As discussed in our prior post, the U.S. Department of Labor (DOL) issued a final rule earlier this year that increased the salary thresholds required to classify certain employees as exempt from overtime pay requirements under the Fair Labor Standards Act (FLSA). On November 15, 2024, the federal district
Continue Reading Federal District Court Vacates Biden’s DOL Overtime Rule
NLRB General Counsel: “Make-Whole Relief” for Non-Competes and No More “Stay-or-Pay”
National Labor Relations Board General Counsel (“GC”) Jennifer Abruzzo recently issued Memorandum GC 25-01 (“Memorandum”), suggesting new remedies for non-competes found to violate the National Labor Relations Act (“NLRA”) and proposing that the National Labor Relations Board (“NLRB”) presume “stay-or-pay” provisions to be unlawful. Although the Memorandum is not binding law, employers should expect GC Abruzzo to direct the NLRB’s regional offices to bring complaints and seek remedies consistent with the Memorandum. The NLRA generally only extends protections to nonsupervisory and nonmanagerial employees, and therefore the Memorandum is not applicable to non-compete or stay-or-pay provisions for employees who are supervisors or managers under the NLRA.
Make-Whole Relief for Unlawful Non-Competes
Part I of the Memorandum expands upon a May 2023 memo in which GC Abruzzo outlined her position that, except in limited circumstances, non-compete provisions violate the NLRA. In the new memo, GC Abruzzo asserts that the financial harms for employees subject to unlawful non-competes extend beyond costs associated with discipline or legal action and include “more pernicious harms” associated with attempted compliance, such as foregoing higher-paying job opportunities or incurring relocation costs. Arguing that rescission—the typical remedy for offending non-compete provisions—fails to address these harms, GC Abruzzo proposes “make-whole relief” for employees impacted by unlawful non-competes. Make-whole relief would include any wage and benefits differential caused by the non-compete restriction; costs of finding new employment that complied with the non-compete, such as lost wages due to being out of work longer or accepting a lower-paying job, or moving or retraining costs; and legal fees associated with defending against a claim regarding an unlawful non-compete.
“Stay-or-Pay” Provisions Framework
Part II of the Memorandum proposes that the NLRB adopt a new framework for assessing so-called “stay-or-pay” provisions, to presume that any such provision is unlawful regardless of whether it was entered into voluntarily. Stay-or-pay provisions are “any contract under which an employee must pay their employer if they separate from employment” and include training or educational repayment provisions, quit fees, damages clauses, and sign-on-bonuses or other types of cash payments tied to a mandatory stay period.Continue Reading NLRB General Counsel: “Make-Whole Relief” for Non-Competes and No More “Stay-or-Pay”
Is Your Workplace Election Ready? Voting Leave Laws Across the States
With Election Day just weeks away, employers should quickly brush up on laws that permit employees to take time off to vote. There is no federal law permitting time off to vote, but a majority of states and the District of Columbia have some form of voting leave law, with
Continue Reading Is Your Workplace Election Ready? Voting Leave Laws Across the StatesCalifornia Joins Growing List of States Prohibiting Employer Action Against Employees Who Refuse Political or Religious Communications
On Friday, California Governor Gavin Newsom signed SB 399, the “California Worker Freedom from Employer Intimidation Act” (the “Act”) that should be of interest to any company with employees in the state. The Act, which takes effect on January 1, 2025, adds a new section to the California Labor Code to prohibit employers from taking or threatening adverse employment action against an employee because the employee refuses to attend employer meetings about, or to participate in, receive, or listen to, any communications about the employer’s opinion on religious or political matters. The law is similar to, but broader than, laws in several other states that attempt to decrease the influence of “captive audience” meetings communicating an employer’s political or religious opinions.
Captive audience laws are frequently promoted by labor organizations that aim to limit employer communications related to unionization. However, the new California law is broader and applies to meetings and communications related to employers’ opinions on “political matters” or “religious matters,” both of which are defined terms in the Act.
