BENEFITS DIGEST

Littler examines Donald v. Toppan, where a Georgia federal court let FMLA interference and retaliation claims proceed past summary judgment after a 15-person reduction in force swept in a production supervisor on intermittent FMLA leave to care for his wife. In her September 28 [order](https://digest.theinnerfirm.com/docs/donald-v-toppan-order-2026-09-28.pdf), Chief Judge Leigh Martin May cited emails suggesting that leave influenced the decision and the company’s failure to explain why it retained another employee in a senior-operator job Donald was qualified to perform. The disability-association, race and sex claims were dismissed, and surviving summary judgment is not a finding that the layoff was retaliatory. Littler’s lesson is to document selection criteria and apply them consistently, because approving leave for years does not inoculate the termination decision.

Fall is benefits shopping season, and Warner Norcross’s Brandon Cross and Stephanie Grant warn employers about a pitch that keeps coming around. Wellness indemnity programs promise a free benefit in which employees pay premiums pretax, collect fixed cash payments for completing wellness activities or getting preventive care, and everyone saves on employment taxes. The IRS has repeatedly said the math fails. When premiums are paid pretax, cash wellness payments that don’t reimburse qualifying, unreimbursed medical expenses can be taxable wages subject to FICA, FUTA and withholding. Paying the premiums entirely after tax can change the result. The problem is the specific combination being sold, pretax funding plus supposedly tax-free cash regardless of expenses, which can leave employers and employees with an unpaid tax bill.

Governor Newsom signed most of the session’s employment bills and vetoed AB 1940, which would have added perimenopause, menopause and related conditions to FEHA’s definition of sex; a companion trigger provision in AB 2563 stays dormant as a result. For benefits and leave practitioners the headline is SB 1149, which extends California’s five days of job-protected bereavement leave to one “designated person” of the employee’s choosing per 12-month period, beyond the current family definition. AB 1697’s fix to the stay-or-pay law, which pushes its restrictions to contracts signed on or after January 1, 2027 and adds exceptions, is already in effect. The AI cluster deserves attention on its own. SB 947 bars using an automated decision system as the sole basis for discipline or termination, AB 1883 bans emotion recognition and neural data collection in workplace surveillance, and SB 951 requires Cal/WARN notices to flag layoffs substantially caused by AI. Most provisions take effect January 1, 2027, with the automated-decision rules operative July 1, 2027.

The Pension Benefit Guaranty Corporation has temporarily waived a year-end report triggered by shrinking active participation in a pension plan. The test generally looks for a drop below 80 percent of the start-of-year count, after adding back departures already reported separately as single-cause events. Morgan Lewis notes the trigger has been tripping most often in frozen plans with few remaining active participants. Technical Update 26-1, issued September 18, covers reporting deadlines on or after that date and lasts until an amended final rule takes effect. Reporting rules for layoffs, shutdowns and other single-cause reductions remain in place, along with their existing exceptions. PBGC says attrition reports rarely flag meaningful risks and cost more to prepare than the information is worth.

The federal agency that insures private-sector pensions has temporarily waived one report triggered by a decline in active plan participants. [Technical Update 26-1](https://www.pbgc.gov/prac/other-guidance/tu/temporary-reporting-waiver-attrition-events) suspends the attrition-event report, a year-end filing due when a plan's active participation falls sharply, after the PBGC concluded the reports seldom uncover anything needing scrutiny and mostly burden frozen plans with few active workers. Milliman's alert fills in the context: reportable events generally go to the agency on Form 10 within 30 days, small and well-funded plans were often exempt from this report already, and the waiver covers deadlines on or after September 18, lasting until a final rule takes effect. What does not change matters as much. Reports for single-cause reductions, a layoff, shutdown, or restructuring that cuts more than 20 percent of active participants at once, are still required, along with every other reportable event.

