APPLIES TO All Employers with Employees subject to NLRA

EFFECTIVE As Indicated

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

Quick Look NLRB General Counsel stated that overbroad non-compete provisions violate the NLRA because they chill the exercise of employee rights under Section 7 of the NLRA. Limited circumstances may exist where non-compete agreements do not violate the NLRA. FTC reportedly delayed its vote on a non-compete ban to April 2024.

Discussion

On May 30, 2023, NLRB General Counsel Jennifer Abruzzo issued a memorandum (Memo) stating that the proffer, maintenance, and enforcement of non-compete provisions in employment contracts and severance agreements violate the National Labor Relations Act (NLRA). This Memo parallels her earlier Memorandum (GC 23-05) addressing confidentiality in the context of severance agreements.

In the Memo, Abruzzo explains that overbroad non-compete agreements are unlawful because they chill the exercise of employee rights under Section 7 of the NLRA, which protects their right to take collective action to improve their working conditions. Abruzzo specifically notes that non-compete provisions “could reasonably be construed by employees to deny them the ability to quit or change jobs by cutting off their access to other employment opportunities that they are qualified for based on their experience, aptitudes, and preferences as to type and location of work.”

The Memo outlines some limited exceptions where non-compete agreements could be lawful, including situations where the provisions clearly restrict only individuals’ managerial or ownership interests in a competing business or true independent contractor relationships. In such limited situations, Abruzzo explains that non-compete agreements should be narrowly tailored to the special circumstances, to justify the infringement on employee rights. She emphasizes that neither an employer’s desire to avoid competition from a former employee, nor an employer’s interest in retaining special investments made in training employees constitute a legitimate business interest that could support such special circumstances.

Memorandums issued by the NLRB’s General Counsel are intended to provide policy guidance and agency interpretation of certain legal principles. While these memorandums do not constitute legally binding authority on employers, such guidance reflects the NLRB’s aggressive posture towards certain employment agreements that could be interpreted as interfering with Section 7 rights.

The NLRB Memo comes on the heels of a report that the Federal Trade Commission (FTC) is not expected to vote on its non-compete ban until April 2024. We previously reported that in January 2023 the FTC proposed a ban on non-competes, stating that they are an unfair method of competition and are in violation of Section 5 of the Federal Trade Commission Act. Because of the large response to the proposed rule, the agency needs sufficient time to review the 27,000 comments and make any proposed adjustments to the rule.

With the convergence of these two timelines, what should employers do now? Employers are advised to review noncompete agreements with legal counsel. Employers should take stock of their non-compete agreements and determine whether adjustments need to be made for existing agreements and to onboarding procedures going forward.

 

Action Items

1. Review and revise non-compete agreements with legal counsel to ensure language does not interfere with employee rights under the NLRA.
2. 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 15 or more Employees

EFFECTIVE May 18, 2023

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

Quick Look The use of algorithmic decision-making software constitutes a “selection procedure,” when used to make or inform decisions about whether to hire, promote, terminate, or take similar employment-related actions toward applicants or current employees. Employers may face liability under Title VII when using AI or other algorithmic decision-making software that creates a disproportionate effect of excluding people based on a protected classification.

Discussion

On May 18, 2023, the Equal Employment Opportunity Commission (EEOC) released new guidance through a Questions and Answers Resource (Guidance), intended to assist employers in determining whether and how to monitor algorithmic decision-making tools when using such technology in employment-related decisions. The Guidance begins with a broad overview and definition of key terms regarding what constitutes automated systems and artificial intelligence, as well as a review of the different theories of discrimination that are prohibited under Title VII.

Specifically, Title VII prohibits disparate treatment and disparate impact discrimination. Disparate treatment discrimination is defined as intentional discrimination against an individual based on their membership in a protected class (i.e., race, sex, religion, national origin, etc.), whereas disparate impact or “adverse impact” discrimination arises when an employer uses a neutral policy, test or selection procedure that has a disproportionate effect of excluding people based on a protected classification. The EEOC notes that this current guidance on the use of AI technology under Title VII focuses primarily on the issue of disparate impact discrimination.

In 1978, the EEOC adopted the Uniform Guidelines on Employee Selection Procedures (the Guidelines), which has provided guidance to employers on how to determine if their neutral tests and selection procedures are lawful for purposes of Title VII disparate impact analysis. The EEOC’s current Q&A Guidance serves to expand upon the 1978 Guidelines, providing updated analysis on selection procedures performed by artificial intelligence or other algorithmic decision-making software when used for certain employment decisions.

