APPLIES TO  All Employers

EFFECTIVE Pending

QUESTIONS? Contact HR On-Call (888) 378-2456

Key Takeaways  The FTC is currently considering a sweeping ban of non-compete agreements for all employers.  If implemented, employers would need to review their restrictive covenants as well as their procedures on preserving confidential information and trade secrets. Violations could result in civil penalties, restitution, damages, injunctive relief, or reformation of contracts in addition to a referral to the Department of Justice for criminal prosecution.

Discussion

On January 5, 2023, the Federal Trade Commission (FTC) unveiled its proposed rule effectively banning most non-competition agreements and superseding all conflicting state laws. In the proposed rule, the FTC explains that non-competes “prevent workers from leaving jobs and decrease competition for workers” and “lower wages for both workers who are subject to them as well as workers who are not.” Therefore, according to the FTC, non-competes are an unfair method of competition and are in violation of Section 5 of the Federal Trade Commission Act. By targeting non-competes, the FTC anticipates employee earnings could increase between $250 billion and $296 billion per year.

The proposed rule defines a non-compete as an agreement that has “the effect of prohibiting the workers from seeking or accepting employment with a person or operating a business after the conclusion of the worker’s employment with the employer.” It applies to both explicit non-competition clauses in employment agreements as well as non-disclosure or non-solicitation agreements that are so broad, they operate as de facto non-compete agreements. It would apply to both prospective and existing non-competes. In addition, it prohibits requiring employees to pay back unreasonable “training costs” if the employment relationship ends within a certain period of time.

The proposed rule would impact all employers and would prevent them from entering into or enforcing non-competes with employees or independent contractors. Employers would need to void any existing non-competes within six months of the effective date of the proposed rule. The notable exception from this proposed rule is a restrictive covenant entered into in connection with the sale of a business and applies to individuals who owned at least 25% of the ownership interest in the business.

What should employers do now? First, remember this is only a proposed rule. From the date it was issued, the FTC has a 60-day public comment period in which to solicit feedback regarding the proposed rule. After the comment period closes, the FTC has its own deliberation period which could also take a significant period of time if there are a lot of objections to the proposed rule – which there is expected to be. Compliance is required 180 days after the final rule is published.

With that said, employers should use the present time to evaluate their ability to comply if the rule survives legal challenges and goes into effect without any significant changes. If the goal of non-competes is to protect a company’s confidential information and trade secrets, other clauses can still be effectively used so long as they do not run afoul of the proposed rule. Carefully tailored confidentiality and non-solicitation clauses are still enforceable if they are not overly broad. Compliant restrictive covenants should be given only to those who are among the most highly compensated in the company and those who genuinely have access to trade secrets. Remember, the proposed rule is meant to prohibit non-competes that unreasonably target low-wage and unskilled workers. Employers should consult with their legal counsel now to determine the extent of the impact to their business and proactively tailor their restrictive covenants to be compliant in the event the proposed rule goes into effect.

Action Items

1. Review the proposed rule here and the FTC’s Fact Sheet.
2. Submit a public comment through March 6, 2023, if desired.
3. Review enforceability of current restrictive covenants with legal counsel.
4. Continue monitoring the FTC website for updates on the rulemaking process.
5. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

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Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2023 ManagEase

APPLIES TO  All Employers

EFFECTIVE December 16, 2022

QUESTIONS? Contact HR On-Call (888) 378-2456

Key Takeaways Employers who have contractor employees on-site are limited in their options to restrict those employees from the employer’s property when the off-duty contractor employees use the property for protected Section 7 activities like union organizing. Violations could result in a cease and desist or violation notice posted at the workplace in addition to compensating employees whose rights have been violated.

