Legal considerations touch every aspect of business but many may seem like a one-and-done. In the current environment of social and regulatory disruption, however, matters that previously seemed settled may be due for attention. In Business Magazine is shining a light on select topics with insights on implications that business leaders may not have known or may be overlooking, given the volume and pace of change.
The New Face of DEI
by Amanda M. Breemes
Diversity, equity and inclusion initiatives are undergoing a profound transformation as administration scrutiny intensifies and employers recalibrate their approaches. For organizations across the United States, especially large employers, the conversation has shifted from expansion to compliance, risk mitigation and strategic adaptation.
A major catalyst for this shift has been the federal government’s evolving enforcement posture. In 2025, the Trump administration moved quickly to redefine the legal boundaries of workplace DEI. Within days of the second inauguration, two sweeping executive orders signaled a new era. One targeted “illegal DEI” programs within federal agencies, while another required federal contractors and grant recipients to certify that their DEI initiatives do not violate anti-discrimination laws. These directives also dismantled long-standing frameworks, fundamentally altering the compliance landscape.
The ripple effects have been widespread. According to Littler Mendelson’s Workplace Policy Institute Survey, 71% of U.S. employers reported being impacted by DEI-related policy changes in the administration’s first year. Among large organizations with 10,000 or more employees, the impact rose to 86%. At the same time, enforcement risk has become a central concern. The Department of Justice’s Civil Rights Fraud Initiative uses the False Claims Act to investigate DEI-related violations among recipients of federal funds, raising the stakes considerably. In Littler’s survey, 35% of respondents cited unlawful DEI practices as their top enforcement concern, climbing to 53% among large employers.
Regulators are also offering increasingly specific guidance on what may cross legal lines. The Equal Employment Opportunity Commission and the Department of Justice have emphasized that DEI programs must not limit, segregate or classify employees based on protected characteristics. This principle applies broadly, extending beyond hiring and promotion decisions to trainings, mentoring opportunities and workplace programming.
A key area of focus is employee resource groups, also known as affinity groups. These groups, often organized around shared identities or experiences, have long been central to corporate DEI strategies. However, current EEOC guidance makes clear that limiting membership in ERGs, Business Resource Groups or similar programs to specific protected classes can constitute unlawful discrimination. Even separating employees into distinct groups for programming, regardless of whether those groups receive identical content or resources, may present legal risk if the separation is based on race, sex or another protected trait.
As a result, employers are rethinking how these groups function. Open access is now critical. Membership, events and benefits tied to ERGs must be genuinely available to all employees, both in policy and in practice. Additionally, organizations are prioritizing equal funding and consistent support across groups, recognizing that separate but equal structures are insufficient under current interpretations of anti-discrimination law.
Beyond ERGs, the guidance reinforces a broader principle that opportunity must be universal. Employers are encouraged to provide training and mentoring that equip workers of all backgrounds with the skills, experience and access necessary to perform well and advance into leadership roles. Similarly, workplace networks, often key drivers of career mobility, must be equally accessible rather than informally limited to certain groups.
Despite the heightened scrutiny, this moment does not signal the end of DEI. Instead, it reflects a shift toward a more disciplined approach. Courts are expected to continue shaping how these rules are applied, using established anti-discrimination standards to evaluate claims. In the meantime, employers are balancing compliance obligations with workforce expectations, recognizing that inclusive cultures remain critical for attracting and retaining talent.
As organizations navigate this shifting landscape, the path forward is clear: Compliance and inclusion must go hand in hand. The next face of DEI will be defined not by narrowing efforts, but by designing programs that expand access, strengthen fairness and stand up to legal scrutiny, ensuring every employee has an equal opportunity to participate, grow and succeed.
Amanda Breemes, an attorney in the Phoenix office of Littler Mendelson P.C., handles diverse employment matters, including discrimination, harassment, ADEA, ADA and FLSA litigation in federal and state courts, advising employers on hiring, onboarding, complaint investigations, and employment terminations across varied industries nationwide.
Arizona Employers Cannot Sleep on Seismic Changes in Drug Rescheduling Initiated by the Federal Government
by J. Alexander Dattilo
On December 18, 2025, President Trump issued Executive Order 14370 that directed the Attorney General to expedite rescheduling marijuana from a Schedule I to a Schedule III Drug. On April 23, 2026, Acting Attorney General Todd Blanche then issued a “Final Order” that reclassified all FDA-approved medications containing marijuana and marijuana products authorized under a state medical marijuana program as a Schedule III Drug. This classification acknowledges that the substance has medical value if taken under a licensed medical professional’s supervision.
On April 18, 2026, President Trump issued Executive Order 14401, titled “Accelerating Medical Treatments for Serious Mental Illness,” which directed federal agencies to expedite research, review and approval of psychedelic drugs like psilocybin (also known as “magic mushrooms”) as potential treatments for serious mental health conditions. This Executive Order could result in the same rescheduling of psilocybin and other psychedelic drugs within months.
