Each month, CUPA-HR General Counsel Ira Shepard provides an overview of several labor and employment law cases and regulatory actions with implications for the higher ed workplace. Here’s the latest from Ira.
New Class Action Lawsuits Allege Employers Violated Their Fiduciary Responsibility to Employees by Offering High-Cost, Low-Deductible Healthcare Plan Options
A new series of lawsuits is targeting large employers, including higher ed institutions, for allegedly violating their fiduciary duties to their employees by offering high-cost, low-deductible healthcare plan options. Bloomberg reports that class action lawsuits have been filed separately against Abbott Laboratories, the University of Rochester and Northwestern University, alleging that the employers offered high-cost, low-deductible options and should have warned employees that this option was not a favorable arrangement. Plaintiffs allege that the high-cost options were ultimately a bad choice.
Employers argued in defense that they were not acting as fiduciaries in offering cost-sharing options, and at least one court has ruled that the question about “settlor function” is subject to further factfinding. Employers also stated that the employees have received all the benefits promised and that some employees want certainty with regard to how much they will spend out of pocket and therefore choose the higher cost option.
New York School District Prevails in First Amendment Claim Raised by Teachers Who Were Barred From Displaying Pride Flags in Their Classrooms
A unanimous three-judge panel of the 2nd U.S. Circuit Court of Appeals refused to reinstate a lawsuit and upheld its dismissal on First Amendment grounds, concluding that the First Amendment does not apply to classroom decorations, which are part of a teacher’s job and therefore out of reach of free speech protection. The appeals court relied on the Supreme Court decision in Garcetti v. Ceballos, in which the Supreme Court held that public employee statements made as part of their job duties are out of reach of First Amendment protection.
The court concluded that classroom adornments are part of a teacher’s job responsibilities and therefore are not protected by the First Amendment (Dolce v. Connetquot Central School District (Case no. 25-1197. 2nd Cir, 8/31/26)). The case has implications for public sector higher ed instructors.
OSHA’s Authority to Regulate Mental Health in the Workplace Blocked by Court of Appeals
The Occupational Safety and Health Administration’s regulatory role to address mental health in the workplace was curtailed by the 5th U.S. Circuit Court of Appeals in a case involving Exxon Mobil. The court held that OSHA lacked the congressional authority to regulate mental health in the workplace. The court cited the dictionary definition of illness at the time of congressional enactment of OSHA in 1970.
The court concluded only medical conditions that are physical in nature are subject to OSHA’s congressional mandate and excluded mental health conditions (Exxon Mobil Corp. v. OSHRC (5th Cir. No. 60108, ruling issued 7/21/26)).
University to Face Federal Jury Trial for Allegations That It Engaged in “Prohibited Transactions” Under ERISA in Paying Recordkeeper Fees
A decade-long lawsuit against Cornell University, which came before the Supreme Court last year, must now face a rare jury trial. Plaintiffs allege that university fiduciaries made the decision to pay recordkeepers out of pension fund assets, which were allegedly “prohibited transactions” under the Employee Retirement Income Security Act of 1974 (ERISA). ERISA litigation is generally handled by judges in bench proceedings (Cunningham v. Cornell University (S.D.N.Y. No. 21-00088, 8/6/26)).
The judge ruled that such allegations are “legal” as opposed to “equitable” in nature and therefore rejected the university’s request for a bench trial as opposed to a jury trial.
EEOC Sues University for Retaliatory Discharge of Minority Employee Following a Complaint That DEI Training Session Isolated Employee
The Equal Employment Opportunity Commission (EEOC) has filed a lawsuit alleging a university violated Title VII by terminating an employee after she complained that she was isolated as the only minority employee attending the university’s diversity, equity and inclusion (DEI) training (EEOC v. Washington University (E.D. Mo. Case No.4:26-cv-01289, Comp filed 8/12/26)).
The employee claimed that she was separated and by herself during the “shared racial identity” section of the training, which used separate Zoom breakout rooms for White and minority employees. The employee claimed the separation was dehumanizing as she was the only minority employee attending the session. The employee also claimed that she was told the “shared racial identity” part of the training would be canceled. Prior EEOC lawsuits in this area have been filed by non-minority employees claiming discrimination.
Accounting Industry Government Contactor Settles Government’s False Claims Act, DEI Lawsuit for $22 Million
An international accounting firm recently settled a government claim that it falsely certified it did not discriminate against employees because of their race by engaging in DEI initiatives that allegedly discriminated against non-minority employees (United States ex rel. American Alliance for Equal Rights v. Deloitte (N.D. Tex. No. 25-cv-458-8/25/26)).
Whether the government’s case would have prevailed in court is an open question. The accounting firm stated that it settled the case to avoid the expense of litigation. Commentators surmised that the defendant’s revenue from government contracts motivated the settlement. This settlement comes on the heels of an April 2026 $17 million settlement entered into by IBM in a similar lawsuit filed by the government. Both Deloitte and IBM entered into their respective settlements with no admission of liability.
Because of the unprecedented and fast-changing pronouncements of the new presidential administration and the intervening court challenges, the developments contained in this blog post are subject to change. Before acting on the legal issues discussed here, please consult your college or university counsel and, as always, act with caution.