Yesterday (July 23), a Pennsylvania judge—in ATS Tree Services, LLC v. Federal Trade Commission—upheld the legality of the FTC's non-compete ban. This ruling contradicts the ruling recently issued in a parallel proceeding in Texas. Earlier this month, a Texas judge—in Ryan, LLC v. Federal Trade Commission—temporarily enjoined the FTC’s non-compete ban from going into effect against the named plaintiff/intervenors. Although the Texas judge declined to implement a nationwide injunction, she signaled an intent to uphold the challenge to the non-compete ban in a future ruling based on her finding that the FTC had likely exceeded its statutory authority and a categorical ban on non-competes would be arbitrary and capricious.  The ruling sides with the FTC, creating a divide in the judiciary on the scope of the FTC's regulatory powers and the legality of the FTC’s upcoming non-compete ban (scheduled to take effect on September 4). While the Court’s ruling partially denied a preliminary injunction based on a finding of no irreparable harm, the crux of the opinion held that plaintiff was unlikely to succeed in establishing that the FTC’s non-compete ban is unlawful. In so finding, the judge endorsed the FTC’s interpretation of its procedural and substantive rulemaking authority and concluded that the FTC has the authority to promulgate a rule that effectively bans non-competes nationwide. What comes next? While the Pennsylvania judge's decision provides a lifeline to the quickly approaching non-compete ban, the FTC's win may be short-lived. By August 30, the Texas judge intends to rule on the ultimate merits of the challenge to the non-compete ban, at which time she could issue more expansive, nationwide relief. Additionally, briefing is underway in a third challenge to the non-compete ban filed in Florida (Villages, Inc. v. Federal Trade Commission). It is expected that yesterday’s developments could spur additional legal challenges by employers. We will continue to monitor and report new developments.   What should employers do now? Given the uncertainty of whether the FTC’s non-compete band will go into effect on September 4, employers should consult with counsel about their options and the appropriate steps and contingencies to explore in the interim.

On July 3, a Texas judge in the bellwether lawsuit, Ryan, LLC v. The Federal Trade Commission, became the first to weigh in on the legality of the FTC’s non-compete ban that is set to take effect on September 4. As was widely anticipated, the Court concluded that a preliminary injunction was appropriate, and it temporarily enjoined the non-compete ban from going into effect against the named plaintiff/intervenors to the Ryan lawsuit. Less anticipated, the Court declined to issue a nationwide injunction to non-parties—meaning that the FTC’s non-compete ban currently remains set to take effect on September 4 for all employers who are not named parties in the Ryan lawsuit. In reaching its conclusion, the Court held that the FTC’s rule banning most non-competes is likely unlawful for two reasons: (1) the FTC likely exceeded its statutory authority because it does not have substantive rulemaking authority to craft rules regarding unfair methods of competition; and (2) a categorial ban on nearly all non-competes would likely be arbitrary and capricious because it is overly broad without any reasonable explanation. While these findings are a clear rebuke of the FTC’s actions, the Court expressed doubt about whether it would be appropriate for it to issue a nationwide injunction that would extend to non-parties because such relief is unnecessary to protect the interests of the named parties (which is the focus at the preliminary injunction stage). The implications of this ruling are going to evolve over the next two months. The Court has ordered the parties to submit a joint status report by July 9 to determine the case’s next steps, and it has committed to issuing a final decision on the merits of the entire lawsuit by August 30. This forthcoming merits-based decision could result in a more expansive nationwide injunction that would extend to non-parties; however, many employers may view this as providing little reprieve in the interim because of the anticipated rulings timing with the looming September 4 effective date and actions needed to prepare for that effective date. For now, employers will need to revisit how they intend to approach the FTC’s Final Rule in the days leading up to September 4. Attention will also likely shift to the parallel lawsuit in Pennsylvania, ATS Tree Services, LLC v. The Federal Trade Commission, which leaves open the possibility of a nationwide injunction still being issued by that Court later this month.

