Category: Blog

ICE has updated its audit guidelines, and the stakes for I-9 compliance just increased. In this episode of California Employment News, Weintraub Tobin attorneys Shauna Correia and Meagan Bainbridge discuss how recent ICE changes are reclassifying common I-9 errors and what that means for employers facing potential audits.

The AI electricity demand shortage is not a hypothetical risk on a five-year horizon — it is an engineering constraint that is already limiting deployment of hardware that has been ordered, paid for, and delivered.

Nvidia GPUs are sitting in warehouses because the data centers to house them don’t have power. The data centers don’t have power because transformer lead times from Siemens, ABB, and Hitachi Energy are running at five years. The transformer backlog exists because the industrial capacity to manufacture large power transformers — the copper windings, the specialized steel cores, the rare earth components — was allowed to atrophy during the decades when nobody was building large-scale electrification infrastructure.

Craig Tindale made this point with particular force in his Financial Sense interview. The AI narrative has been built almost entirely on the financial ledger: compute investment, model capability, revenue projections, market capitalization. The material ledger — the copper, the transformers, the electrical infrastructure, the water for cooling, the land for physical footprint — has been largely ignored. That asymmetry is now producing visible bottlenecks that no amount of capital can resolve on a short timeline.

China’s position is instructive by contrast. China has three times the electrical generating capacity of the United States. It is expanding that capacity at a rate that dwarfs Western grid investment. The AI race is not just a race for compute. It is a race for the physical infrastructure that powers compute — and on that dimension, the current trajectory has China winning in slow motion while the West debates transformer procurement timelines.

Tindale’s prediction: by late 2027, the AI electricity demand shortage will be front-page news as data center expansion plans collide with grid capacity limits that cannot be resolved in the time frames the industry has promised investors. Position accordingly: grid infrastructure, electrical equipment manufacturers, and energy generation assets are the picks-and-shovels play of the AI era that nobody is talking about.

China copper supply chain control in 2026 is no longer a future risk — it is the present reality, and the implications for American industry, defense, and infrastructure are more severe than most analysts are willing to state plainly.

China controls approximately 40% of global copper smelting capacity and is aggressively expanding that share. Through state-backed financing, below-cost processing contracts, and strategic acquisitions across Chile, Peru, the DRC, and Zambia, Chinese entities have positioned themselves as the unavoidable midstream node in the global copper supply chain. Mine the ore anywhere in the world, and there is a meaningful probability that it flows through a Chinese smelter before it becomes a usable industrial input.

The downstream consequences are concrete. Every hyperscale data center requires approximately 50,000 tonnes of copper in construction alone. The United States is planning 13 to 14 of them. Every EV requires roughly four times the copper of an internal combustion vehicle. The grid upgrades required to power the electrification transition need hundreds of thousands of tonnes more. All of this demand converges on a supply chain whose midstream is controlled by a strategic competitor.

Craig Tindale mapped this dependency in forensic detail in his Financial Sense interview, drawing on bottom-up analysis of every major copper processing node globally. His conclusion is not that a crisis is coming. His conclusion is that the crisis is already structural — it simply hasn’t triggered a visible market event yet. When it does, the response timeline is measured in decades, not quarters. Copper mines take 19 years from discovery to production. Smelters take years to permit and build. The window to act was twenty years ago. The second-best time is now.

For investors: copper royalty companies, mid-tier miners with permitted projects in stable jurisdictions, and Western midstream processors building capacity outside Chinese control are structural positions, not trades. China copper supply chain control is the defining material constraint of the next industrial era.

Eisenhower industrial policy lessons are among the most relevant and least cited precedents for America’s current strategic predicament — because Eisenhower understood something that most politicians today have never had to learn: logistics wins wars, and logistics requires manufacturing.

Dwight Eisenhower is remembered for two things in popular history: his warning about the military-industrial complex, and the interstate highway system. Both are misread. The warning about the military-industrial complex is typically invoked as an argument for constraining defense spending. What Eisenhower actually warned against was the corruption of the defense procurement process by financial interests — not the industrial capacity itself, which he regarded as essential. The interstate highway system was not a public works project. It was a national defense infrastructure investment designed to allow the rapid movement of military forces across the continental United States, modeled explicitly on the German Autobahn that Eisenhower had observed during the Allied advance in 1945.

Craig Tindale placed Eisenhower in a lineage of leaders — Hamilton, Napoleon, Menzies, Churchill — who understood that industrial capacity is not an economic amenity. It is the physical foundation of national power. Eisenhower won the European theater not through tactical brilliance but through logistical dominance. He understood that you win by being able to produce more of everything your opponent can destroy faster than they can destroy it. That understanding shaped every institutional and infrastructure decision he made as president.