Although these are federal executive orders, they are likely to have significant impacts on Arizona employers’ drug testing requirements, accommodation practices and company policies, especially if the state legislature is emboldened to enact additional legalization regulations.
Impact of Drug Rescheduling on Arizona Employers
For Arizona employers, these seismic shifts at the federal level have already caused a wave of change that will have both immediate and long-term impacts.
In the immediate future, the rescheduling of marijuana as Schedule III Drug will potentially force Arizona employers to face a flood of claims under the Americans with Disability Act by employees who are registered as medical marijuana cardholders.
Previously, Arizona employees and prospective employees who are medical marijuana cardholders could only leverage cardholder status to assert claims under the Arizona Medical Marijuana Act for discrimination based on (1) their status as a cardholder or (2) any drug test results of positive for marijuana metabolites. The AMMA does not allow employees to consume, possess or be impaired by marijuana during work hours. And until now, courts had regularly rejected ADA claims based on an employer’s refusal to allow marijuana use as an accommodation, given that marijuana — as a Schedule I Drug — fell under the automatic exclusion applicable to illegal drugs. Now that marijuana is a Schedule III Drug, however, Arizona employees who are cardholders may argue that their medicinal marijuana use must be accommodated, just like use of other prescribed medications.
Conversely, there is currently only a possibility that psychedelics, including psilocybin, will be rescheduled. Arizona has yet to legalize psilocybin use; its legislature passed SB 1570 in 2024, which if enacted would have created a system to license psychedelic-assisted therapy centers and ultimately legalized medicinal psilocybin use to treat depression and PTSD. Governor Katie Hobbs vetoed the bill but simultaneously allowed continued use of a $5-million grant for state-funded psilocybin research and publicly suggested that she will legalize psilocybin use for the treatment of depression and PTSD should the research support that decision.
History has repeatedly shown that the public is often receptive to legalizing medicinal use before it will support recreational use. If the April 18, 2026, Executive Order ultimately causes psilocybin to be reclassified as a Schedule III Drug (just as the December 18, 2025, Executive Order did for marijuana), this will accelerate the pace of drug development and research for psychedelics — which could quickly tip the scales towards legalizing medicinal psilocybin use in Arizona. This legalization would likely be accompanied by law protecting employees who use psilocybin for medical purposes, which is exactly what the AMMA did for employees who are medical marijuana users when it was enacted in 2010.
Compliance Strategies for Employers
The immediate and long-term impacts of the rescheduling of marijuana and potential rescheduling of psilocybin (and/or other psychedelics) is a rapidly evolving issue. It remains to be seen whether and to what extent courts will now allow Arizona employees to bring ADA “failure to accommodate” claims based on their status as medical marijuana cardholders. It is also unclear whether psilocybin and other psychedelics will even be rescheduled as Schedule III Drugs. Despite these uncertainties, Arizona employers can avoid legal landmines by replicating compliance measures they may have already been taking to comply with the AMMA.
First, employers should conduct comprehensive reviews of drug use and testing policies. Zero-tolerance policies covering off-duty marijuana use for medicinal users will now face even greater scrutiny.
Employers should also ensure managers are well-versed in company policy and procedure on ADA accommodation requests. If an employee who is a medical marijuana cardholder requests marijuana use as an accommodation, managers should treat it as a genuine accommodation request and quickly inform human resources and/or corporate leadership, who, in turn, should consider carefully how to advance the interactive process for such a request in a legally compliant way.
Employers should also review and update descriptions of any positions that are safety-sensitive by ensuring these contain detailed explanations of job requirements that show their safety-sensitive nature.
Lastly, employers should continue the reliable tactic of documenting indicia of impairment (e.g., bloodshot eyes, slurred speech, etc.). Managers should use a “Reasonable Suspicion Checklist” to document any such observations, regardless of whether the cause of said impairment is suspected to be marijuana, psilocybin or any other drug.
J. Alexander Dattilo is a shareholder at Ogletree Deakins’ Phoenix Office and a member of the firm’s Drug Testing practice group. Dattilo devotes a substantial portion of his practice to litigating and advising on issues related to employee drug-testing that implicate the AMMA and DTEA.
Navigating the New Landscape of Hybrid Work, Remote Work and Return-to-Office Policies
by Eric Johnson and Rosa Leon
The American workplace has undergone a profound transformation in recent years, and the legal landscape surrounding how and where employees work is still catching up. For business owners and employers, the shift toward hybrid work, remote work and the ongoing push for return-to-office mandates presents a web of legal considerations that many may not fully appreciate. Understanding these issues now can help businesses avoid costly missteps down the road.