In April, the U.S. Supreme Court unanimously held in Muldrow v. City of St. Louis, that to sustain a prima facie case of employment discrimination under Title VII of the Civil Rights Act of 1964 (“Title VII”), plaintiffs do not have to show that a discriminatory transfer to another position caused “material” or “significant” harm to the plaintiff; rather plaintiffs only have to show that “some” harm occurred because of the job transfer. In its opinion, the Court did not explicitly articulate how “some” harm is defined. Regardless, the reduced “harm” standard will invariably increase the number of claims that survive early dismissal at the trial court level. Indeed, Justice Kavanaugh opined that a plaintiff “should easily be able to show some additional harm – whether in money, time, satisfaction, schedule, convenience, commuting costs or time, prestige, status, career prospects, interest level, perks, professional relationships, networking opportunities, effects on family obligations, or the like.” Pre-Muldrow, federal circuits disagreed on how much harm a plaintiff must show to have suffered an actionable “adverse employment action” under Title VII. Some circuits previously held that no showing of harm necessary beyond the discriminatory act itself was required, while other circuits generally applied a heightened standard of harm for claims to be actionable under Title VII. Post-Muldrow, employers will be forced to grapple with a lowered, undefined standard of “harm,” which will likely require additional litigation to sort out. Further, while the Court’s holding was focused on job transfers, the decision might encourage employees to challenge other types of employment actions, (i.e., scheduling changes, work assignments, training and mentorship, or other opportunities) in an attempt to lower the legal standards for actionable discrimination claims altogether. However, it is not time to panic (yet). Employers still have the well-known defense in their arsenal that the job transfer was made for legitimate, non-discriminatory reasons. As such, thorough documentation for the reasons supporting an employee’s job transfer have just become even more critical to shield employers from increased discrimination claims under Title VII. Contact your Polsinelli attorney to ensure your policies, programs, and employment decisions are structured to mitigate increased risk surrounding the new Muldrow job transfer standard.

On June 7, 2024, the Office of Federal Contract Compliance Programs (OFCCP) released its first Corporate Scheduling Announcement List (CSAL) for fiscal year 2024. Specifically, this list identifies around 500 federal supply and service contractors and subcontractors that will be audited. The CSAL can be found here and the OFCCP answers to CSAL-related questions can be found here. Of the 500 contractors and subcontractors identified, 440 are establishment-based reviews, 30 are corporate management compliance evaluations (CMCE) focused on the contractor’s headquarters, 24 are functional affirmative action plan (FAAP) reviews, and 6 are university reviews. The release of the CSAL does not indicate that audits are beginning but rather, informs contractors and subcontractors that they have been identified for audit. This allows contractors and subcontractors advance notice and can be very helpful in providing time to prepare for the audit, gather data and documents necessary for the audit, and identify any potential issues that may need to be addressed before or during the audit. Before formally initiating an audit, OFCCP sends contractors and subcontractors a Scheduling Letter. Scheduling Letters are often issued around 45 days after the CSAL is released, and as such, it can be difficult and rushed for contractors and subcontractors to prepare for the audit. Polsinelli regularly represents federal contractors and subcontractors in OFCCP audits and is available for consultation with contractors and subcontractors identified in the CSAL.

Tuesday, June 4, 2024, is the deadline to submit and certify the 2023 EEO-1 Component 1 Report to the Equal Employment Opportunity Commission (EEOC). While the deadline has been extended occasionally in prior years, no such announcement has been made to date. Accordingly, all covered employers should take steps to comply by the deadline. The importance of meeting this annual reporting requirement was further emphasized this week when the EEOC filed suit against 15 employers in various industries across 10 states for failing to submit their EEO-1 Component 1 Reports for past years, including for the years 2021 and 2022. Additional information regarding reporting requirements and whether your company is required to submit and certify can be found here. Polsinelli will continue to monitor developments with EEO-1 reporting and the above-referenced EEOC lawsuits. If you have questions about EEO-1 reporting or need assistance preparing this report, contact your Polsinelli attorney.