The Eisenhower industrial policy lessons for 2026 are direct. Rebuild the production base before you need it, because by the time you need it, it’s too late to build. Treat infrastructure as defense. Understand that the capacity to manufacture is the capacity to project power. And never mistake financial efficiency for strategic strength — a lesson America learned in the 1940s, forgot in the 1990s, and is relearning now at considerable cost.

US manufacturing decline in the technology sector was on full display at CES 2025 — not in a press release or a government report, but in the composition of the exhibitor floor itself.

The Consumer Electronics Show is the annual showcase of global technology innovation. For decades it was an American-dominated event, a demonstration of Silicon Valley’s capacity to define the direction of the technology economy. In January 2025, that narrative cracked visibly. Over 50% of exhibitors came from Asia. China alone accounted for 30 to 35% of the total exhibitor count. American companies represented less than 28% of the show floor — in an event held in Las Vegas, in the country that invented the consumer electronics industry.

Craig Tindale referenced this data point in his Financial Sense interview not as a cultural observation but as a material one. The companies at CES were not just showing products. They were demonstrating manufacturing capability — the ability to design, prototype, and produce at scale. The Chinese exhibitors were making things. The American exhibitors were largely showing software interfaces to hardware made elsewhere.

This is the visible face of the deindustrialization thesis. We did not just offshore manufacturing. We offshore the knowledge of how to manufacture. The engineers who understand how to design for manufacturing, how to spec a production line, how to troubleshoot yield issues at scale — those skills follow the factories. They don’t stay in the country of the brand owner. They accumulate in the country of the manufacturer.

The CES floor composition is a leading indicator. When the companies that make the physical things stop showing up at the world’s premier technology showcase, it is because they no longer exist in sufficient density to fill the floor. That is not a trend that reverses with a tariff. It reverses with a generation of deliberate industrial policy — if we start now.

The Federal Reserve deindustrialization blind spot is not an accident. It is a structural feature of the theoretical frameworks the FOMC uses to model the economy — and it has allowed thirty years of industrial hollowing to proceed without triggering a single alarm in the Fed’s monitoring systems.

The core of the problem lies in the price theory assumptions embedded in standard macroeconomic models. Neoclassical economic theory posits that markets clear efficiently: if a smelter closes, demand for its output will eventually generate sufficient price signals to reopen it or create a substitute. The model treats industrial capacity as fungible and reversible. Close a factory, the workers disperse, the capital depreciates, but the capacity is theoretically available to be reconstituted when prices justify it.

This is not how industrial capacity actually works. Craig Tindale put it plainly: when a smelter closes, the workforce disperses. The engineers retire or retrain. The institutional knowledge — the embodied understanding of how to safely operate a sulfuric acid processing line or a zinc dust facility — disappears with the people who held it. It cannot be reconstituted by a price signal. It has to be rebuilt from scratch over years, training new people in skills that no longer exist in the domestic labor market. The models don’t capture this because the models don’t track skills, they track prices.

The FOMC’s inflation mandate has made this worse. When the Fed focuses on consumer price stability, it systematically ignores asset price inflation — housing, financial instruments — while treating industrial input price increases as the primary threat to be suppressed through rate policy. High interest rates make industrial capital projects uneconomic. The cost of capital for a copper smelter at 15-20% WACC means no copper smelter gets built. Cheap money goes into financial assets. The industrial economy starves while the paper economy inflates.

The Federal Reserve deindustrialization blind spot isn’t a conspiracy. It’s a model failure. And model failures of this scale have consequences that don’t show up until they’re too large to ignore.

Unrestricted warfare economic strategy — the use of financial markets, trade policy, and commercial mechanisms as weapons of geopolitical conflict — is not a theory. It is a documented doctrine, and China has been executing it for twenty-five years while the West debated whether it was real.

In 1999, two colonels in the People’s Liberation Army published a strategic manual titled “Unrestricted Warfare.” Its central argument was that 21st century conflict would not be limited to kinetic military engagements. Any domain — financial markets, trade networks, information systems, material supply chains, legal systems — could be weaponized against an adversary. The key insight was that Western liberal democracies, conditioned to think of warfare as tanks and aircraft, would not recognize economic and commercial operations as acts of war until the damage was irreversible.

Craig Tindale’s analysis in his Financial Sense interview maps the execution of this doctrine across the critical mineral supply chain with forensic precision. Chinese state smelters offering below-cost processing contracts to Chilean copper miners — unrestricted warfare. State-backed short sellers targeting DoD-funded industrial startups — unrestricted warfare. Gallium export restrictions timed to coincide with Western directed energy weapons programs — unrestricted warfare. The pattern is consistent, the doctrine is explicit, and the West has been largely too conditioned by Cold War kinetic thinking to recognize it.

