This week, we are catching up on developments from the Department of Labor for determining whether someone is an independent contractor or employee, a nomination to restore a quorum at the EEOC, continued cuts to K-12 education grants, and guidance on implementing the Administration’s Accreditation EO. In addition, we review some of the recent oral arguments in front of the U.S. Supreme Court in cases that may have a major impact on public education.
Additional information regarding these developments can be found below.
- The U.S. Department of Labor’s Wage and Hour Division Issues Guidance on Independent Contractor Under the FLSA;
- The Trump Administration Halted $1 Billion in Funding for School Mental Health Grants;
- SCOTUS Hears Oral Arguments that Could Have Big Impacts on Public Education;
- Department of Education Issues Updated guidance on Trump’s Higher Education Accreditation Executive Order; and
- Trump Nominates a Third EEOC Commissioner, Potentially Restoring Quorum for the Commission.
1. The U.S Department of Labor Issued Guidance on Independent Contractor Misclassification Enforcement – by Karen Villagomez
On May 1, 2025, the U.S. Department of Labor’s Wage and Hour Division (“WHD”) issued guidance to its field officers on determining employee or independent contractor status under the Fair Labor Standards Act while the 2024 Biden-era rule is under review. The WHD will now base its enforcement actions on the criteria in Fact Sheet #13 (July 2008) and the reinstated Opinion Letter for determining whether someone is an employee or independent contractor.
Fact Sheet #13
Fact Sheet #13 states that a worker must be economically dependent on the employer to be considered an employee, rather than operating independently. It identifies the following factors:
- The extent to which the services rendered are an integral part of the principal’s business;
- The permanency of the relationship;
- The amount of the alleged contractor’s investment in facilities and equipment;
- The nature and degree of control by the principal;
- The alleged contractor’s opportunities for profit and loss;
- The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor;
- The degree of independent business organization and operation.
Notably, the WHD will not consider the worker’s location, formal employment agreement, license, or form of payment in its analysis.
This guide introduces a seventh factor that explicitly considers whether a worker maintains a separate business structure and operates independently. It also emphasizes entrepreneurial characteristics, including the worker’s ability to seek other clients and build a business beyond a single working relationship.
Opinion Letter
Opinions letters are official written interpretations provided by the DOL in response to specific inquiries about how the FLSA and other labor laws apply to a particular set of facts. The reinstated opinion letter analyzes whether service providers working through a digital service platform are employees or independent contractors. The DOL concludes that service providers are properly classified as independent contractors due to their significant autonomy, economic independence, and lack of control from the platforms.
Litigation Status
Several lawsuits challenging the 2024 Biden-era Rule are on hold in federal court while the DOL considers a new standard for determining FLSA employee status. Although the DOL’s WHD will not apply the 2024 Rule in its FLSA investigations, the 2024 Rule remains in effect for purposes of private litigation.
Next Steps
Employers must continue to consider both sets of rules when evaluating employment relationships as well as relevant state laws. We will continue to monitor these developments closely.
For questions related to employee and independent contractor status, please contract a Franczek attorney.
2. The Trump Administration Halts Funding for School Mental Health Grants – by Brittany Begley
The Trump Administration recently announced that it would cease funding approximately $1 billion in grants that supported mental health professionals working in schools throughout the country. Recipient schools have been using these grants to employ critical mental health support staff including school counselors and social workers. Through a letter issued by the United States Department of Education at the end of April, impacted schools were informed that such funding violates “the letter or purpose of Federal civil rights law.”
As context, these federal funds were initially granted as a result of the Bipartisan Safer Communities Act which was passed in 2022 under the Biden Administration in response to the school shooting that took place in Uvalde, Texas. The Act set aside federal funds directed to schools specifically for the purpose of addressing student mental health. According to the Department of Education letter, these grants, despite being multi-year, will conclude at the end of the schools’ current budget period. The letter also informs schools of their right to request reconsideration of the Department’s decision, providing an address to which to address such requests.
Currently, ISBE has not indicated its response, if any, to the Federal government’s actions in withholding these funds. However, we will continue to monitor this situation as it develops. Please reach out to a Franczek attorney if you have any questions related to such correspondence from the Department of Education.
3. SCOTUS Hears Oral Argument Regarding Money Damages for IEP Violations and Funding for Religious Schools – by Kristen Kinast and Hailey Golds
The U.S. Supreme Court recently heard oral argument in two cases that may have significant impact on public schools going forward: A.J.T. v. Osseo Area Schools, Independent School District No. 279, which considered whether parents alleging special education violations can also receive money damages for the same IEP-related issues under the Americans with Disabilities Act (ADA) and Section 504 of the Rehabilitation Act (“Section 504”); and OK v. Drummond, which considered a constitutional challenge to public funding for religious charter schools in Oklahoma.