Yesterday (May 29), in Ryan, LLC et al. v. The Federal Trade Commission, the FTC filed its response in opposition to Plaintiffs’ request to stay/enjoin the FTC Rule banning non-competes from taking effect on September 4. The Court has committed to issuing a decision on Plaintiffs’ request no later than July 3. Consistent with commentary to the Rule, the main thrust of the FTC’s response argues it has authority to issue the Rule pursuant to the Federal Trade Commission Act’s directive that Congress “empowered and directed” the FTC to prevent the use of unfair methods of competition through rulemaking. The FTC also devotes significant briefing to dispelling the application of the “major questions doctrine” to curtail its regulatory ability. We anticipate the Court’s decision will most likely hinge on whether the Court applies the major questions doctrine – articulated in the U.S. Supreme Court’s 2022 decision in West Virginia v. Environmental Protection Agency – to grant a nationwide injunction enjoining the Rule. In the West Virginia decision, the Supreme Court found the EPA’s policy involved a “major question” and that the agency went too far in its attempt to regulate absent explicit permission from Congress to do so. The U.S. Court of Appeals for the Fifth Circuit employed that same rationale to affirm a preliminary injunction blocking enforcement of President Biden’s COVID-19 federal contractor vaccine mandate. The Fifth Circuit’s decision likely drove the filing of the two lawsuits challenging the Rule in Texas federal courts, which sit in the Fifth Circuit. Plaintiffs' reply briefs are due June 12. Your Polsinelli Restrictive Covenant and Trade Secret Group will continue to monitor these cases and will keep you updated with any major litigation developments.

Effective October 1, 2024, Maryland will become the sixth state (plus the District of Columbia), to require that employers provide an upfront disclosure of the wage or salary range for open positions in job listings. The new law follows a recent proposed rule similarly seeking to require federal contractors to disclose pay information in job postings. These proliferating pay transparency requirements demonstrate the need for employers to continue focusing on achieving pay equity throughout the workforce. Maryland’s law is applicable to all employers within the state, regardless of size, and applies to any position that will be physically performed, at least in part, in Maryland. As with transparency laws enacted by other states, this leaves uncertainty about the law’s application to fully remote positions that can conceivably be performed from anywhere. The new law requires that employer job listings, whether posted directly or through a third party like a recruiting firm, include a wage and salary range, as well as a general description of the benefits offered for the position. The wage or salary range must be set in good faith by reference to: (1) Any applicable pay scale;  (2) Any previously determined minimum and maximum hourly rate or minimum and maximum salary for the position; (3) The minimum and maximum hourly rate or minimum and maximum salary of an individual holding a comparable position at the time of the posting; or (4) The budgeted amount for the position. The law also applies to internal postings for promotions or transfers.  If this information is not included in a job posting, it must be provided to the applicant before any discussion of compensation takes place, or earlier upon the request of the applicant. Notably, the factors that must be referenced in setting the wage range could potentially be inconsistent – for example, an employer could be hiring for a position in which comparable employees make between $80,000 and $120,000 but have $100,000 budgeted for the hire. The law does not provide guidance on how employers should navigate such discrepancies. In addition to the job posting requirements, the law sets forth anti-retaliation and recordkeeping obligations for employers. Penalties for violation of the new law range from $300 to $600 and take effect only upon a second or subsequent offense, as the law provides that employers will receive a compliance warning for a first offense. The law is enforceable only by the Maryland Department of Labor and does not contain a private right of action. Employers with jobs that can be performed, at least in part, in Maryland should review their pay equity and transparency practices in light of this new law. If you have questions about pay equity and pay transparency practices, contact your Polsinelli attorney.

On April 29, 2024, the Equal Employment Opportunity Commission (“EEOC”) issued final guidance on workplace harassment. The guidance is effective immediately and is the first time the EEOC has updated its workplace harassment guidance since 1999. It reflects changes in the law in the last two decades, including making clear that federal law prohibits discrimination on the basis of sexual orientation and gender identity. The guidance provides an overview of anti-harassment laws but does not change legal requirements currently applicable to employers. While the guidance is not law and not binding on a court, it is intended to serve as a resource for employers, employees, and others, and provides insight into how the EEOC views various topics related to workplace harassment. Employers should review the guidance because it provides 75+ examples, as well as other information, that can be helpful in understanding the nuances of anti-harassment laws. For example, the guidance notes that “[n]ot all harassing conduct violates the law, even if it is because of a legally protected characteristic,” and it provides several examples of unlawful harassment. The guidance also covers topics such as establishing causation, hostile work environment, liability for harassment claims, and remote work. If you have any questions about workplace harassment, contact your Polsinelli attorney.