Discussion

The National Labor Relations Board (NLRB) has reversed course for the access standard for off-duty employees of an onsite contractor to engage in Section 7 activities in the workplace. The previous standard under Bexar County I allowed property owners to exclude the employees of an onsite contractor from the property for Section 7 activities if the property owner can demonstrate that the contractor employees “have one or more reasonable nontrespassory alternative means to communicate their message.” The Court of Appeals for the D.C. Circuit reviewed the standard in Local 23, American Federation of Musicians v. National Labor Relations Board and determined the NLRB arbitrarily implemented the standard for determining when a property owner could prohibit an onsite contractor’s employees from conducting labor organizing activity on the premises. The Court remanded the case to the NLRB to affirm the standard or develop a new test.

The NLRB chose to reinstate the union-favorable standard under New York New York Hotel & Casino which was in effect prior to the Bexar County I standard. The NLRB reasoned that a contractor employee’s position was more similar to employees of the property owner rather than nonemployee third parties like unions and nonemployee organizers. This means a property owner can only lawfully exclude off-duty employees who regularly work on the property for an onsite contractor who are seeking to engage in Section 7 activity if they are able to show the Section 7 activity significantly interferes with the use of the property or other legitimate business reasons like seeking to maintain production and discipline. Employers with onsite contractors should review their policies regarding access for employees of the onsite contractor and their ability to engage in off-duty Section 7 activity on the property.

Action Items

1. Review policies regarding access of company property by employees of onsite contractors.
2. Train appropriate personnel on revised standard.
3. Consult with legal counsel prior to responding to protected Section 7 activity.
4. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

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Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2023 ManagEase

APPLIES TO All Employers with Employees in IL, IN, and WI

EFFECTIVE October 25, 2022

QUESTIONS? Contact HR On-Call (888) 378-2456

Key Takeaways Employers do not have to make a reasonable accommodation under the Americans with Disabilities Act or Illinois law when an employee under a medical restriction is unable to perform an essential function of the job. Employers should still exercise caution and consult with legal counsel when considering an adverse action against an employee protected by the Americans with Disabilities Act (and/or state law) since violations could result in fines of up to $150,000 and damages in civil actions.

Discussion

In Tate v. Dart, et al., the Seventh Circuit Court of Appeals stated that a medical restriction that leaves an employee unable to perform an essential function of their position does not result in disability discrimination for a failure to accommodate under the Americans with Disabilities Act (ADA) and Illinois state law. Here, a correctional officer suffered a back injury at work and received time off. His return to work included medical restrictions to “avoid situations in which there is a significant chance of violence or conflict.” Upon his return, the employee was promoted to sergeant. As an accommodation, he was transferred to a unit where the chance of violence was low. He later sought an additional promotion to lieutenant provided he could obtain a medical clearance. He failed to do so, and the Sheriff’s Office declined his request for an accommodation and returned him to his rank as sergeant. The Sheriff’s Office cited lieutenants have to frequently respond to emergency situations involving disruptive inmate behavior which results in the use of force. Hence, responding to situations with a significant chance of violence or conflict was an essential function of the job.

The employee alleged disability discrimination and failure to accommodate; however, both the district court and the Seventh Circuit found in favor of the Sheriff’s Office and Cook County. In its ruling, the Court looked into whether responding to inmate violence was an essential function of the correctional lieutenant position. In this case, the job description listed responding to emergencies and using physical force as major components of the job. The data supported this description since there was at least one incident per week resulting in the use of force during a two-year period. The Court further said that since the medical restrictions used the word “avoid”, employers should be able to rely on the restriction’s plain meaning. The ruling provides significant guidance for employers on their evaluation of medical restrictions as it relates to whether employees can perform the essential functions of the job upon their return to duty. In addition, it shows the importance of having updated and accurate job descriptions.

Action Items

1. Review and update “essential functions” in job descriptions.
2. Update procedures on reviewing medical restrictions upon return to work.
3. Train appropriate personnel on managing accommodation requests.
4. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

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Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2023 ManagEase

APPLIES TO All Employers with CA Employees or Applicants

EFFECTIVE January 1, 2023

QUESTIONS? Contact HR On-Call (888) 378-2456

Key Takeaways Covered employers with the possibility of hiring employees in California must comply with the state’s pay transparency law in job postings. The California Labor Commissioner’s Office released additional guidance on the law’s requirements as it relates to covered employee count, pay scales, and remote work. Violations of the law can result in civil penalties and damages in civil actions.