The new Guidance explains that a “selection procedure” is any, “measure, combination of measures, or procedure” that employers use as a basis for an employment decision, and therefore, AI or other algorithmic decision-making tools would be subject to the 1978 Guidelines “when they are used to make or inform decisions about whether to hire, promote, terminate, or take similar actions towards applicants or current employees.” The Guidance further explains that employers can assess whether a selection procedure has a disparate impact on a particular group by determining whether the procedure selects individuals in a protected group “substantially” less than individuals of another group. Under this new Guidance, if the AI system adversely affects applicants or employees of a particular protected category, then the system likely violates Title VII.

The Q&A Guidance also reviews the 1978 Guideline’s “four-fifths rule,” explaining that the rule is simply a rule of thumb, and “may be inappropriate under certain circumstances,” such as where AI makes a larger number of selections and thus smaller differences may reflect an adverse impact on certain groups, or where an employer’s actions disproportionately effect individuals in protected groups. Therefore, employers cannot blindly rely on the four-fifths rule to ensure compliance under Title VII.

Additionally, the new Guidance confirms that employers may be held responsible for AI decision-making that creates a disparate impact, “even if the tools are designed or administered by another entity.” This means, employers using an AI or other algorithmic decision-making software can still be found liable for discrimination under Title VII even if the software was developed by someone outside the company.

Developing a selection procedure using AI technology provides employers the opportunity to explore different algorithmic options, so if an employer finds that a certain algorithm creates a disproportionate exclusion of a certain protected classification, the employer can and should take steps to select a comparably alternative algorithm. Notably, the EEOC directs that an employer’s failure to adopt a less discriminatory algorithm during the development process may give rise to liability under Title VII.

 

Action Items

1. Review the EEOC’s full Q&A Guidance on the use of AI under Title VII here.
2. Conduct periodic audits of employment decision-making processes on an ongoing basis to ensure compliance with state and federal anti-discrimination laws and regulations.
3. Implement policies and procedures addressing AI use in the workplace.
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 CMS-Covered Healthcare Facilities

EFFECTIVE August 4, 2023

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

Quick Look CMS-covered health facilities no longer have to require health care staff to obtain COVID-19 vaccinations. Continuing policies that require COVID-19 vaccinations may assist facilities which participate in value-based purchasing programs.

Discussion

On the heels of the Biden-Harris administration ending the COVID-19 Public Health Emergency effective May 11, 2023, Centers for Medicare and Medicaid Services (CMS) stated it would also end its mandatory vaccination requirement for CMS-covered healthcare facilities. On May 31, 2023, CMS issued a final rule which formally rescinds the mandatory health care staff vaccination requirement. The final rule will be published on June 5, 2023 in the Federal Register and will become effective 60 days after the date of publication.

Under the final rule, CMS-covered healthcare facilities are no longer required to enforce COVID-19 vaccinations among staff and contractors. CMS will instead use value-based measures and incentives to encourage facilities to keep workers up-to-date on their COVID-19 vaccinations. This means the Department of Health and Human Services (HHS) will continue to consider COVID-19 vaccinations as a quality measure in “value-based purchasing” programs which could affect ratings and payments. Performance on these measures can be publicly posted according to the final rule. Withdrawal of the COVID-19 vaccination requirements does not prohibit facilities from creating policies that require such vaccinations. Healthcare employers are encouraged to maintain “evidence-based policies regarding staff vaccination for COVID-19 and other communicable diseases for which vaccination is available and recommended.” Long-term care facilities must continue to provide information on COVID-19 vaccines and provide the vaccine. Employers should review their policies and prepare to implement necessary changes prior to the effective date.

 

Action Items

1. Read the final rule here.
2. Revise COVID-19 vaccination policies, if appropriate.
3. Train appropriate personnel on updated requirements.
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 FLSA-Covered Employers with Employees in TX, LA, and MS

EFFECTIVE April 28, 2023

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

Quick Look Fifth Circuit said that the DOL’s 80/20 Rule has a burdensome recordkeeping requirements that may cause irreparable harm to employers. The issue has been sent back to the district court for reconsideration and remains a developing issue.

