by Steve LewickyMaryland prohibits the waiver of punitive damages, or the shortening of time periods to bring suit, in consumer contracts
The Maryland General Assembly recently concluded its 2026 legislative session. One of the bills passed during the session, and signed into law by the Governor, is HB 103. This new law prohibits inclusion in consumer contracts of provisions that would waive, limit, impair, or disclaim statutory damages, punitive damages, declaratory relief, or injunctive relief. Consumer contracts also may not shorten the time available to bring suit under the contract, to a time period shorter than what is provided under Maryland law (typically three years from breach of the contract).
If a consumer contract contains a prohibited provision, a court may not give effect to the prohibited provision, but the court may still enforce the remainder of the contract, to the extent practicable. In other words, inclusion of one of these prohibited provisions does not render the contract void, but the prohibited provision will not be enforced. Inclusion of one of the prohibited provisions also may be considered an “unfair, abusive, or deceptive trade practice” under the Maryland Consumer Protection Act, leading to enforce action brought under that Act.
The new law takes effect October 1, 2026.
by Steve LewickyMaryland expands the time period to bring enforcement actions under local consumer protection laws – from one year to three years
The Maryland General Assembly recently concluded its 2026 legislative session. One of the bills passed during the session, and awaiting the Governor’s signature, is HB 1105/SB 979, which would increase the statute of limitations period from one year to three years for civil enforcement of local consumer protection codes. If the Governor signs the bill into law, it will take effect October 1, 2026.
A number of Maryland counties have local consumer protection laws, separate and distinct from the state Consumer Protection Act. Among those counties are Montgomery, Prince George’s and Howard. The Howard County local consumer protection law, found at Title 17, Subtitle 4 of the county code, prohibits deceptive or unfair trade practices, and authorizes enforcement remedies and penalties. This change to the claim period will most typically affect local consumer protection claims that arise from home improvement disputes, landlord-tenant consumer complaints, or service-contract disputes.
by Steve LewickyAttorney-Client Privilege in Maryland Fiduciary Litigation
The Maryland General Assembly recently concluded its 2026 legislative session. One of the bills passed was HB 65, which resolves uncertainty over whether fiduciaries waive attorney-client privilege when they seek legal advice in a fiduciary capacity, and when fiduciary funds are used to pay counsel. Unless it is vetoed by the Governor, this new law will take effect October 1, 2026.
The key provision of this legislation will establish that, unless waived by the client, a communication between an attorney and a client that acts as a fiduciary is subject to the attorney-client privilege even if fiduciary funds are used to compensate the attorney for legal services rendered to the client. This clarification of the law will be significant in some estate and trust ligation, guardianship disputes, or other disputes involving fiduciaries. In the past, beneficiaries have argued that when a fiduciary seeks legal advice for the benefit of a trust or an estate, and the legal fees are paid out of fiduciary assets, those communications “belong” to the beneficiaries and should not be privileged from disclosure to the beneficiaries. Through HB 65, the Legislature has now rejected that argument, unless the privilege is actually waived. The bill expressly provides: “The existence of a fiduciary relationship between a fiduciary and a beneficiary does not constitute or give rise to a waiver of the attorney-client privilege.”
This bill, if signed by the Governor, will strengthen privilege assertions in fiduciary litigation by trustees, personal representatives, guardians, agents under powers of attorney, and other fiduciaries. While some jurisdictions outside Maryland recognize a version of the fiduciary exception under which beneficiaries are treated as the “real clients,” HB 65 moves Maryland in the opposite direction, by codifying privilege protection.