“Political matters” are “matters relating to elections for political office, political parties, legislation, regulation, and the decision to join or support any political party or political or labor organization.” While the state will likely sharpen the contours of the law through regulation, as drafted this includes not only electoral and partisan political matters, but also issue-based activity, such as meetings about an employer’s position on proposed regulations or efforts to “activate” employees on a grassroots level to contact legislators about pending legislation. The definition of “political matters” also would cover union organizing.
“Religious matters” are “matters relating to religious affiliation and practice and the decision to join or support any religious organization or association.”Continue Reading California Joins Growing List of States Prohibiting Employer Action Against Employees Who Refuse Political or Religious Communications
Texas District Court Enjoins FTC’s Rule Banning Non-Compete Clauses
July 10, 2024, Covington Alert
On July 3, 2024, Judge Ada Brown of the United States District Court for the Northern District of Texas granted the motions for a preliminary injunction—filed by Ryan LLC (“Ryan”) and several trade associations, including the U.S. Chamber of Commerce (“Chamber”)—to prevent the FTC’s rule banning non-compete clauses from going into effect, but the court’s order only applies to the named plaintiffs (i.e., it is not a nationwide injunction). The court has indicated that it will issue a final order on the merits by August 30, 2024, just a few days before the FTC’s rule is scheduled to go into effect on September 4. It is possible that Judge Brown enjoins the non-compete ban nationwide in her final order.
Background
In April, the FTC issued a final rule banning almost all non-competes with U.S. workers, with narrow exceptions, pursuant to its claimed authority to issue competition-related rules under Sections 5 and 6(g) of the FTC Act. That same day, Ryan challenged the FTC’s rule and, shortly thereafter, filed a motion to stay and preliminarily enjoin the rule, arguing that the FTC has no statutory authority to promulgate the rule, that the rule is the product of an unconstitutional exercise of power, and that the FTC’s acts were arbitrary and capricious. The Chamber and other trade groups intervened as plaintiffs on May 8, making substantially the same arguments.
The Order
In its Order, the court found that the Plaintiffs had demonstrated a likelihood of success that (1) the FTC does not have the statutory authority to engage in competition-related rulemaking, (2) the non-compete rule is arbitrary and capricious, and (3) the plaintiffs and intervenors had satisfied the standard to obtain injunctive relief.Continue Reading Texas District Court Enjoins FTC’s Rule Banning Non-Compete Clauses
Changes to WA’s Non-Compete Law Require Employers to Take Action
Since 2020, with the adoption of Washington state’s non-compete statute (Chapter 49.62 of the Revised Code of Washington (“RCW 49.62”)), Washington has imposed significant restrictions on employer use of non-compete agreements with employees and independent contractors, permitting such agreements only subject to certain statutory and common-law requirements, including without limitation, a minimum annual earnings threshold (the 2024 limits are $120,559.99 for employees and $301,399.98 for independent contractors), and a Washington forum for any disputes.
Now, Senate Bill 5935 (“SB 5935”) – which takes effect on June 6, 2024 – amends the non-compete statute to further restrict the use of non-compete provisions and expand the types of agreements that may be considered non-competes. As a result, employers will need to take quick action to review their employment agreements and hiring processes to ensure compliance with the new law.
However, as discussed in our Covington Alert, on April 23, 2024 the Federal Trade Commission issued a final rule purporting to ban the use of non-competes with most U.S. workers. The FTC Rule – should it become effective – would supersede inconsistent state laws. The earliest the FTC Rule would take effect is late August 2024, and pending legal challenges may result in court orders that could delay or stay enforcement of the FTC Rule. Accordingly, employers with workers in Washington State should take steps to comply with SB 5935 before it takes effect on June 6, 2024. Employers should also consider consulting with employment and executive compensation counsel for assistance with navigating the evolving non-compete landscape.
Here is an overview of the key changes under SB 5935:Continue Reading Changes to WA’s Non-Compete Law Require Employers to Take Action
Senate Whitepaper Addresses AI in the Workplace
On September 6, 2023, U.S. Senator Bill Cassidy, ranking member of the Senate Health, Education, Labor and Pensions (HELP) Committee, published a white paper addressing artificial intelligence (AI) and its potential benefits and risks in the workplace, as well as in the health care context, which we discuss here.
