Employer Policies and Procedures

FTC Finalizes Non-Compete Rule – Prohibiting All New Non-Compete Agreements

Jordan B. Schwartz Leave a comment

As many of you may have heard by now, on April 23, 2024, almost exactly one year after it set forth its Proposed Rule regarding Non-Compete Clauses, the Federal Trade Commission (FTC) issued a pre-publication version of its final Non-Compete Clause Rule (the “Final Rule”). Barring judicial interference, the Final Rule will likely go into effect in August (120 days after it is published in the Federal Register).

As expected, the Final Rule bans nearly all non-compete agreements between employers and workers – including employees, independent contractors, and even unpaid workers. Indeed, under the Final rule, an employer generally will be prohibited from entering or attempting to enter into a non-compete with a worker, maintaining a noncompete with a worker, or representing to a worker that the worker is subject to a noncompete. The Final Rule will also require employers to cease enforcement of existing non-competes (aside from agreements with senior executives, as we will explain below) and actively inform workers that existing non-compete clauses will no longer be enforced. The FTC will provide model language to help employers comply with the notification requirements.

Last year, during the Proposed Rule’s review process, our Labor and Employment team submitted comments on behalf of a coalition of businesses requesting certain revisions to the Proposed Rule. We realized that the Proposed Rule was going to be passed in some way, shape, or form.  Thus, we submitted extremely focused comments, in which we advocated for only three substantive revisions to the Proposed Rule: (i) that the sale of business exemption should not be limited to those with a 25% ownership but rather should apply to all business owners; (ii) that the Proposed Rule should not apply retroactively; and (iii) that the Proposed Rule should exclude executives, highly paid employees, highly skilled employees, and those with access to a company’s confidential information. Although we will never know for sure how much weight the FTC gave to our comments, there is no disputing that a significant portion of these desired outcomes were achieved. Continue reading →

New Website Accessibility Rule to Go into Effect

Jordan B. Schwartz Leave a comment

On Monday April 8, 2024, Attorney General Merrick Garland signed the final rule under Title II of the Americans with Disabilities Act (ADA) to ensure the accessibility of web content and mobile applications (apps) for people with disabilities.  This final rule clarifies the obligations of state and local governments to make their websites and mobile applications accessible and marks the United States Justice Department’s latest effort to ensure that no person is denied access to government services, programs, or activities because of a disability.  According to Attorney General Garland, “by issuing clear and consistent accessibility standards for state and local governments’ digital content, this rule advances the ADA’s promise of equal participation in society for people with disabilities.”

While this rule does not yet apply to businesses in the private sector, it is inevitable that such a rule is forthcoming, and that this rule will be used as a model for any future rule.  Thus, it is important for all hotels, restaurants, stores, and other places of public accommodation to be aware of the requirements set forth in this final rule and, where possible, to start preparing for the issuance of a similar rule.

As for the content of the final rule, it mandates technical standards for state and local governments to help ensure the accessibility of their programs and services provided through the web and mobile apps by adherence to WCAG, the Web Content Accessibility Guidelines, which is a set of guidelines that say what is needed for web accessibility, such as requirements for captions for videos. The stated goal of this final rule is to achieve a more inclusive society by providing clarity on how to make sure these platforms are accessible for people with disabilities and provide standards for addressing a wide variety of perceived barriers. For example, the rule will help ensure blind individuals can access information about public transportation on a city’s mobile app or website, enable people who are deaf or hard of hearing to participate in university lectures online, and allow individuals with manual disabilities affecting their ability to use a mouse to access web information about voter registration. A fact sheet detailing information about the final rule is available here. Continue reading →

FTC Targets Employers Utilizing Worker Surveillance Technologies

Darius Rohani-Shukla Leave a comment

When used appropriately, worker surveillance technologies like time and attendance software, video surveillance systems, GPS tracking software, and biometric technology can benefit employers in a variety of ways, including by boosting productivity, identifying internal and external cybersecurity threats, and even preventing or responding to workplace accidents. However, employers must be careful that employee monitoring programs do not run afoul of an increasingly wide range of regulators, now including the Federal Trade Commission.

In recent comments, FTC Division of Privacy and Identity Protection Associate Director Benjamin Wiseman outline the Commission’s commitment to protecting worker privacy. The Commission is the nation’s primary privacy regulator and its privacy enforcement tool is Section 5 of the FTC Act, which prohibits unfair, deceptive, and anticompetitive trade practices. In recent years, the Commission demonstrated its willingness to pursue novel technological issues through enforcement actions against companies utilizing AI facial recognition technologies.  Wiseman warned that businesses that infringe on worker privacy risk becoming targets of FTC enforcement actions, stating:  Continue reading →

Classification as Employee More Likely Under DOL’s New Rule

Lindsay A. DiSalvo Leave a comment

Not long after we rang in the new year, the Department of Labor (“DOL”) promulgated its Final Rule on how to analyze if a worker is an employee or independent contractor under the Fair Labor Standards Act (“FLSA”). Specifically, the “Employee or Independent Contractor Classification Under the Fair Labor Standards Act” Rule (“Independent Contractor Rule”) rescinds the standard adopted by the Department of Labor in January 2021 and replaces it with the more nebulous, multifactor analysis previously applied by the Agency based on longstanding judicial precedent. The new Independent Contractor Rule takes effect on March 11, 2024 and is likely to result in significantly more workers being classified as employees as compared to the 2021 Rule.