by Steve LewickyBusiness Judgment Rule in Maryland
The Appellate Court of Maryland recently issued an unpublished opinion in the case of Special Situations Fund III QP, L.P. v. Travel Ctrs. of Am. Inc.[1], in which it analyzed the application of the Business Judgement Rule when a corporate merger is challenged. Unlike in Delaware, where the Business Judgment Rule and the duties of corporate directors have been developed solely by judge-made case law, the Business Judgment Rule in Maryland has been codified by the Legislature at Md. Corps. & Assoc. Code § 2-405.1.[2]
Directors of Maryland corporations are required to act:
(1) In good faith;
(2) In a manner the director reasonably believes to be in the best interests of the corporation; and
(3) With the care that an ordinarily prudent person in a like position would use under similar circumstances.[3]
An act by a director relating to or affecting the acquisition or a potential acquisition of control of the corporation, or any other transaction or potential transaction involving the corporation, may not be held to any higher duty or greater scrutiny than is applied through the statutory Business Judgment Rule.[4]
A director acting in accordance with the standard of conduct set forth in § 2-405.1 has immunity from liability arising from the performance of the director’s duties.[5] The statute also creates a presumption that a director acted in accordance with the Business Judgment Rule.[6]
When a party brings a lawsuit to challenge actions of a board of directors that fall within the board’s business judgment, the claimant must plead specific facts in the complaint sufficient to overcome the Business Judgment Rule.[7] This can be accomplished in either of two ways:
(1) by pleading facts showing fraud or bad faith,[8] or
(2) by pleading facts showing that a director has a conflict of interest relating to the board’s decision, i.e., that the director, or someone close to the director, has a personal financial interest in the outcome of the board’s decision.[9]
If a plaintiff pursues the second route and pleads facts sufficient to show a financial conflict of interest, then the burden will shift to the board of directors to show that its action was just and proper, and that no advantage was taken of the stockholders.[10] In other words, when pursuing the second path, a claimant must plead facts that demonstrate fraud, bad faith, unconscionable conduct, or a conflict of interest – but this can be overcome by the board by showing that the directors with an interest in a contemplated transaction disclosed their conflicts beforehand, or demonstrate that the transactions implicated by those conflicts are fair and reasonable to the corporation.[11] If the board or the stockholders were properly informed of a conflict of interest beforehand, then the contract or transaction may still be authorized, approved, or ratified by a majority of the disinterested board members or stockholders.[12]
[1] 2025 Md. App. LEXIS 1006 (Nov. 25, 2025).
[2] Special Situations Fund, p. 40, n. 3; Hanks, James J., Maryland Corporation Law, § 6.09 6-78 (2d ed. 2020, Supp. 2024).
[3] Md. Corps. & Assoc. Code § 2-405.1(c).
[4] Id., § 2-405.1(h).
[5] Special Situations Fund, p. 41.
[6] Id.
[7] Id., p. 42.
[8] Cherington Condominium v. Kenney, 254 Md. App. 261, 279 (2022); Special Situations Fund, p. 42.
[9] Kenney, 254 Md. App. at 279; Special Situations Fund, p. 43.
[10] Kenney, 254 Md. App. at 279-80; Special Situations Fund, p. 43.
[11] Kenney, 254 Md. App. at 285; Special Situations Fund, p. 61.
[12] Kenney, 254 Md. App. at 283; Sullivan v. Easco Corp., 656 F. Supp. 531, 535 (D. Md. 1987); Special Situations Fund, p. 61.
by Steve LewickyMaryland shareholder derivative actions must be preceded by a demand on corporate directors to bring suit
Maryland’s intermediate appellate court handed down a decision on August 28, 2025, emphasizing that, in almost all circumstances, a plaintiff must make a demand on corporate directors before initiating a corporate derivative action.[1] A principle known as the “business judgment rule” holds that shareholders in a Maryland corporation ordinarily may not use the courts to override business decisions made by corporate directors.[2] This principle is codified at § 2-405.1 of the Maryland Corporations and Associations Code.