Discussion

On April 28, 2023, the Fifth Circuit Court of Appeals directed a Texas district court to further examine a lawsuit challenging the U.S. Department of Labor’s (DOL) 80/20 Rule, which impacts employers utilizing a tip credit to fulfill their minimum wage obligations under the Fair Labor Standards Act (FLSA). This decision is part of an ongoing process to determine the legitimacy of the 80/20 Rule.

In October 2021, the DOL announced a final rule reinstating the 80/20 Rule, which divides employee work into three categories: (1) tip-producing work; (2) directly supporting work; and (3) work that is not part of a tipped occupation. Under the Rule, a tip credit cannot be claimed if tipped employees spend over 20% of their time on non-tip generating tasks or if such non-tip generating tasks are done continually for more than 30 minutes.

In December 2021, the Restaurant Law Center (RLC) and the Texas Restaurant Association (TRA) brought suit in the Texas federal district court, challenging the validity of the 80/20 Rule and filing a preliminary injunction to preclude the DOL from enforcing the Rule. The preliminary injunction was initially denied by a Texas district court judge in February of 2022, based on the judge’s finding that RLC and TRA had not shown that there would be irreparable harm flowing from enforcement of the 80/20 Rule. RLC and TRA appealed this decision to the Fifth Circuit Court of Appeals.

The Fifth Circuit determined that the district court judge had incorrectly disregarded evidence of irreparable harm, specifically finding that the 30 continuous-minute limitation under the 80/20 Rule creates a minute-by-minute record keeping obligation and imposes significant costs on employers. Following the Fifth Circuit’s April 28^th decision, the case has been sent back to the district court for reconsideration. Employers in the Fifth Circuit should continue to monitor developments of this area, however, for the time being, the 80/20 Rule remains in effect.

 

Action Items

1. Review compliance with the 80/20 Rule.
2. Continue to monitor legal developments regarding legitimacy of the 80/20 Rule for tipped employees.
3. Consult with legal counsel regarding applicability of the 80/20 Rule to current tipped employees.
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 Washington, D.C.

EFFECTIVE As Indicated

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

Quick Look Washington, D.C. employers may not take any adverse actions against an employee or applicant because of their recreational cannabis use or participation in D.C.’s or another state’s medical cannabis program. Testing for cannabis is prohibited as a condition of employment except for certain safety-sensitive positions or unless otherwise required by law.

Discussion

Washington, D.C.’s Cannabis Employment Protections Amendment Act of 2022 provides broad protections for employees who use marijuana. Employers may not take any adverse actions against an employee or applicant because of their recreational cannabis use or participation in D.C.’s or another state’s medical cannabis program. The Act is scheduled to become effective on or after July 13, 2023 but is currently unfunded. Once an approved budget includes the law’s provisions, it will become effective. Employers should not wait for an approved budget to begin implementing some of the requirements and limitations.

Adverse actions include failure to hire, failure to promote, demotions, suspensions, and terminations due to use of cannabis, status as a medical cannabis patient, or testing positive on a drug test absent on-the-job impairment. Testing for cannabis is prohibited as a condition of employment except for certain positions or unless otherwise required by law. Testing is allowed for safety-sensitive positions; positions that require regular or frequent operation of a motor vehicle, heavy or dangerous equipment or machinery; regular or frequent work on a construction site or near power or gas utility lines; positions that require the administration of medications; and employees of the federal government. Post-accident and reasonable suspicion drug testing is allowed, although the law is silent on random or return-to-work testing. Employees who exhibit impairment during the hours of work that 1) substantially decreases or lessens the employee’s performance of the duties or tasks of the employee’s job position, or 2) interfere with an employer’s obligation to provide a safe and healthy workplace are also not protected from adverse action if their impairment is due to lawful cannabis use.

Employers are also required to provide a notice to employees of their rights under the law, whether their positions have been designated as safety-sensitive, and the protocols for drug and alcohol testing. The notice must be provided no later than 60 days after the law’s effective date, upon hire, and annually thereafter. The D.C. Office of Human Rights is expected to issue a notice template. Violations of the law can result in a fine of up to $5,000 per violation in addition to a civil penalty, lost wages, reasonable attorneys’ fees, training, reinstatement, and other relief necessary to undo the harm of the adverse action. This is in addition to a plaintiff’s private right of action.

 

Action Items

1. Review the law here.
2. Revise alcohol and substance abuse policies including drug testing.
3. Train appropriate personnel on the requirements.
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