The Rise of Flexible Work Post-Pandemic
When the pandemic forced millions of employees to work from home, many businesses discovered that remote arrangements could be surprisingly effective. Today, a significant number of employers have adopted permanent hybrid or fully remote models, while others have moved aggressively to bring employees back to the office. Each approach carries its own set of legal and practical implications in ways that demand attention.
Wage and Hour Compliance
One issue overlooked by some employers concerns wage and hour compliance for remote employees. For out of state remote employees, the wage and hour laws of the state where the employee is physically located may apply. This can affect things like minimum wage, overtime, meal/rest breaks and even pay stub and pay frequency mandates. Before an employer agrees to engage a remote employee in a different state, it should consider the legal and practical implications of such an arrangement.
Regardless of the applicable state law, other wage and hour concerns may also arise with remote employees. For instance, accurately tracking an employee’s work time is critical and employers should have a mechanism whereby it is able to accurately track all time spent working by a remote employee. Employers should also expressly prohibit hourly employees from reviewing/sending work related emails and/or performing other tasks while “off the clock.” Employees should also be told that they may not work overtime without first checking with their supervisor.
Tax and Benefits Complications
Multi-state remote work also creates potential tax nexus issues such as state income tax withholdings, corporate tax filings and even sales tax obligations. Benefits administration can become more complex. Health insurance and/or workers’ compensation plans may have network limitations due to employee location. State-specific employee leave laws, including paid family leave, sick leave and other mandated benefits, must be considered. Employers should also determine whether any ergonomic or other tools can be provided to remote employees to reduce the risk of workplace injuries. A remote employee injured at home while working is likely a compensable injury under workers’ compensation laws.
Return-to-Office Mandates and Accommodation Obligations
For employers pursuing return-to-office policies, the legal considerations are also significant. Employees who have previously worked remotely may request remote work as a reasonable accommodation for an alleged disability under the Americans with Disabilities Act or analogous state laws. Employers must engage in the interactive process with employees and carefully evaluate whether remote work is a feasible option. Blanket denials without individualized assessment can expose businesses to discrimination claims.
Additionally, employers should be mindful that return-to-office mandates can have a disparate impact on certain protected groups. Employees may also inquire as to whether their commute time is compensable and/or the impact of high gas prices related to returning to the office. Whether meritorious or not, concerns raised by employees about working conditions may qualify as protected activity under the National Labor Relations Act for which employees cannot be retaliated against. Employers should be careful to document the legitimate business reasons for requiring in-person attendance and assess the legal risk of any such policy before it is adopted.
Updating Policies for a Changing Workplace
Perhaps the most important step for employers right now is to review and update their workplace policies/agreements. Any policy/agreement should clearly address expectations around work location, hours, data security, equipment, expense reimbursement and the employer’s right to modify or revoke remote arrangements. Hybrid policies should specify which days or functions require in-person attendance and how scheduling will be managed.
Employers should review their policies on timekeeping, workplace safety, harassment and discrimination, performance management, etc., and confirm the policies are broad enough to apply in both in-office and remote settings and modify as needed.
Looking Ahead
The legal framework governing workplace flexibility is not static. Legislators/regulators at the state and federal level continue to consider new rules that may affect remote and hybrid work arrangements. Employers who stay informed and are flexible will be best positioned to adapt and thrive in this new era of work.
Eric Johnson is a partner at Quarles & Brady and the Phoenix office chair of the Labor & Employment Practice Group. He focuses on employment law counseling and litigation.
Rosa Leon is a Labor & Employment associate in the Quarles Phoenix office. She advises on a wide range of labor and employment law issues, such as compliance, risk management and collective bargaining.
Are Employer Policies Keeping Up with Technology Advances?
by Alex Harris
In my opinion, the most pressing legal issue for Arizona businesses right now is the gap between how quickly technology is changing daily operations and how slowly most businesses update the legal documents and policies that govern that technology. Many businesses are using tools, platforms and data practices that did not exist five to ten years ago but are still relying on employee handbooks, contracts and privacy disclosures from that era.
One area businesses may be overlooking is the use of artificial intelligence in hiring, performance management, marketing and customer communications. Employers need to know that they remain on the hook for the outcomes of the AI tools they use. For example, if an automated résumé screening tool, chatbot or scoring system results in a discriminatory impact, the fact that the tool came from a third-party vendor will not necessarily protect the employer. Businesses should understand what tools they are using, who is supervising them, what data is being collected and whether the results can be explained and are legally permissible.
A second area is data privacy. Even businesses that are not based in California, Colorado or one of the other states with comprehensive consumer privacy statutes can be subject to those laws if they collect data from residents of those states through their website, app or marketing platforms. Privacy notices, cookie banners, terms of service and data-request procedures should be reviewed frequently. Businesses that collect biometric information, geolocation or health-related data should be especially careful because that information often carries heightened consent and disclosure obligations.