On April 23, 2024, the Federal Trade Commission (“FTC”) conducted a special Open Commission Meeting to vote on a Final Rule (the “Rule”) banning most non-compete clauses as an “unfair method of competition.” By a vote of 3-2, the Rule was approved for publication in the Federal Register. The Rule becomes effective 120 Days from Publication in the Federal Register (the “Effective Date”). Here is what you need to know: What clauses are impacted by the Rule? The Rule defines a prohibited “non-compete clause” to include any contract term, workplace policy, or term or condition of employment, written or oral, that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from seeking work, accepting work, or operating a business after prior employment ends. Other types of post-employment covenants (e.g., non-solicitation) could be attacked under the Rule if they have the effect of a non-compete. What employers and workers are impacted by the Rule? Generally, the Rule will impact all employers other than certain banks, savings and loan companies, non-profits, and common carriers, which are not subject to the FTC’s authority by law. The Rule applies to paid and unpaid workers, including employees, independent contractors, externs, interns, volunteers, apprentices, and sole proprietors. The Rule does not apply to the franchisee in a franchisor relationship. What conduct is prohibited by the Rule? The Rule prohibits employers from (1) entering into or attempting to enter into a non-compete clause, (2) enforcing or attempting to enforce a non-compete clause, and (3) representing that a worker is subject to a non-compete clause. The Rule applies to non-compete clauses entered before the Effective Date unless the non-compete clause is with a “Senior Executive”. The exception for “Senior Executives”: Unlike the proposed rule, the final version of the Rule provides an exception for non-compete clauses entered into with Senior Executives before the Effective Date. A Senior Executive means a worker receiving total annual compensation (excluding fringe benefits) of at least $151,164 in the preceding year, and was “in a policy-making position”—meaning the entity’s president, CEO, officer, or other person who has final authority to make policy decisions that control significant aspects of the entity (and not just a subsidiary or affiliate). The exception for “bona fide sales of business”: The Rule does not apply to non-compete clauses entered into “pursuant to a bona fide sale of a business entity, of the person’s ownership interest in a business entity, or of all or substantially all of a business entity’s operating assets.” The Rule does not limit this exception to only those holding at least 25% ownership interest in a business, like the proposed rule did. What does the Rule require employers to do now? On or before the Effective Date (unless the Rule is enjoined), employers are required to provide all workers with impacted non-compete clauses clear and conspicuous notice to the worker that the non-compete clause will not be, and cannot be, legally enforced against the worker. The notice must be provided in writing by hand deliver, mail, email or text message, and group communications are permissible. The Rule provides model notice language. What happens to existing lawsuits? The Rule does not apply to causes of action related to non-compete clauses that have accrued prior to the Effective Date. Put another way, the Rule likely will not change cases involving alleged violations of non-compete clauses occurring before the Effective Date. What do we expect next? Lawsuits challenging the Rule were filed within hours of the vote, including a lawsuit filed in the United States District Court for the Eastern District of Texas by the U.S. Chamber of Commerce. Given the scope of the Rule and its impact, it is anticipated that at least some courts will enjoin the Rule from taking effect until the U.S. Supreme Court has an opportunity to weigh in on the Rule’s validity and constitutionality. Is there still risk when hiring a competitor’s employees? Yes. The Rule does not take effect for months and may never take effect if the court challenges are successful. The Rule also does not apply to conduct occurring before the Effective Date, so actions taken now still have risk. More importantly, the Rule generally does not eliminate all risk to hiring employees from a competitor because even without non-compete clauses, employers can bring suit based on other contract terms (non-solicitation and non-disclosure clauses), trade secrets, and legal theories to protect their interests when former employees go to work for a competitors. Contact your Polsinelli attorney if you need guidance reviewing your non-compete agreements or strategy around restrictive covenants.