Whether a severance program is an ERISA plan decides where and how disputes over it get fought, and John Deere is arguing its program is not one. Two former employees claim they were entitled to payments from the program the company offered in its 2024 layoffs, a one-time lump sum based on years of service and pay. Deere's motion to dismiss rests on the Supreme Court's Fort Halifax decision: a single payment from a single event, calculated with fixed inputs, requires no ongoing administration and so is not an ERISA plan at all. The company also argues neither plaintiff qualified regardless, one because he was terminated individually rather than in a layoff, the other because he resigned, signed a waiver in exchange for three months of pay, and kept the money. This is a motion, not a ruling. But sponsors design severance on both sides of the Fort Halifax line, sometimes deliberately, and the case is a reminder that the design choice controls everything from claims procedures to which court hears the fight.

Every New Jersey separation now gets reported to the state, whether or not the employee files for unemployment. Employers must report resignations, terminations, retirements, and layoffs within seven days through the state labor department's new Employer Response Portal. The obligation comes from a 2022 law that took effect in 2023, but enforcement waited for the state to build the system, and it is separate from and in addition to the BC-10 form given to departing employees. Coverage is broad: any employer with a single New Jersey-based employee is generally in, including out-of-state companies. Access runs through the state's Employer Access System, which requires registering with the company's EIN and an authorization code. HR and payroll teams with New Jersey headcount should build the seven-day report into their offboarding checklist now.

Patients have sued Novo Nordisk and Eli Lilly, alleging that the companies failed to warn about a rare optic-nerve condition that can cause sudden, sometimes permanent vision loss. The consolidated proceeding in the Eastern District of Pennsylvania had more than 130 cases as of this summer. The companies deny the allegations and dispute causation. Separately, Europe's medicines regulator classified the condition, NAION, as a very rare side effect of semaglutide in 2025. It estimated about one additional case per 10,000 people treated for a year.

A layoff can quietly trigger a 401(k) problem. If employer-initiated turnover hits 20% in a plan year, the IRS presumes a partial plan termination, and everyone affected becomes fully vested in employer contributions no matter what the vesting schedule says. Troutman warns that a multi-year phased RIF can stretch the measurement period, that some voluntary quits connected to the RIF count too, and that missing one of these invites participant lawsuits and IRS or DOL audits. Worth reading before the workforce decision is final, not after.

As companies across major sectors continue to announce significant reductions in force, Troutman Pepper Locke examines the retirement plan consequences that can follow a shrinking workforce, and the compliance issues plan sponsors should be watching before the next round of cuts.

The fifth installment of the firm's executive-pay series covers the contractual frame from hiring through departure: employment agreements, severance design, and the Dodd-Frank clawback rules now binding on all listed companies.

New Jersey now requires employers to report every employee separation to the state DOL through a new portal, under a 2023 mandate taking effect. Mostly an HR-operations item, with severance and COBRA administration touchpoints.

Judge Gilliam granted preliminary approval of a $13 million settlement resolving ERISA fiduciary-breach and benefit-denial claims by 220 former Atmel employees over severance under the Atmel U.S. Severance Guarantee Benefit Program: $9.5 million to the class plus $3.5 million in fees, reported to deliver 80 to 100 percent of unpaid severance with interest.

The fifth installment in the firm's executive compensation series turns to employment agreements, severance, and clawback provisions, following earlier parts on equity compensation, deferred compensation, Section 409A compliance, and the Section 280G golden parachute rules.

What employers should know about key developments this week: • Severance Agreement Overhaul: The No Severance Ultimatums Act, awaiting Governor Kathy Hochul’s signature, would remove the current age-based restriction, extend a 21-day review period plus a seven-day revocation period to all employees.

Bonus, equity, and severance arrangements should be carefully coordinated with applicable tax rules, benefit plans, and corporate governance requirements to avoid unintended consequences.

What employers should know about key developments this week: Severance Agreement Overhaul: The No Severance Ultimatums Act, awaiting Governor Kathy Hochul’s signature.

Section 409A of the Internal Revenue Code (Section 409A) imposes strict rules governing the timing of deferred compensation payments, such as when and under what circumstances such payments can be made.

On June 29, 2026, the U.S. District Court for the District of Delaware affirmed the disallowance of federal WARN Act claims asserted against Yellow Corporation by the International Brotherhood of Teamsters and other unions.