Cybersecurity is another area where the legal exposure has grown faster than most internal policies. Arizona, like nearly every other state, requires notification to affected individuals after certain data breaches, often within tight time frames. Businesses should have a written incident response plan, know when and who to notify, and confirm that their cyber insurance actually aligns with that plan before a breach incident occurs.
Finally, businesses should look closely at their technology vendor agreements. Standard SaaS terms often allow the vendor to use customer data to train models, change features or substantially limit their own liability. Businesses handing sensitive data to a vendor should confirm in writing how that data may be used, how it is secured, what happens on termination and what notice they will receive if the vendor experiences a breach.
Technology compliance should be treated as ordinary business maintenance. Arizona businesses should periodically review their AI usage, privacy disclosures, cybersecurity, employee practices and vendor contracts so they can identify risk early and update their practices before a problem becomes expensive.
As part of Rose Law Group’s corporate practice, Alex Harris advises both newly formed and established companies on the full spectrum of business matters, from the ordinary course of navigating day-to-day operations, securing financing, or mergers and acquisitions. His practice spans every stage of a company’s lifecycle, including formation, governance, fundraising, stock and asset sales, mergers, and corporate reorganizations.
The New Ground Rules: Balancing State Mandates, Water Scarcity and Tech in Arizona Real Estate Development
by Benjamin Tate
Businesses operating in Arizona are navigating a period of rapid legal and regulatory change, particularly in the context of real estate development and the land use and zoning ordinances that regulate it. While many companies are understandably focused on immediate operational concerns such as inflation, workforce shortages and supply chain disruptions, doing so may come at the expense of overlooking trends that can significantly impact long-term business stability and growth. For Arizona employers and property owners, understanding these changes is no longer optional — it is an essential component of risk management and strategic planning.
Statewide Preemption
One of the most important developments in Arizona land use law is the increasing tension between statewide growth initiatives and local zoning authority. Arizona continues to experience substantial population and commercial expansion, especially in metropolitan regions like Phoenix, Tucson and surrounding suburban communities. The Arizona State Legislature has passed, and Governor Katie Hobbes has signed, several bills over the past few years mandating changes to local zoning regulations to accelerate housing supply growth. These bills impact areas like middle housing (HB 2721), accessory dwelling units (HB 2720) and office-to-multifamily conversion (HB 2110).
These bills are just a few examples of state-level regulatory preemption aimed at easing development regulations and creating more housing opportunities, requiring municipalities to amend their ordinances to align with the legislation. In many cases, these changes create new residential development opportunities that may otherwise be overlooked.
Water Usage
Arizona’s long-term water supply concerns are reshaping development approvals across the state, and these concerns are heightened by this year’s unusually warm winter and below average regional snowfall. In some jurisdictions, water availability is now a central factor in entitlement decisions and project feasibility. At the state level, the Arizona Department of Water Resources’ reform of the state’s Active Management Area regulations in 2023, combined with state legislation related to groundwater availability (HB 2647) and residential lease communities (HB 2025/2026) have forced developers to rethink their water strategies for new projects.
As we enter this new era of water conservation in Arizona, developers must be cognizant of the fact that water policy is increasingly tied to land use approvals and infrastructure planning. Businesses entering into real estate acquisitions or lease agreements should conduct careful due diligence regarding water access, utility obligations and future restrictions that could affect operations and long-term value.
Technological Advancements
The exponential growth of artificial intelligence and its related technological advancements are omnipresent in today’s news headlines. AI tools are being integrated into architectural and civil drafting software, municipal permitting and plan review systems, and legal software tools faster than users can adapt to them. With the technology itself still in its infancy and its integration into numerous professional software tools still largely untested, the opportunities for over-reliance are abundant. Whether it is a structural engineer confirming the accuracy of building load calculations on a permit application or an attorney reviewing the legal analysis in a land use entitlement memorandum, it is imperative that the professional signing or stamping an official document carefully review and double-check any work product generated by AI tools.
Ultimately, the legal landscape surrounding real estate development in Arizona is evolving alongside broader economic and societal changes. The most successful businesses and developers will be those that proactively monitor regulatory developments, engage experienced legal and planning professionals early and incorporate land use strategy into broader business planning. In today’s environment, adaptability and legal awareness are no longer advantages — they are necessities.
Benjamin Tate is a land use and zoning attorney at Withey Morris Baugh, PLC, joining the firm in 2017. Tate is a second-generation Phoenix native with deep roots in the Valley and a passion for development. As a former litigator, he brings to the table his formidable skill set as an advocate, with a tenacity for getting results. In his practice, Tate utilizes his considerable experience in politics on the local, state and national level to successfully navigate complex political and bureaucratic landscapes.