As has been expected, and as we addressed at the end of 2023 in our previous blog post, on April 23, the U.S. Department of Labor (“DOL”) at long last issued its final rule raising the salary thresholds for overtime exemptions. The rule, “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees,” addresses the scope of the carveout for positions deemed to be exempt from the overtime requirements of the Fair Labor Standards Act (“FLSA”). Specifically, the final rule sets into motion increases in the salary threshold that must be met for a position even to be potentially exempt. The salary thresholds are higher in the final rule than they were in the proposed rule. Beginning July 1, 2024, the salary threshold will increase to $43,888/year from the current level of $35,568/year. Following that, the threshold level will increase to $58,656/year on January 1, 2025. The January 2025 level equates to $1,128/week. The DOL has said that the increased threshold beginning January 1, 2025, will affect some 3 million workers. In addition to the general salary exemption thresholds, the rule will raise the threshold for classification as a highly compensated employee, from the current $107,432 to $132,964 in July 2024 and then to $151,164 in January 2025. This will not be the last increase – the rule sets forth that automatic updates to the threshold amounts will take place every three years based on the latest earnings data. As has been the case with previous attempts at increases through DOL rules, we anticipate there will be challenges to the rule. Finally, the rule will not alter the duties necessary for the exemption qualification of a position. And employers should remember that some states have higher salary thresholds for exemption under their state wage-and hour laws. Contact your Polsinelli attorney for further guidance regarding this rule change and other wage-and-hour matters.

FTC Final Rules Banning Non-Competes Vote Next Tuesday As you know, last year, the FTC issued a proposed rule banning virtually all non-compete agreements (which does not include non-solicitation agreements, confidentiality agreements and the like). Yesterday, the FTC announced that a special Open Commission Meeting will be held virtually on Tuesday, April 23, 2024, at 2 p.m. EDT at which time the FTC is expected to vote on a Final Rule. Here is what you need to know for now: When is the vote on the Final Rule to ban non-competes? Tuesday, April 23, 2024 at 2 p.m. EDT. The Open Commission Meeting will be available to view here.  What is expected to happen? The consensus among Polsinelli’s Restrictive Covenant and Trade Secret Practice Group, other experts, and scholars is that the FTC will vote to implement a Final Rule substantially similar to the Proposed Rule. In short, that means that it will vote to ban essentially all non-competes with limited exceptions (some form of ownership in the entity being sold – the Proposed Rule had a 25% threshold). When will the Final Rule be effective? The Final Rule is expected to become effective 60 days after publication in the Federal Register. (The FTC has the ability to implement the Final Rule sooner if necessary due to an “emergency situation” but we do not anticipate that in this instance.) What can you do now? Understand that the vote will be Tuesday; that does not mean the Rule will be effective Tuesday. Understand that the Rule likely will not be effective until 60 days after publication in the Federal Register and that we anticipate that there will be litigation seeking to block the Rule from going into effect, as discussed below. Evaluate your use of non-competes, and develop strategies for navigating the uncertainties of the time. Strategically and thoroughly analyze your trade secret protocols and protections. What do we expect next? Experts and scholars (and we) fully expect the Final Rule will be challenged in Federal Court with the challenging parties seeking immediate injunctive relief preventing implementation of the Final Rule, based upon the FTC exceeding its authority. Contact your Polsinelli attorney if you need guidance reviewing your non-compete agreements or strategy around restrictive covenants.

The Office of Federal Contract Compliance Programs (OFCCP) announced that the Contractor Portal for federal contractors and subcontractors to certify compliance with their affirmative action plan (AAP) obligations will open on April 1, 2024, with contractors and subcontractors having until July 1, 2024, to submit the required certification. This is the third year of OFCCP’s annual certification requirement. Contractors must again certify that they have developed and maintained annual affirmative action plans for each of their workplace establishments or functional/business units, as applicable.  Beginning last year, contractors and subcontractors were required to enter the start date of their currently maintained AAP. For the current 2024 certification period, contractors are certifying compliance for its most recent AAP start date.  In addition, covered federal contractors must disclose the number of employees which are included in each establishment AAP.  OFCCP continues to stress the need to meet this reporting deadline. The agency has indicated that contractors who fail to certify compliance (due to either failing to complete the certification or stating in the certification they have not complied) “will be more likely to appear on OFCCP’s scheduling list” for annual compliance audits. The certification requirement applies to existing federal contractors. OFCCP encourages new contractors to register as soon as possible after entering a contract and then update certification within 90 days of developing their AAP. Polsinelli assists many federal contractors and subcontractors in completing the Contractor Portal certification requirement and assists many entities doing business (directly or indirectly) with the federal government in determining whether they are subject to AAP obligations. Polsinelli’s OFCCP & Affirmative Action Plans practice is available to provide practical assistance to contractors and subcontractors with the certification process.