There is, however, an “extraordinary equitable device” through which Maryland shareholders, in limited circumstances, may enforce a corporate right if the corporation itself has failed to assert its rights on its own behalf.[3] This may be accomplished through a “corporate derivative action,” which is essentially a suit by one or more shareholders of a corporation to compel the corporation to sue to protect its own rights, while at the same time also being a suit by the corporation against one or more defendants that are harming the corporation.[4]
Because a corporate derivative suit intrudes on the board of directors’ managerial control of the corporation, a shareholder bringing such a suit is required first to make a demand that the board of directors take action before initiating a shareholder derivative suit.[5] The purpose of requiring this pre-suit demand is to afford the directors of the corporation an opportunity to exercise their reasonable business judgment to decide whether the corporation itself should bring suit.[6]
Required Internal Investigation
Once shareholders make a demand on the corporation, the corporation’s board of directors is required to conduct an investigation into the allegations in the demand and determine whether pursuing the demanded litigation is in the best interests of the corporation.[7] Often, the board will appoint a special litigation committee of independent directors to decide whether the corporation should pursue the litigation.[8] If the board refuses the demand, the complaining shareholder may then bring a lawsuit (commonly referred to as a “demand refused” derivative action).[9] A corporate board’s decision to deny a request to bring litigation would benefit from the same “business judgment rule” presumption as any other decision of the board.[10] In order to establish the right to proceed with a derivative action, the shareholder must overcome a presumption that the board’s decision not to proceed with litigation was the product of proper business judgment.[11]
Demand Excused Derivative Actions
In narrow circumstances, courts have allowed shareholders to bring a derivative action without first making a demand on the board of directors. These are called “demand excused” derivative actions.[12] This type of derivative action – which requires showing that making a prior demand on the board of directors would have been a futile exercise – was analyzed by the Supreme Court of Maryland in its 2001 decision in Werbowsky v. Collomb.[13]
In that case, the court established a narrow standard for allowing “demand excused” derivative actions, holding that the requirement for a prior demand should not be excused simply because a majority of the directors approved or participated in some way in the challenged transaction or board decision, or on the basis of generalized or speculative allegations of director conflicts.[14]
The court concluded that, although “demand excused” derivative actions were not entirely foreclosed, they are strictly limited to situations in which either a demand (or awaiting response to a demand) would cause irreparable harm to the corporation, or a majority of the directors are so personally and directly conflicted or committed to the decision in dispute that they cannot reasonably be expected to respond to a demand in good faith and within the ambit of the business judgment rule.[15]
In short, a demand is required in nearly every derivative action brought in Maryland. The requirement to make a prior demand is not excused simply because the majority of a corporation’s directors approved or participated in some way in the challenged transaction or decision, or on the basis of generalized or speculative allegations that the directors are conflicted or are controlled by other conflicted persons, or would be hostile to bringing a lawsuit.[16]
The Importance of Making a Demand Before Filing a Lawsuit
In its Nathanson decision[17] handed down in August 2025, the Maryland Appellate Court adhered to the Supreme Court of Maryland’s 2001 ruling in Werbowsky, but also addressed a situation in which the party seeking relief attempts to cure an earlier failure to make a demand, by sending a demand after the trial court has dismissed the asserted claims for failing to make a demand. In the Nathanson case, a lawsuit was first brought in federal court by two shareholders against an investment advisory firm and its directors, alleging that the defendants engaged in reckless borrowing practices leading to substantial losses.[18]
The shareholders alleged in their federal lawsuit that applicable Maryland law excused them from making a pre-suit demand on the grounds that making such a demand under the circumstances of the case would be futile.[19] The federal lawsuit was dismissed because a forum selection clause in the firms’ bylaws provided that disputes were to be adjudicated before the Circuit Court for Baltimore City.[20]
Following dismissal of the federal action, the shareholders brought essentially the same suit in the Circuit Court for Baltimore City.[21] On motion, the Circuit Court thereafter dismissed the state court claim, for reasons that included a failure to make pre-suit demand.[22] The shareholders noted an appeal, and a few weeks after the Circuit Court entered its order dismissing the case, the shareholders sent a demand letter to the board.[23]
The board formed a litigation committee, and pursuant to its investigation, notified the shareholders that the committee rejected the litigation demand.[24] The shareholders then brought a new lawsuit in the Circuit Court for Baltimore City, reasserting their derivative claims and asserting that the board wrongfully refused the demand.[25] In their appeal, the defendants argued that, by making the litigation demand after the dismissal of their derivative action, the shareholders rendered their second lawsuit moot.
The court applied the Werbowsky holding and found that the allegations in Nathanson did not satisfy the “very limited exception” to the demand requirement, and did not “clearly demonstrate, in a very particular manner” that “a majority of the directors are so personally and directly conflicted or committed to the decision[s] in dispute that they cannot reasonably be expected to respond to a demand in good faith and within the ambit of the business judgment rule.”[26]
[1] Howard Nathanson, et al, v. Tortoise Capital Advisors, LLC, et al, 2025 Md. App. LEXIS 733 (2025).
[2] Boland v. Boland, 423 Md. 296, 328 (2011); Nathanson, 2025 Md. App. LEXIS 733.
[3] Werbowsky v. Collomb, 262 Md. ___ (599 ( ); Mona v. Mona Elec. Grp., Inc., 176 Md. App. 672, 698 (2007).
[4] Wasserman v. Kay, 197 Md. App. 586, 610 (2011).
[5] Oliveira v. Sugarman, 451 Md. ___, 223 ( ).