The investment implication is that standard geopolitical risk frameworks are insufficient. Companies with Chinese-controlled input dependencies carry risks that don’t appear in standard financial models. The risk is not that China will invade. The risk is that China will simply stop issuing export licenses. That is a commercial decision that happens to produce military-grade strategic outcomes. Unrestricted warfare economic strategy doesn’t require a declaration of war. It just requires patience and control of the midstream.

Mandatory fees added to customer checks have become one of the more aggressively litigated areas in California consumer and employment law. Restaurants are the most visible target, but the issue reaches any California business that adds a line-item charge to customer invoices — event venues, hotels, salons, fitness studios, delivery services, and beyond. The framework is layered: local ordinances, a statewide gratuity statute interpreted broadly by the Court of Appeal, and the Consumers Legal Remedies Act as amended by SB 478 and SB 1524. Here are five considerations for California employers.

1. Raising menu (or service) prices is the cleanest path.

The cleanest legal approach is generally to raise prices rather than add a separate fee to customer checks. Price increases are not subject to local service-charge ordinances, are not covered by the gratuity analysis under O’Grady v. Merchant Exchange Productions, Inc. (2019) 41 Cal.App.5th 771, and avoid the disclosure traps of SB 478. Economically, the approach achieves the same result as an across-the-board house-retained fee without the regulatory exposure. The Santa Monica City Attorney’s office has publicly identified price increases as the safest path.

Bottom line: If the goal is to recover costs across the board, building those costs into the listed price is materially less risky than collecting them through a separate fee.

2. Several California cities require mandatory service charges to be paid to employees — and the coverage rules reach beyond city-based employers.

Santa Monica (SMMC § 4.62.040), West Hollywood (WHMC § 5.130.050), Berkeley (BMC § 13.99), and Oakland (OMC § 5.92), for example, each have ordinances requiring mandatory service charges to be distributed to non-managerial employees who contributed to the chain of service. Santa Monica treats violations as strict liability. Both Santa Monica and West Hollywood apply their ordinances to any employee performing as little as two hours of work per week within city limits, regardless of where the employer is headquartered — a coverage trigger that catches employers operating across Los Angeles County. West Hollywood goes further on healthcare-related surcharges: within seven days of collection, the surcharge revenue must either be deposited into employee-controlled accounts (FSAs, HSAs, or POP cafeteria plans) or paid directly to employees as wages, and the employer cannot retain any portion.

Bottom line: Employers with operations in any of these jurisdictions should assume that mandatory service charges will need to be distributed to non-managerial employees and must understand these heightened regulations.

3. The O’Grady “reasonable customer” test still applies statewide.

The O’Grady decision held that a mandatory service charge can constitute a “gratuity” under Labor Code § 351 — meaning the employer must distribute it to non-managerial employees — if a reasonable customer would believe the charge is for the server’s work. The court rejected the prior view that mandatory service charges are categorically not gratuities, and emphasized that the analysis turns on the customer’s reasonable expectations rather than the label. Plaintiffs’ firms have since filed putative class actions and PAGA claims against California restaurants and hospitality employers asserting that house-retained fees are gratuities under O’Grady. The risk is not limited to jurisdictions with local ordinances.

Bottom line: O’Grady establishes a statewide gratuity exposure for any mandatory fee a customer might reasonably believe is for the employee’s service — regardless of what the fee is called or where the business is located.

4. If a fee is retained, the label and structure have to do real work.

A business that adds a mandatory fee and retains it must navigate both the local ordinances (where applicable) and the O’Grady test. Labels suggesting the fee compensates employee service — “service charge,” “auto-gratuity,” “kitchen appreciation fee,” “living wage fee,” “hospitality fee,” “healthcare surcharge,” “benefits surcharge” — fall directly within the local ordinance definitions and are highly likely to be treated as gratuities under O’Grady. A retained fee has a meaningful chance of surviving challenge only if (i) it is described with specificity as offsetting a defined non-labor cost (for example, credit card processing or a specific non-labor regulatory cost), (ii) it is actually used for that stated purpose — not commingled with payroll, (iii) it is disclosed clearly and conspicuously before the customer orders, on menus, online ordering pages, and receipts, and (iv) the disclosure expressly disclaims being for employee services. Internal accounting should track fee revenue against the disclosed purpose.

Bottom line: A retained fee is defensible only if the label, the disclosure, the actual use of the funds, and the recordkeeping all align — the label alone will not save it.