History of the Independent Contractor Analysis

The FLSA requires all employers to pay their employees a minimum wage for all hours worked, as well as overtime (1.5 times their regular rate of pay) for all hours worked in excess of 40 hours per week. However, the FLSA also exempts certain types of workers from these requirements, including independent contractors, who are not considered employees under the law. Despite explicitly exempting independent contractors from coverage under the FLSA, the law does not define the term “independent contractor”, nor does it provide any structure to determine whether a worker is an employee or an independent contractor. Thus, in enforcing the provisions of the FLSA, the DOL applied a multifactor analysis termed the “economic reality test” developed based on Supreme Court precedent.

Continue reading →

Understanding and Adjusting to the EEOC’s Strategic Enforcement Plan for 2024 to 2028

Darius Rohani-Shukla Leave a comment

Earlier this Fall, the EEOC released its strategic enforcement plan (SEP) for fiscal years 2024 to 2028.  The SEP establishes the EEOC’s six subject matter priorities that the Agency will focus its tools, including enforcement (including investigations, settlements, and litigation), education and outreach, research, and policy development on during that time frame. This SEP has important implications for employers as it lays out specific areas where failing to comply with federal employment laws and EEOC guidance could result in tough EEOC enforcement actions.

Priority #1: Eliminating Barriers in Recruitment and Hiring

Continue reading →

Ohio Becomes the 24th State to Legalize Recreational Marijuana

Kimberly Richardson Leave a comment

On November 7, 2023, Ohio voters passed a measure to legalize recreational marijuana. The state now joins 23 other states, two territories and the District of Columbia that have legalized marijuana for recreational use.

The approved ballot measure, commonly referred to as “Issue 2,” will allow adults over the age of 21 to buy, possess and grow marijuana as of December 7, 2023.  It is important to note that Issue 2 was a citizen-led initiative, which means lawmakers have the authority to change some of the language in the coming months.  Once finalized, the law will be captured in a new chapter of the Ohio Revised Code, Chapter 3780.

Ohio’s longstanding medical marijuana program will remain in effect.

What does this mean for the Ohio Employer?

The new law is not expected to significantly impact the workplace. Ohio employers are not required to permit or accommodate an employee’s use, possession, or distribution of recreational marijuana. Employers may still refuse to hire, discharge, discipline or otherwise take an adverse employment action against an individual because of that individual’s use, possession, or distribution of recreational marijuana. Employers may continue to establish and enforce drug testing policies, drug-free workplace policies, or zero-tolerance policies. Furthermore, if an employer terminates an employee because of that individual’s recreational marijuana use in violation of the employer’s policy, the employee will be considered to have been discharged for just cause. Continue reading →

Title VII and the Use of AI in Employment Decisions

Ashley D. Mitchell Leave a comment

Employers are increasingly turning to artificial intelligence (“AI”) for assistance in making employment decisions, and although AI can eliminate disparate treatment, employers should be aware of the potential for disparate impact. Title VII of the Civil Rights Act of 1964 (“Title VII”) prohibits discrimination on the basis of race, color, religion, sex (including pregnancy, sexual orientation, and gender identity), or national origin in employment practices (recruiting, hiring, monitoring, transferring, evaluating, terminating).

While New York City is the only jurisdiction that regulates the use of AI in employment decisions, there is EEOC guidance on the use of AI in the workplace and as a result of President Biden’s October 30, Executive Order we expect the Secretary of Labor to issue best practices around the use of AI in employment decisions soon.

New York City

New York City Local Law 144 regulates the use of automated employment decision tools. Automated employment decisions tools are “any computational process, derived from machine learning, statistical modeling, data analytics, or artificial intelligence, that issues simplified output, including a score, classification, or recommendation, that is used to substantially assist or replace discretionary decision making for making employment decisions that impact natural persons.”

Under Local Law 144 employers or employment agencies that use an automated employment decision tool to screen a candidate or employee for an employment decision must: Continue reading →

NLRB Returns to its Prior “Ambush” Election Rules

Kara Maciel Leave a comment

By Kara Maciel and Samuel Rose

The National Labor Relations Board (“NLRB”) has issued its 2023 Rule related to union representation elections. Representation petitions can be filed by employees, unions, or employers and ask the NLRB to conduct an election to determine whether employees wish to be represented by a union in collective bargaining.