[6] Id.; quoting Kamen v. Kemper Fin. Serv., Inc., 500 U.S. 90, 96 (1991).
[7] Shenker v. Laureate Educ., Inc., 411 Md. ___, 344 ( ).
[8] Boland, 423 Md. at 332.
[9] Shenker, 411 Md. at 344; quoting Bender v. Schwartz, 172 Md. App. 648, 666 (2007).
[10] Sugarman, 451 Md. at 223.
[11] Id.
[12] Boland, 423 Md. at 331, n.25.
[13] Werbowsky v. Collomb, 362 Md. 581 (2001)
[14] Id., at 618.
[15] Id., at 620.
[16] Id., at 618.
[17] Howard Nathanson, et al, v. Tortoise Capital Advisors, LLC, et al, 2025 Md. App. LEXIS 733 (2025).
[18] Id., p. (4).
[19] Id., p. (5).
[20] Id., p. (6).
[21] Id., p. (7).
[22] Id., p. (13).
[23] Id., p. (14).
[24] Id.
[25] Id.
[26] Nathanson, 2025 Md. App. LEXIS 733, quoting Werbowsky, 362 Md. at 620.
by Steve LewickyMaryland Tax Changes
The Maryland General Assembly ended its annual legislative session earlier this month. Here is a quick summary of important changes to the state’s tax code:
Increased income taxes for high earners
Beginning in Tax Year 2025, personal income tax rates were increased to 6.25% on income above $500,000, and to 6.5% on income above $1 million. In addition, a 2% tax surcharge will be imposed on capital gains received by taxpayers earning over $350,000 per year. Taxpayers earning above $200,000 per year also will have the value of their personal deductions phase out depending on the level of taxable income above that threshold.
Sales tax on data services and IT services
For transactions on and after July 1, 2025, there will be a 3% sales tax on technology and data services, and related party transactions. Further guidance on the application of this new tax is expected from the Maryland Comptroller during June 2025.
No change to estate tax exemption
A proposed reduction of the Maryland estate tax exemption, from $5 million to $2 million, was not enacted. The Maryland estate tax exemption remains at $5 million.
Increases to government fees and excise taxes
A number of government fees will increase, effective July 1, 2025, including: The vehicle emissions inspection fee will increase from $14 to $30; The cannabis sales tax will increase from 9% to 12%; The vehicle excise tax will increase from 6% to 6.5%; The sports betting tax will increase from 15% to 20%.
by Steve LewickyFederal Employment Law: Key Takeaways from Attorney Steve Lewicky
In this recent interview, attorney Steve Lewicky joins Brian Kuhn, Certified Financial Planner at Wealth Enhancement Group, to discuss the latest developments in federal employment law. From court rulings that impact thousands of probationary federal employees to the implications for government contractors facing early termination, this conversation is packed with insights for federal workers navigating uncertain times. Watch the full video below and read on for a detailed summary of the key takeaways.
Watch the full interview on YouTube
Federal Employment Law: Key Takeaways from Attorney Steve Lewicky
About the Speaker
Steve Lewicky is an attorney in Maryland focusing on business law, litigation, and federal employment matters. His firm, located in Howard County, Maryland, regularly advises government employees and contractors on their legal rights.
What’s Happening Right Now in Federal Employment Law?
According to Lewicky, his firm is fielding an influx of calls from both current and former government employees, as well as federal contractors, in light of recent developments. Two major federal court cases—one in Maryland and another in the Northern District of California—have resulted in temporary restraining orders preventing the mass termination of probationary federal employees.
The Maryland Case: A Turning Point
The Maryland recently ruled that the government cannot terminate large numbers of probationary employees without due process—specifically, without providing a performance-related reason or advance notice. Thousands of employees have received notices placing them on administrative leave or informing them of termination, but the court issued an emergency injunction due to the procedures that were employed.
The court ordered that employees be reinstated immediately, and the government was required to submit a written status report confirming compliance.
Can the Government Still Lay Off Federal Employees?
Yes, but only if proper procedures are followed.
Unlike private-sector employment—which is generally “at-will”—federal employment involves more protections. Government employees cannot be terminated arbitrarily, and different rules apply depending on whether someone is a probationary employee or not.
- Probationary Employees: Limited appeal rights. The probationary period may last 1–2 years and can apply to new positions even if the person has served in government for years.
