the information or influencing the game.
Players and staff should also receive education on these issues that is practical and scenario‑based. Schools should also emphasize that early self‑reporting of suspicious activity by players and staff is expected, and communicate the presence of a compliance hotline that can be used to escalate any concerns. Programs may want to consider whether a policy of leniency is appropriate for athletes who promptly self-report issues to incentivize candor.
Programs also should implement or tighten policies that govern third-party access to practices and games. The role of external skills coaches, youth basketball connections, and other team outsiders who have influence over current players should be scrutinized to ensure those with bad intentions are filtered out.
Finally, the nature of current NCAA transfer rules — that essentially allow immediate and unlimited transfers — also means that coaches’ relationships with players are developed more quickly and not as thoroughly vetted. Teams should incorporate integrity and sports‑betting briefings into initial compliance meetings with transfers, and provide them with confidential opportunities to disclose prior approaches from gamblers or fixers before they join the team. Outgoing players should also be provided exit counseling about ongoing legal and NCAA risks, including that misconduct can still be investigated after transfer or graduation.
Determine if you have a problem, even if there is no subpoena (yet).
Colleges increasingly receive sports betting integrity alerts or internal reports before any law enforcement contact. Programs should be vigilant and quickly investigate any alerts, or any repeated or unexplained statistical anomalies involving specific players. When that occurs, programs should immediately notify department leadership, compliance, and the general counsel, so that an appropriate investigation can occur before it escalates to a law enforcement issue.
The Smith indictment is a warning that point‑shaving and betting schemes can — and likely will — target a broad range of institutions. Now is the time for colleges and universities to reassess their betting integrity policies, close gaps in education and oversight, and ensure they are ready to respond promptly and credibly if their programs are implicated.
Even without wrongdoing at the institutional level, colleges can be drawn into complex, multiyear investigations and face real reputational, regulatory, and operational consequences. Institutions that implement robust policies, education, monitoring, and a thoughtful response framework will be better positioned with law enforcement, regulators, and the NCAA, when issues arise.
Troutman Pepper Locke is closely monitoring law enforcement’s focus on sports betting and related fraud schemes. If you have questions on how these issues impact your institution or wish to evaluate your existing compliance program, please do not hesitate to contact a member of our White Collar Litigation + Investigations team.
On December 19, 2025, Governor Kathy Hochul signed Senate Bill S5655 further amending New York’s Prompt Payment Act to render void any provision in a private construction contract exceeding $150,000 that requires retainage of more than 5% of the contract sum.[1]
More than two years ago, on November 17, 2023, Hochul signed Senate Bill S3539, which amended Section 756-c of the New York General Business Law to cap the amount of retainage that may be withheld from a contractor or subcontractor on a private construction contract of $150,000 or more at 5% of the contract sum.[2]
Before the December 19, 2025, amendment, owners and general contractors could effectively circumvent the retainage cap by relying on Section 756-a of the New York General Business Law, which allows the terms of a construction contract to supersede the Prompt Payment Act “except as otherwise provided in [the] article.”[3] Under the new legislation, however, any contractual provision that does not comply with the retainage requirements in Section 756-c is void and unenforceable.[4]
Notably, based on the plain language of the statute, the 5% retainage cap applies to the total contract sum, not to individual progress payments. As a practical matter, this still permits owners to withhold 10% retainage on progress payments for the first 50% of a contractor’s work, provided that retainage withholding is reduced to 0% on future progress payments once 50% of the project has been completed.
In light of these changes to New York’s retainage requirements — which took effect immediately and apply to all contracts entered into on or after December 19, 2025 — owners, contractors, and subcontractors should carefully review their construction agreements and consult experienced construction counsel before negotiating or revising retainage provisions. Troutman Pepper Locke attorneys are well positioned to advise clients on the complexities of prompt payment requirements nationwide and to negotiate construction contracts that protect their interests.
[1] 2025 NY Senate-Assembly Bill S5655, A5405.
[2] 2023 NY Senate-Assembly Bill S3539, A4167.