A.J.T. v. Osseo Area Schools
On April 28, 2025, the Supreme Court heard oral arguments from the parties in A.J.T. v. Osseo Area Schools. Specifically, the Court considered whether parents must establish a school district acted in “bad faith” or “gross misjudgment” to recover money damages from a district for failure to accommodate under the ADA or Section 504.
The plaintiff, A.J.T., is a student with epilepsy whose seizures prevented her from attending school in the morning, and instead attended school in person from 12:00 p.m. to 4:15 p.m., ninety-five minutes past the regular school day but one hundred and thirty-five total minutes less than the typical school day of six and a half hours. In addition to this modified school day ,, Osseo School District (“Osseo”) provided the student with one-on-one and summer instruction, special education services, and an aide while in school. Osseo denied A.J.T.’s parents’ requests for additional in-home evening instruction, however, which would have given her the six and a half hours of instruction provided to other students. Osseo asserted that it could not provide A.J.T. with evening instruction because state law does not require the district to provide both in-school and at-home support, and that providing in-home evening instruction to A.J.T. would create an unwanted precedent.
In 2020, A.J.T. successfully filed a claim against Osseo in a Minnesota administrative court under the Individuals with Disabilities Education Act (“IDEA”), resulting in the court finding that A.J.T. had not been provided with a free appropriate public education and Osseo being required to provide A.J.T. with in-home instruction from 4:30 until 6:00 p.m. In 2021, A.J.T. also filed suit in federal court against Osseo under the ADA and Section 504 claiming that Osseo discriminated against A.J.T. because of her disability based on the same IEP-related issues. Unlike the IDEA claim, however, the ADA and Section 504 claims were not successful. The court found, and the Eight Circuit Court of Appeals agreed, that the ADA and Section 504 are only violated if school officials act with “bad faith or gross misjudgment,” which Osseo had not demonstrated in this case. A.J.T. appealed this decision to the U.S. Supreme Court, which agreed to hear the case. On appeal, A.J.T. argued that the lower courts should have applied a “deliberate indifference” standard, which is the standard applied for other discrimination claims.
The Supreme Court narrowly defined the question presented as “Whether the ADA and Rehabilitation Act require children with disabilities to satisfy a uniquely stringent ‘bad faith or gross misjudgment’ standard when seeking relief for discrimination relating to their education.” Osseo had previously argued that discrimination claims based on a district’s development of an IEP are not typical discrimination claims, and that applying a lower “deliberate indifference” standard for these types of claims would greatly increase liability for a school district. At oral argument, the attorney for the school district expanded its position and argued that the higher “bad faith or gross misjudgment” standard should be applied broadly to individuals seeking financial relief under all discrimination statutes, not just the ADA and Section 504, and not just in the educational settings. This position prompted a line of questioning from the Court as to whether the district’s arguments violated the Supreme Court’s own administrative rules that require respondents to address certain legal questions in advance of oral argument.
The ruling in this case may have major implications for the Americans with Disabilities Act and Section 504 of the Rehabilitation Act. A finding in favor of the parents that applies the lower “deliberate indifference” standard to discrimination claims based on a student’s IEP could expose school districts to increased financial liability for free appropriate public education violations.
OK v. Drummond
On April 30, 2025, the Supreme Court heard arguments in OK v. Drummond considering whether barring religious organizations from operating charter schools is constitutional.
A religious institution, St. Isidore of Seville Catholic Virtual School, sought approval from Oklahoma to form a charter school. Initially, Catholic Virtual School obtained state approval, but then the Attorney General for the state of Oklahoma brought suit asserting that approving the charter, and therefore providing state funding to the school, violated provisions of the Oklahoma and United States Constitutions and the Oklahoma Charter Schools Act. The AG argues that the law prohibits the state from using public money for the benefit of any religious institution.
The Oklahoma Supreme Court, in 6-2 decision, found that the Catholic Virtual School is a governmental entity and state actor because it is created by and overseen by a state entity, the Oklahoma Statewide Virtual Charter School Board . As a state-created entity, charter schools also receive many of the same legal protections and benefits as their government sponsor. In addition, the Catholic Virtual School was found to provide the public function of educating students. As a result, the court found that certifying the charter of the Catholic Virtual School, and making it a state actor, violated the Establishment Clause of the U.S. Constitution as well as the Oklahoma Constitution and Charter Schools Act.
The Catholic Virtual School argued that denying the school a charter violates the Free Exercise clause of the U.S. Constitution because it discriminates against the school on the basis of its religious foundation. The Oklahoma Supreme Court rejected that argument, finding that previous case law relied on by the School and Board concerned private entities, whereas the Catholic Virtual School would be a state actor.