- Non-Probationary Employees: Protected by the Merit Systems Protection Board (MSPB), which allows them to appeal terminations, request reinstatement, back pay, and in some cases, attorney’s fees.
Lewicky emphasized that even probationary employees have some appeal rights, and recent rulings show that courts are scrutinizing how terminations are being handled.
Reduction in Force (RIF): Another Legal Consideration
The government may conduct a reduction in force for budgetary or organizational reasons, but there are also strict rules:
- Advance notice must be given.
- Affected employees must be informed of job placement options.
- In some cases, states must be notified to offer support to displaced workers.
Again, Lewicky stressed that while RIFs are legal, failing to follow the proper process can make the actions unlawful.
What About Federal Contractors and Subcontractors?
Federal contractors are also facing increased uncertainty. While every contract is different, most contain a “termination for convenience” clause allowing the government to end the contract at any time—even if performance has been adequate.
However, when this happens:
- Contractors must cease work immediately.
- Contractors must document all costs associated with the wind-down.
- The government must compensate for incurred costs and unpaid work completed.
Lewicky noted that contractors should seek legal counsel immediately upon receiving a termination notice due to the complex and strict timeline involved in appealing or negotiating a fair settlement.
Legal Support and Consultations
Steve Lewicky’s firm offers initial consultations, either via Zoom or in person, to help federal employees and contractors understand their rights and options. They’re currently speaking with a high volume of individuals affected by these changes and are available to assist with legal strategy and appeals.
Conclusion
If you’re a federal employee or government contractor navigating recent changes, it’s more important than ever to understand your rights and the proper legal procedures. These recent court rulings show that the government must follow specific rules, even in times of large-scale employment changes. Whether you’re facing termination, administrative leave, or contract wind-down, speaking with an experienced federal employment attorney can help protect your interests.
by Steve LewickyTrump Administration Seeks to Void Union Contracts for a Large Portion of the Federal Workforce
On Thursday, March 27, 2025, President Trump issued an executive order seeking to end union representation for a large portion of the federal workforce. Later that day, eight federal agencies brought suit against unions representing a large swath of federal employees, seeking a court order declaring all existing union contracts between those unions and the plaintiff government agencies to be void, in light of the executive order.
In this lawsuit (U.S. Dept. of Defense, et al, v. American Federation of Government Employees, AFL-CIO, District 10, et al, W. Dist. Tex., Case No. 6:25-cv-00119), the Government asserts that a top priority of the Trump Administration since taking office has been “to improve the efficiency and efficacy of the federal workforce, and to promote the national security of the United States,” and goes on to allege that “[u]nfortunately…departments and agencies have been hamstrung…by restrictive terms of collective bargaining agreements” with government employee unions.” The government then argues that “inflexible [collective bargaining agreements] obstruct presidential and agency head capacity to ensure accountability and improve performance.”
Government employees at some core national security agencies, such as the FBI, CIA, NSA and U.S. Secret Service, have always been excluded from the right to unionize that was granted by Congress in the Federal Service Labor-Management Relations Act in 1978. Since the late 1970s, however, federal employees outside of those few exempted agencies have had the right to join unions and to engage in collective bargaining (though not the right to strike or to bargain over pay levels). Congress included in the 1978 statue flexibility for a future president to exclude employees of agencies beyond the FBI, CIA, NSA and Secret Service from the right to collectively bargain through unions, but only if the president makes a determination that an agency or department outside of the FBI, CIA, NSA or Secret Service has, as one of its “primary functions,” intelligence, counterintelligence, investigative or national security work that would be incompatible with permitting collective bargaining by its workforce. The statute does not define the terms “national security work” or “investigative work.”
In the new lawsuit, the Administration seeks to take away union and collective bargaining rights from employees at a broad range of agencies, including not only the Defense Department and the Department of Homeland Security, but also the Departments of Agriculture, Housing and Urban Development, Justice, Veterans Affairs and the EPA and Social Security Administration. Notably, none of President Trump’s predecessors since the late 1970s have made such a finding for these other agencies, nor did President Trump do so during his first term.
The new executive order excludes police and firefighter unions from its scope, even though these functions would seem to fit within activities associated with national security. Commentators have noted that these law enforcement unions were the only federal employee unions that endorsed the candidacy of President Trump during the 2024 election campaign.