[3] General Business Law § 756-a.
[4] General Business Law § 757.
On January 15, 2026, the Environmental Protection Agency (EPA) published the long-awaited proposed rule Updating the Water Quality Certification Regulations (Proposed Rule), which, if adopted, would largely reinstate the previous Trump administration’s 2020 Clean Water Act Section 401 Certification Rule (2020 Rule). EPA’s proposal seeks to limit the scope of state-issued water quality certifications (WQCs) under Section 401 of the Clean Water Act (CWA) to water quality impacts associated with discharges authorized by federal agency actions. The Proposed Rule also addresses concerns raised by applicants for federal licenses and permits (including for hydroelectric projects, natural gas pipelines, and other energy and infrastructure projects) that certain states have overstepped their Section 401 authority to impose onerous terms and conditions unrelated to water quality and artificially extended the statutory time limits for issuing WQCs.
CWA Section 401 requires any applicant for a federal license or permit that may result in any discharge to waters of the United States (WOTUS) to obtain a state certification that “any such discharge will comply with the applicable provisions” of sections 301, 302, 303, 306, and 307 of the CWA — all of which relate to effluent limitations. States may impose conditions on such certifications, including to comply with “any other appropriate requirement of State law” as provided in CWA Section 401(d). Over time, however, many states have used this conditioning authority to address issues unrelated to water quality.
EPA’s Proposed Rule, similar to the 2020 Rule, would narrow the scope of WQC conditions and provide predictable timelines for projects to receive their WQCs. In so doing, the Proposed Rule rolls back significant portions of the current rule, issued in 2023 under the Biden administration (2023 Rule).
Following is an overview of key changes in the Proposed Rule:
- Scope of Certification – EPA notes the current 2023 Rule “provides States with sweeping authority to decide the fate of nationally important infrastructure projects, such as natural gas pipelines and hydropower dams, based on potentially speculative water quality impacts not linked to a point source discharge into waters of the United States.” To correct this, and consistent with the 2020 Rule, the Proposed Rule would scrap the 2023 Rule’s provision that the WQC can relate to the “activity as a whole” and instead limit state certifications to addressing discharges “from a point source into waters of the United States.” This, in turn, would prevent states from using Section 401 to address nonpoint source impacts, impacts to purely state waters that are not considered WOTUS, and non-water quality policy concerns such as land use, endangered species, and climate change. The preamble to the Proposed Rule describes in detail how limiting WQCs in this way is consistent with the legislative history and plain language of the CWA, relying heavily on the Supreme Court’s landmark 2024 decision in Loper Bright Enterprises v. Raimondo curtailing judicial deference to agencies’ statutory interpretations.
- Request for Certification – The Proposed Rule would create a uniform, national standard for what a permit applicant must submit in a “request for certification” to establish, with certainty, the start of the one-year statutory period for states to act on a WQC request. Conversely, the Proposed Rule would bar states from imposing their own “completeness” criteria that control when the clock starts — although they may still request additional information from applicants.
- Timing of Review – The Proposed Rule reiterates that the failure of a state to act on a WQC request within one year results in a waiver, while imposing several restrictions on states’ ability to extend the one-year certification deadline. Extensions would require the approval of the federal agency and only be allowed for specified reasons, and state certifying authorities would be barred from orchestrating withdrawal and resubmittal of requests to extend the one-year “reasonable period of time” cap — a maneuver that has long been criticized by applicants as gamesmanship that further facilitates the injection of non-water quality policy priorities into the certification process. Notably, the Proposed Rule does not foreclose another form of gamesmanship: denial of WQC applications without prejudice.