Before the Supreme Court, Justices Roberts and Kavanaugh seemed sympathetic to the argument that the Catholic Virtual School has been subject to religious discrimination, comparing the school’s focus on religious instruction to other institutions’ focus on Native American culture or STEM education. Justices Sotomayor, Jackson, and Kagan, however, pointed out that a publicly funded, religious school would be able to set admissions policies, mandate Catholic religious practices, and implement employment policies based on religious teachings, all while receiving federal funds. Justice Gorsuch questioned whether simply providing funds to a charter school was a sufficient reason to find that the school is transformed into a state actor, or whether the School remained a private entity.
The Court’s decision in OK v. Drummond could alter the landscape for public funding of private religious schools.
Stay tuned for our Supreme Court review and webinar in July, where we will continue to provide updates on these and other important Supreme Court cases as the Court issues its decisions in the coming months.
4. Department of Education Issues Updated guidance on Trump’s Higher Education Accreditation Executive Order – by John Anders
On April 23, 2025 the Trump Administration issued an executive order intended to reshape the accreditation landscape and recognize new accreditors for higher education institutions while targeting existing accreditor initiatives focused on diversity, equity, and inclusion efforts. The U.S. Department of Education has since issued a press release announcing a Dear Colleague Letter (“DCL”) meant to provide guidance in alignment with the executive order.
The May 1 press release and Dear Colleague Letter provide guidance to institutions of higher education on changing accrediting agencies. The letter revoked a pre-clearance process previously established by two Dear Colleague Letters in July and September 2022 and lifted the Office of Postsecondary Education’s October 29, 2024, pause on accepting and reviewing applications for initial recognition of new accreditors.
According to the Dear Colleague Letter, neither the law nor regulation “dictate a robust or onerous process” for obtaining Department approval for a change in accrediting agencies. The Department, therefore, stated it would “conduct expeditious review of applications received except in rare cases where an institution lacks a reasonable cause for making a change.” The DCL further suggests that Department guidance should “allow institutions the freedom to develop unique partnerships with accrediting agencies,” citing exemplary reasons to change accreditors, which included finding an accreditor better aligned with a religious mission, a shift in academic program offerings, compliance with state law, a desire to set stronger academic standards, or “any other justifiable desire.”
The DCL states that the Department will determine an institution’s cause not to be reasonable if the institution has had its accreditation withdrawn, revoked, or otherwise terminated for cause in the preceding two years or has been subject to a probation, show cause order, or suspension order during that same time period. The Department provided exceptions to these disqualifying circumstances if it determines the prior agency “did not provide the institution its due process rights,” the agency applied its standards inconsistently, or if the adverse action is deemed to be the result of the agency’s “failure to respect an institution’s stated mission, including its religious mission.”
According to the Department, the updated guidance “establishes a simple process that will remove unnecessary requirements and barriers to institutional innovation.” The Department’s guidance will open the door to new accreditors and relieve much of the federal scrutiny of institutions’ decisions to choose new accreditors. It also suggests a shift of responsibility onto States and accrediting agencies to uphold program integrity.
5. Trump Nominates Brittany Panuccio as Third EEOC Commissioner – by Hailey Golds
On May 6, 2025, President Trump nominated Brittany Panuccio to become a commissioner at the Equal Employment Opportunity Commission (“EEOC”). Panuccio is currently an Assistant U.S. Attorney in the Southern District of Florida, and she previously worked for the Department of Education, Department of Justice, and U.S. Court of Appeals.
Panuccio’s nomination will fill a role that has been vacant since, as we previously reported, President Trump removed two commissioners, including sitting chair Jocelyn Samuels. Samuels has since filed a lawsuit in federal court in the District of Columbia challenging her removal. President Trump’s action left the five-member panel of EEOC with only two members, Acting Chair Andrea Lucas, appointed by Trump, and Commissioner Kalpana Kotagal, appointed by President Biden to a term that is set to expire in July 2027. If Panuccio is approved, the Commission will once again have a quorum of 3 members, meaning that the agency will be able to institute changes to its pre-existing regulations.
Once a quorum is in effect, the EEOC is expected to continue, the EEOC is expected to continue to move forward to implement its objectives as outlined in several public documents, including a statement highlighting the EEOC’s mission to “protect[] women from sexual harassment and sex-based discrimination in the workplace by rolling back the Biden administration’s gender identity agenda”; position statement stating that the EEOC will re-evaluate its final rules implementing the Pregnant Workers Fairness Act; two guidance documents “focused on educating the public about unlawful discrimination” in the workplace related to Diversity, Equity, and Inclusion efforts; an announcement of the EEOC’s intention to hold universities and colleges accountable for antisemitism on “campus workplaces” under Title VII, and a statement asserting the EEOC’s intention to “rigorously enforce” antidiscrimination laws to ensure all workers are protected from national origin discrimination, including American workers.