The Government filed its lawsuit in the Western District of Texas, Waco Division, which is one of the handful of federal courthouses across the country that has only a single judge — a Trump appointee. In Federal District Courts with more than a single judge, judges are assigned to new cases based on random blind assignment to protect against “court-shopping” by plaintiffs. In single-judge Federal courthouses, there is no uncertainty about which judge will be assigned to a newly filed case, since there is only a single judge to assign.
The combined acts of declaring a large portion of the federal workforce to be ineligible for union representation, and then seeking a court order to void all contracts between those employees’ unions and the Government, carry a strong odor of union-busting. Government employee unions have been at the forefront of bringing lawsuits during the first months of the Trump Administration to challenge the legality of a large number of Administration actions. Elections have consequences, however, and one of these is to place in power a new Administration that can exercise discretion granted by Congress in previously enacted statutes. It will be interesting to see what level of review and scrutiny the federal court in Texas (and appellate courts) give to this executive order, and specifically the President’s determination that some agencies with core functions that seem to be outside the national security space are, in fact, performing national security work or investigative work.
by Steve LewickyCourts order reinstatement of federal employees, but the Administration moves forward with future reduction in force plans
It’s a stressful and confusing time for federal employees. In recent days, two U.S. District Court judges – one in Maryland and the other in California – issued sweeping nationwide injunctions compelling the Government to pause employee terminations and to reinstate a large number of recently terminated federal employees. In both cases, the courts found that recent terminations of probationary employees were unlawful because they were undertaken by the Office of Personnel Management (#OPM) (the government’s human resources office) and not by the federal agencies where the employees actually worked, and because the Government did not adhere to notice and timing requirements.
In the Maryland case, Maryland v. U.S. Dept. of Agriculture, et al, U.S. Dist. Ct. Md., Case No. 1:25-cv-00748, Judge James Bredar entered a Temporary Restraining Order (#TRO) on March 13, 2025, ordering the covered cabinet agencies to reinstate all employees, throughout the United States, who were previously employed by the covered agencies and were “purportedly terminated” by the Government on or after January 20, 2025. Eighteen U.S. Government agencies and departments are covered by this TRO. The covered agencies were also ordered to undertake no further reductions in force (#RIFs), “whether formally labeled as such or not,” except in compliance with notice requirements established by federal statute and regulations. In order ensure compliance by the Government, Judge Bredar ordered the government agencies and departments to submit a detailed status report to the court by mid-day next Monday, March 17, setting forth the number of employees reinstated by the Government, broken down by agency. The court also scheduled a hearing for March 26, to determine whether a longer-duration preliminary injunction will be entered. The TRO does not prohibit the Government “from conducting lawful terminations of probationary federal employees – whether pursuant to a proper RIF or else for cause, on the basis of good-faith, individualized determinations,” but may not do so “as part of a mass termination.”
In a 56 page memorandum opinion accompanying the TRO, Judge Bredar noted that, under Title 5 of the Code of Federal Regulations (CFR), civil service employees are considered to be under probationary status during the first year or two of their employment, and a probationary employee may lawfully be terminated if his or her work performance or conduct fails to demonstrate fitness or qualification for continued employment, or for reasons based on conditions arising prior to his or her employment. If the Government decides to terminate a probationary employee, however, Title 5 of the CFR requires the Government to notify the employee in writing as to why the decision to terminate was made, including a statement of the agency’s conclusions as to the inadequacies of the employee’s performance or conduct. The only other way properly to terminate a probationary civil service employee is as part of a reduction in force (RIF) – but federal statutes and regulations establish detailed procedures that must be followed by federal agencies when conducting a RIF. The Title 5 regulations include a requirement that, when conducting a RIF, an agency follow certain retention preferences that are set forth in Title 5 of the U.S. Code, which create priorities such as by length of service, military service preferences, and performance ratings. The regulations also require, in a RIF, that the agency establish “competitive areas” in which employees compete for retention, and rank employees for intention based on the retention factors discussed above. In most circumstances, an agency conducting a RIF must provide employees at least sixty days written notice before termination, and even in extraordinary circumstances must provide thirty days prior written notice. For larger scale RIFs, notice also must be provided to affected states, so that state governments have an opportunity to carry out “rapid response activities” to assist dislocated employees in obtaining new employment.