- Contents of Certifications – Among other changes, the Proposed Rule would require states to explain how each condition of a certification relates to a CWA effluent limitation and would mandate any WQC denial to cite the specific water quality requirement at issue, which may deter certain states’ efforts to prolong the WQC process by denying applications without prejudice. Notably, EPA explains that WQC conditions should be limited to “water quality requirements” defined as applicable provisions of sections 301, 302, 303, 306 and 307 of the CWA, and any applicable and appropriate state water quality-related regulatory requirements for discharges. In explaining what water quality-related requirements are “applicable and appropriate,” EPA expressly provides that it is not limiting state regulatory provisions to only EPA-approved provisions — although it requests comment on this point. The Proposed Rule continues to allow states to incorporate narrative water quality standards and other regulatory requirements that apply to point source discharges, declining to limit conditions to just “numeric water quality criteria.”
- Modifications – The Proposed Rule would allow states to modify a previously granted WQC only when the federal permitting agency and the applicant agree to the modification, including the content of that modification.
- Neighboring Jurisdictions – The Proposed Rule would streamline the process by which other states may object to a discharge that “may affect” their water quality under CWA Section 401(a)(2), including establishing a 60-day deadline for the other state to file an objection and a 90-day deadline for the permitting agency to act on a valid state objection.
In aggregate, the proposed amendments would create a WQC process that is more predictable, provides long-term certainty for WQC holders, and significantly constrains states’ ability to bootstrap other policy concerns onto their Section 401 authority. However, EPA notes in the preamble that if a state imposes conditions in a WQC that exceed the scope outlined in the 401 Rule, the remedy would be found in court. This means litigation of both the Proposed Rule and individual WQCs is likely to continue.
EPA did not include several regulatory changes suggested by industry during past comment periods in the Proposed Rule, indicating that there are still opportunities for further improvement before EPA adopts a final rule. For example, the Proposed Rule is silent on the issue of who (states and/or action agencies) has the authority to enforce WQC conditions incorporated into the federal license or permit, as well as the extent to which EPA or the federal permitting agencies can serve as a “gatekeeper” for WQC conditions that exceed the scope of CWA Section 401.
Comments on the Proposed Rule are due by February 17, 2026. For questions or to discuss its implications on specific projects and industries, we encourage you to contact Troutman Pepper Locke’s attorneys in our Energy and Environmental + Natural Resources practice groups.
State attorneys general (AGs) are among the most active and influential regulators in the U.S., using broad statutory authority, political visibility, and growing technical knowledge to shape policy and enforcement across sectors. In 2025, they asserted their authority to shape the legal and regulatory environment across the U.S. through aggressive and coordinated action. Despite changing regulatory and political priorities, AGs continued to respond quickly to constituent concerns, tested new legal theories, and coordinated across state lines — often stepping in where federal oversight has receded or taken a different course. Their ability to act nimbly at the intersection of law, politics, and public policy ensures that state AGs will remain central players in the regulatory landscape in 2026 and beyond.
Troutman Pepper Locke’s nationally recognized State AG team closely monitors developments in this complex and rapidly evolving regulatory landscape, serving as a trusted partner for clients seeking assistance with state AG enforcement, litigation, compliance, and government relations matters. The 2025 State AG Year in Review provides a comprehensive overview of the evolving regulatory landscape, highlighting key events and trends that defined the year. This report underscores state AGs’ focus on several sectors, themes, and industries, including (1) antitrust + enforcement; (2) artificial intelligence; (3) consumer financial services; (4) gaming; (5) health care + pharma; (6) marketing + advertising; and (7) privacy + cyber.
Our team is dedicated to helping companies navigate today’s challenges and anticipate tomorrow’s requirements, so they can focus on growing their business instead of managing regulatory risk. We hope this report serves as a practical tool in supporting those efforts.
To access the report, please click here.
Michael Sabino, an associate in Troutman Pepper Locke’s Bankruptcy + Restructuring Practice Group, was featured on the January 15, 2026 Turnaround Time podcast episode, “Distressed M&A Due Diligence: Legal, Financial and Operational Insights from the Front Lines.”
On the heels of the 44th Annual J.P. Morgan Health Care Conference, Troutman Pepper Locke attorneys Joe Kadlec and Emma Trivax discuss how AI, shifting regulatory scrutiny, and evolving investor oversight are reshaping health care transactions and preview what dealmakers should expect in 2026.