The 2023 Rule reverses many of the provisions in the NLRB’s 2019 Rule which extended the timeline that the parties had to conduct an election.  The 2019 Rule gave rise to extensive litigation resulting in the U.S. Court of Appeals for D.C. striking down significant portions of the rule. The NLRB had already rescinded the struck down provisions of the 2019 Rule, but the 2023 Rule makes additional changes, essentially returning the election process to the 2014 Rule. The NLRB says that the 2023 Rule “will meaningfully reduce the time it takes to get from petition to election in contested elections and will expedite the resolution of any post-election litigation.”

The 2023 Rule includes numerous differences from the 2019 Rule, including: Continue reading →

Fifth Circuit Articulates New Employee-Friendly Test for Title VII Claims

Ashley D. Mitchell Leave a comment

Title VII plaintiffs in the Fifth Circuit are no longer required plead disparate treatment in an ultimate employment decision.

In Hamilton v. Dallas County, the en banc court overturned decades of precedent and articulated a new employee-friendly rule for Title VII disparate treatment claims—“a plaintiff plausibly alleges a disparate treatment claim under Title VII if she pleads discrimination in hiring, firing, compensation, or the ‘terms, conditions, or privileges’ of her employment.”

The Standard Articulated by the Hamilton Court

  • “To adequately plead an adverse employment action, plaintiffs need not allege discrimination with respect to an ‘ultimate employment decision.’ Instead, a plaintiff need only show that she was discriminated against, because of a protected characteristic, with respect to hiring, firing, compensation, or the ‘terms, conditions, or privileges of employment’—just as the statute says.”
  • “The days and hours that one works are quintessential ‘terms and conditions’ of one’s employment”
  • “We thus leave for another day the precise level of minimum workplace harm a plaintiff must allege on top of showing discrimination in one’s ‘terms, conditions, or privileges of employment.’”

Background

The Dallas County Sheriff’s Department (“Department”) gives its detention officers two days off each week. Prior to 2019, detention officers’ days off were determined by seniority. In 2019, the Department eliminated the seniority system and days off were determined by sex—only men were allowed to take off Saturday and Sunday. Women could not elect to have both of their days off on the weekend.

Nine female detention officers sued the Department, alleging that the sex-based scheduling policy violated Title VII’s prohibition against sex discrimination. The trial court granted the County’s motion to dismiss, reasoning that the scheduling policy was not an “ultimate employment decision.” Under Fifth Circuit precedent, alleged conduct violated Title VII if it was an “ultimate employment decision” such as hiring, granting leave, discharging, promoting, and compensating. The Fifth Circuit panel affirmed the trial court’s dismissal, noting that this case was the “ideal vehicle” for an en banc court to align the Circuit’s precedent with the meaning of Title VII’s text. The Fifth Circuit panel explained that “[s]urely allowing men to have full weekends off, but not women, on the basis of sex rather than a neutral factor like merit or seniority, constitutes discrimination with respect to the terms or conditions of those women’s employment.”

En Banc Decision Continue reading →

In withdrawal liability, a non-employer may always employ its defense that it was never an “employer”

Mark Trapp Leave a comment

When a multiemployer pension fund determines that an employer owes withdrawal liability, the fund must send the employer a notice and demand for payment. 29 U.S.C. § 1399(b)(1). To challenge the fund’s withdrawal-liability assessment, the employer must timely request a review by the fund, 29 U.S.C. § 1399(b)(2)(A), and if the employer disagrees with the results of the review, it must timely initiate arbitration.

An employer that fails to initiate arbitration waives any defenses to the assessed withdrawal liability and the amount demanded becomes due and owing. The Multiemployer Pension Plan Amendments Act (“MPPAA” or “the Act”) states:

If no arbitration proceeding has been initiated pursuant to subsection (a), the amounts demanded by the plan sponsor … shall be due and owing on the schedule set forth by the plan sponsor. The plan sponsor may bring an action in a State or Federal court of competent jurisdiction for collection. 29 U.S.C. § 1401(b)(1).

Thus, the failure to initiate arbitration has a simple result – the amount demanded by the plan sponsor becomes due and owing. Numerous court decisions have noted this harsh consequence of the failure to initiate arbitration, stating “In short, arbitration reigns supreme under the MPPAA.” Robbins v. Admiral Merchants Motor Freight, Inc., 846 F.2d 1054, 1057 (7th Cir. 1988).

But what if the entity claims not to have been an “employer” at all? Does the failure to initiate arbitration preclude such an entity from contesting the withdrawal liability assessment? The short answer is “no” – whether a company is an “employer” within the meaning of the MPPAA is a threshold question for the court. And since only an “employer” is required to arbitrate, a district court may address this threshold question before arbitration.

This exception was at issue in Central States, Southeast and Southwest Areas Pension Fund v. Event Productions, Inc., No. 21-cv-5695 (N.D. Ill. June 1, 2023). In that case, Continue reading →