Judge Bredar noted that, on February 11 and 12, various agencies of the U.S. Government terminated large numbers of probationary employees, with further terminations occurring in the weeks thereafter. The court determined that these terminations were not based upon qualifications or performance, noting that the termination notices did not even cursorily identify any issues with the individual’s performance, but instead explained that the termination was “in the public interest” or “due to the priorities of the current administration.” The court found that the Government’s actions reflected that these terminations were in fact RIFs – but did not adhere to statutory RIF requirements.
The TRO issued by Maryland federal court was broadly consistent with a TRO entered at almost the same time by the U.S. District Court for the Northern District of California, which ordered the Government to pause firings and to reinstate probationary employees at six government agencies. Earlier, on March 5, a similar decision was handed down by the Merit Systems Protection Board (#MSPB), ordering reinstatement of probationary employees that were terminated at the U.S. Department of Agriculture.
As of the time of this post, it appears that at least some agencies are moving forward with reinstatement and payment of back pay in response to the court orders, but it is not clear if all covered agencies are doing so. More clarity should be forthcoming on Monday, March 17.
The two TROs are being appealed by the Government, and issuance of a TRO does not necessarily mean that the same relief will be granted by the court later at the preliminary injunction stage, or after a trial on the merits. Beyond the possibility that these TROs may be overturned on appeal or modified by the issuing courts at the preliminary injunction stage, it’s also important to recognize that the legal reasoning set forth in these two emergency orders does not preclude the Government from reducing the size of the federal workforce using the RIF procedures set forth in federal law. The Government just needs to follow the rules, procedures and timetables that are mandatory in RIFs. News outlets have reported in recent days that agencies have already been given guidance by OPM to plan for RIFs, so presumably the agencies and OPM intend to pursue RIFs down the road even if the firings of probationary employees during late February and early March are reversed due to the Government’s failure to comply with RIF requirements when taking those actions.
by Steve LewickyGovernment Employees Receiving Notices of Termination: Now What?
Our firm has been contacted in recent days by many US Government employees that have received letters informing them that their employment will be terminated “for cause” in thirty days. Most of these have been accompanied by separate letters putting the employee on administrative leave for the intervening thirty days. Situations vary by agency, by status of the employee, and by other factors, but in all cases it’s important for these employees to understand their rights.
US Government employment is not “at will” – the type of employment relationship that is common in the private sector. Termination of government employment is subject to and controlled by federal statutes that establish Civil Service employment protections. If a federal employee is terminated or disciplined without cause or reason, those employment actions may be appealed to the Merit Systems Protection Board (MSPB), an independent agency of the government. The Merit Systems Protection Board hears appeals when the government takes adverse employment actions like removals and terminations, suspensions of more than 14 days in length, reductions in pay or grade, or performance-based employment actions. It can award remedies that include back pay accruing after the date of termination, reinstatement in the position, and sometimes reimbursement of attorneys’ fees.
An employee’s appeal rights are greatly affected by whether they are still in a probationary period. The government can remove a probationary employee subject only to limited rights of appeal. Outside of probationary periods, government employees have broad rights of appeal from a termination or removal decision.
While some agencies appear to be terminating large numbers of employees at the same time by alleging “cause” for removal, some agencies may also try to reduce head count using established workforce reduction programs, such as: (a) voluntary separation incentive payments (VSIPs), (b) voluntary early retirement authority (VERA), or involuntary separations by a reduction in force (RIF). Agencies also appear, in some cases, to be attempting to reduce their workforce by reassigning employees to a different office location, often at great distance, and then terminating employment if the employee refuses to relocate.
Federal employees receiving an offer of voluntary separation incentive payments (VSIPs) and/or an offer of voluntary early retirement (VERA) should closely examine the proposed terms of these offers, and will benefit from having legal counsel review any such proposals. Reductions in force (RIFs) can only be undertaken in conformance with government regulations on RIFs, and the government should be held to these requirements.
Lewicky, O’Connor, Hunt & Meiser helps current and former US Government employees navigate the current upheavals in federal employment. Every person’s situation is different, but in most cases it is very important for a government employee receiving notice of termination or of other adverse employment action to promptly provide a written objection response to the agency, and to file an appeal to the Merit Systems Protection Board within the fixed time period for doing so. We guide our clients in taking these steps. Equally important, recent government actions and pronouncements suggest that the government may be contemplating employment actions that are not in compliance with applicable laws. This makes it even more important to have legal counsel to analyze and explain new or unprecedented developments, as the occur.