5. SB 478 and SB 1524 add a separate statewide transparency layer that reaches beyond restaurants.

Effective July 1, 2024, SB 478 amended the Consumers Legal Remedies Act (Civ. Code § 1770(a)(29)) to prohibit advertising or listing a price that does not include all mandatory fees and charges, often referred to as drip pricing, with limited exceptions for government taxes and reasonable shipping. The law applies to virtually every California business that sells goods or services to consumers — not just restaurants. Restaurants, bars, and certain food businesses received a carve-out under SB 1524, but only if mandatory fees are clearly and conspicuously displayed with an explanation of their purpose on any menu, advertisement, or other display showing the price of a food or beverage item. As of July 1, 2025, the “clear and conspicuous” disclosure must meet the technical standards in Civil Code § 1791(u) — text in larger or contrasting type, font, or color, or otherwise visually set off from the surrounding text. Violations of SB 478 can be enforced as CLRA claims, including on a class basis, with damages of the greater of actual damages or $1,000 per violation, plus restitution, punitive damages, and attorneys’ fees.

Bottom line: Any California business — restaurant or otherwise — adding mandatory fees to customer transactions should review its pricing displays, online checkout flows, and menu disclosures against SB 478 and the July 1, 2025 technical requirements to avoid a CLRA class action layered on top of the underlying service-charge exposure.

Mandatory fees are now subject to a complex analysis in California: local service-charge ordinances, the statewide O’Grady gratuity test under Labor Code § 351, and the SB 478/SB 1524 transparency framework under the CLRA. Each layer carries its own private right of action. Employers should periodically review their customer-facing fee structures, disclosures, and internal accounting against this framework.

The post Friday’s Five: Mandatory Fees and Service Charges in California — What Employers Should Know appeared first on California Employment Law Report.

The magnesium titanium supply chain is one of the most critical and least understood dependencies in American defense manufacturing — and a single facility closure in Utah may have compromised it for years.

Titanium is essential to advanced aerospace manufacturing. An F-35 fighter is approximately 25% titanium by structural weight. Titanium is also used extensively in naval vessels, missile casings, and satellite components. It is strong, lightweight, and resistant to heat and corrosion in ways that no common substitute replicates at aerospace-grade performance levels.

Producing titanium metal from ore requires magnesium as a chemical reducing agent in the Kroll process — the dominant industrial method for titanium production. Without sufficient magnesium input, titanium output is constrained regardless of how much titanite ore you have in the ground. The magnesium titanium supply chain is sequential and non-negotiable: no magnesium, no titanium metal, no F-35 airframe.

US Magnesium operated a production facility on the shores of the Great Salt Lake in Utah — for decades the primary domestic magnesium producer and a critical node in the defense supply chain. The facility was environmentally problematic, generating significant air and water pollution. Under ESG pressure and facing bankruptcy, it was purchased by the State of Utah and retired. The environmental case for closing it was real. The national security case for keeping it open was also real. The ESG narrative won, and the magnesium titanium supply chain lost a domestic anchor it has not replaced.

Craig Tindale used this as a case study in the gap between ideological policy optimization and mechanical systems thinking. We closed a polluting facility without first building its replacement. We broke the supply chain and then declared victory over pollution. India experienced exactly this failure mode during a titanium production run — ran out of magnesium mid-process and had to halt output. We have arranged for the same vulnerability domestically. The F-35 program office knows this. The public doesn’t.

A hard asset investing strategy built around physical scarcity is not a contrarian bet in 2026 — it is the logical conclusion of thirty years of Western deindustrialization meeting the most material-intensive technology buildout in history.

Let me state the framework plainly. The paper economy — equities, bonds, derivatives, financial instruments of every variety — has expanded to approximately $400 trillion in notional value. The physical industrial economy that actually produces the goods, energy, and materials the world depends on represents roughly 1 to 2 percent of that figure. That ratio is historically anomalous. It was produced by three decades of financialization, cheap money, and the systematic underinvestment in physical productive capacity that Craig Tindale documented in detail in his Financial Sense interview. It will not persist.

The normalization of that ratio — whether gradual through rotation or abrupt through crisis — is the defining investment theme of the next decade. Physical assets that the industrial economy cannot function without will appreciate relative to financial instruments whose value rests on assumptions about perpetual growth in a system that is hitting material constraints.

The specific hard asset investing categories I’m watching: physical gold and silver held outside the banking system; uranium through vehicles like the Sprott Physical Uranium Trust; copper royalty companies with exposure to projects in stable jurisdictions; critical mineral processors building Western midstream capacity; and agricultural land in water-secure regions. Each of these positions reflects the same underlying thesis: the physical world is reasserting its primacy over the financial world, and the repricing will be substantial.

This is not a trade. It doesn’t have a price target or a twelve-month horizon. It is a structural allocation to the thesis that what is real, scarce, and essential will outperform what is abundant, financial, and derivative. History supports that thesis. The supply chain math demands it.