Continue Reading Senate Whitepaper Addresses AI in the WorkplaceDOJ, FTC, CFPB, and EEOC Statement on Discrimination and AI
On April 25, 2023, four federal agencies — the Department of Justice (“DOJ”), Federal Trade Commission (“FTC”), Consumer Financial Protection Bureau (“CFPB”), and Equal Employment Opportunity Commission (“EEOC”) — released a joint statement on the agencies’ efforts to address discrimination and bias in automated systems.
The statement applies to “automated systems,” which are broadly defined “to mean software and algorithmic processes” beyond AI. Although the statement notes the significant benefits that can flow from the use of automated systems, it also cautions against unlawful discrimination that may result from that use.
The statement starts by summarizing the existing legal authorities that apply to automated systems and each agency’s guidance and statements related to AI. Helpfully, the statement serves to aggregate links to key AI-related guidance documents from each agency, providing a one-stop-shop for important AI-related publications for all four entities. For example, the statement summarizes the EEOC’s remit in enforcing federal laws that make it unlawful to discriminate against an applicant or employee and the EEOC’s enforcement activities related to AI, and includes a link to a technical assistance document. Similarly, the report outlines the FTC’s reports and guidance on AI, and includes multiple links to FTC AI-related documents.
After providing an overview of each agency’s position and links to key documents, the statement then summarizes the following sources of potential discrimination and bias, which could indicate the regulatory and enforcement priorities of these agencies.
- Data and Datasets: The statement notes that outcomes generated by automated systems can be skewed by unrepresentative or imbalanced data sets. The statement says that flawed data sets, along with correlation between data and protected classes, can lead to discriminatory outcomes.
- Model Opacity and Access: The statement observes that some automated systems are “black boxes,” meaning that the internal workings of automated systems are not always transparent to people, and thus difficult to oversee.
- Design and Use: The statement also notes that flawed assumptions about users may play a role in unfair or biased outcomes.
We will continue to monitor these and related developments across our blogs.Continue Reading DOJ, FTC, CFPB, and EEOC Statement on Discrimination and AI
Update on California and New York Pay Transparency Laws
As we discussed in a previous post, effective January 1, 2023, California employers must include pay scales in job postings, and a similar bill in New York was awaiting signature by Governor Kathy Hochul. The California Labor Commissioner has now issued guidance to assist employers in complying with the new law, and the New York State bill was signed into law on December 21, 2022 and is set to take effect on September 17, 2023.
California
The California Labor Commissioner recently published FAQs (adding to existing FAQs under the state’s equal pay law) with insights for employers on some gray areas in the new law:
Threshold for coverage.The FAQs clarify that an employer is covered by the pay transparency requirements if it reaches the threshold of 15 employees at any point in a pay period they compensate their workers at the minimum higher wage rate for the duration of the entire pay period and going forward as long as they have a minimum of 15 employees. Also, all employees, regardless of the number of hours worked or geographical location, will be included in the count, so long as there is at least one employee located in California.
Job postings for remote positions.The Labor Commissioner interprets the new law to mean that the pay scale must be included on a posting if the position may ever be filled in California, whether in-person or remote.
Information to include in job postings.The FAQs confirm that “pay scale” means the salary or hourly wage range that the employer reasonably expects to pay for a position, and can include just a set hourly or piece rate, rather than a range, if that is what the employer intends to pay. If the position’s hourly or salary wage rate will be based on a piece rate or commissions, the piece rate or commission range must be included in the job posting; however, the posting does not need to include bonuses, tips, or other compensation or tangible benefits provided in addition to a salary or hourly wage. Finally, the Labor Commissioner states that the pay scale must be expressly stated in the posting, and it will not be sufficient to comply with the new law to take shortcuts such as linking the salary range in an electronic posting or including a QR code in a paper posting that will then take the applicant to the salary information.Continue Reading Update on California and New York Pay Transparency Laws
Avoiding Layoffs In an Uncertain Economy
As interest rates rise and the threat of a recession looms, many employers are beginning to struggle with balancing the cost of maintaining their workforce with an expected decrease in profits. The frequent result of such a balancing act is a mass layoff. While a reduction in workforce may be
Continue Reading Avoiding Layoffs In an Uncertain Economy