Discussion

The California Labor Commissioner’s Office updated its Frequently Asked Questions to clarify some elements of SB 1162, the new pay transparency law. SB 1162 went into effect on January 1, 2023. It requires employers with 15 or more employees to post a pay scale in open job advertisements and all employers to disclose pay ranges upon request and has additional requirements for the Annual Pay Data Report. Employers who were looking for more robust guidance will have to wait. In the interim, we have the below clarifications.

Employee Count. The Labor Commissioner clarified that employers should count employees for the 15-employee threshold as they do for the purposes of 2022 COVID-19 Supplemental Paid Sick Leave and the new minimum wage rates. This means the threshold applies when: 1) an employer reaches 15 employees at any point in a pay period; and 2) at least one employee is currently located in California. All employees, including those located out of state, count for the purpose of reaching the threshold.

Remote Work. The pay scale must be included in the job posting if the position can ever be filled in California whether in-person or remotely.

Pay Scale. The pay scale does not include bonuses, commissions, tips, or other benefits. If the hourly or salary wage is based on a piece rate or commission, then the piece rate or commission range must be included. Links and QR codes cannot be substituted for placing the wage information in the actual posting.

Remedies. Employees can file a claim or civil action for retaliation within one year of the retaliation.

Action Items

1. Review SB 1162 and the additional guidance.
2. Update job postings to comply with requirements.
3. Train appropriate personnel on job posting requirements and pay data reporting.
4. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

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Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2023 ManagEase

APPLIES TO All Employers with CA Employees and Applicants

EFFECTIVE Pending

QUESTIONS? Contact HR On-Call (888) 378-2456

Key Takeaways The CRD is contemplating additional restrictions on the use of criminal history in employment decisions. Violations of the law include damages of up to $10,000 per violation, punitive damages, and attorneys’ fees and costs.

Discussion

California’s Civil Rights Department (CRD) recently issued draft revisions to the Fair Employment and Housing Act (FEHA) regulations governing the use of criminal history in employment decisions. The updated revisions were made after receipt of public comments. Although the last written comment period ended on December 30, 2022 and the CRD has not yet scheduled the Council’s next meeting, employers should review and consider what changes they will need to make to their background check procedures. The following are key changes being considered.

Prohibition of Consideration Prior to Conditional Offer. An employer cannot consider criminal history prior to making a conditional offer even if the applicant volunteered the information about their criminal history. There is a limited exception if the employer or their agent is required by law to conduct a criminal background check.

Denial of Employment Due to Conviction History. The CRD clarified that the applicant’s possession of a benefit, privilege, or right required in order to perform the job by a licensing, regulatory, or government agency or board, does not demonstrate that the conviction history directly and adversely relates to the duties of job. Additional factors were also added as consideration for the “nature and gravity of the offense or conduct,” “time that has passed since the offense or conduct and/or completion of the sentence,” and “nature of the job held or sought.”

Evidence of Rehabilitation or Mitigating Circumstances. If an applicant voluntarily provides evidence of rehabilitation or mitigating circumstances before or during the initial individualized assessment of whether the criminal history directly and adversely relates to the duties of the job, that evidence must be considered as part of the initial individualized assessment. If after the employer provides notice of a preliminary decision to disqualify, then the applicant can submit such evidence optionally and voluntarily. An employer cannot refuse to accept such additional evidence voluntarily provided by an applicant at any stage of the hiring process.

Action Items

1. Review the proposed regulations here and here.
2. Review job applications, offer letters, background check guidelines, and pre-adverse action notices for potential revisions.
3. Continue to look for updates on the proposed revisions.
4. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

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Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2023 ManagEase