On Tuesday, April 30, 2024, the Equal Employment Opportunity Commission (EEOC) will open the 2023 EEO-1 Component 1 Report for employers to report the race, ethnicity and gender of their employees. The EEO-1 reporting period is scheduled to remain open until Tuesday, June 4, 2024. This reporting is mandatory for private sector employees with 100 or more employees and certain federal contractors with 50 or more employees. In addition, employers with less than 100 employees who are related to other entities, such that combined, there are over 100 employees, may also be required to file. The EEOC anticipates posting updates regarding the 2023 EEO-1 Component 1 data collection by Tuesday, March 19, 2024, including the 2023 EEO-1 Component 1 Instruction Booklet and the 2023 EEO-1 Component 1 Data File Upload Specifications. Polsinelli will continue to monitor developments with the EEO-1 report. If you have questions about EEO-1 reporting or need assistance preparing this report, contact your Polsinelli attorney.

As we reported last month, effective January 1, 2024, non-compete agreements in California are unenforceable regardless of where the contract is signed. This means employees who sign non-competes outside California, then move to California and seek new employment in violation of the non-compete, can rely on California law to invalidate the non-compete. Practically speaking, this creates unpredictable challenges for employers with mobile or largely remote workforces. More importantly, AB 1076 makes it unlawful for employers to include a non-compete clause in an employment contract or require an employee to enter a non-compete. Any employer who uses, or attempts to use, a non-compete with employees working in California can now be sued by those employees, and the law entitles the employee to an injunction, damages, and attorneys’ fees in the lawsuit. In addition, by February 14 – next week – employers must provide notice to any current or former employee employed after January 1, 2022, that their non-compete clause or non-compete agreement is void. This notice must be individualized and, in writing, sent to the employee’s last known mailing and email address. Employers who fail to provide the required notice on time may be assessed a civil penalty of up to $2,500 per violation. Members of Polsinelli’s Restrictive Covenant and Trade Secret Practice Group are available to assist employers in mitigating the risks of using non-competes and other restrictive covenants with employees.

On January 31, 2024, several U.S. government agencies released proposals and guidance aimed at imposing new pay transparency and salary history requirements upon federal government contractors and subcontractors. These proposals, should they go into effect, will subject federal contractors and contractors to a suite of pay equity regulations mirroring those recently enacted in progressive states like California and New York. Proposed FAR Clause Implementing Salary History Restrictions Most significantly, the FAR Council, which consists of the Administrator for Federal Procurement Policy and the heads of the Defense Department, NASA, and the General Services Administration, published a proposal to amend the Federal Acquisition Regulation (FAR) to implement a new pay equity clause. Under the new proposal, the new clause would be applicable to the bulk of federal government contracts that are performed in the United States and its outlying areas, and will also flow down to subcontractors at any tier.  The proposed clause applies to recruitment for any position that works “on or in connection with” a federal contract – an established standard covering not just the employees who perform the direct services called for under the contract, but also support services that are necessary for the contract’s performance. The proposed FAR clause prohibits several actions in connection with an employer’s use of an applicant’s prior compensation level in past positions during the recruiting process: Contractors cannot seek an applicant’s compensation history from the applicant or the applicant’s former employer, or require the applicant to disclose compensation history. Contractors cannot retaliate against or refuse to interview or hire applicants who do not respond to an inquiry about compensation history. Contractors cannot rely on an applicant’s compensation history (if known or discovered) as criteria for screening applications or in determining the applicant’s new compensation upon hire. Notably, the prohibition on using prior compensation in setting an applicant’s new compensation applies even if the applicant voluntarily discloses their compensation in pay negotiations. The proposed clause would also impose compensation disclosure requirements for contractors’ job advertisements. The clause requires that all advertisements for positions that work on or in connection with a federal contract must disclose the range of salary or wages the contractor believes in good faith that it will pay for the position. Job listings must also disclose a “general description” of benefits and other types of compensation (i.e., commissions, bonuses, etc…) offered. If more than 50% of compensation will come from non-wage or salary compensation, then the contractor must specify the percentage of overall compensation or dollar amount of each other form of compensation. Job advertisements must also include a notice of rights under the new FAR clause and information about how to submit claims of discrimination. New OFCCP Guidance on Salary History Concurrently with the proposed FAR clause, the Office of Federal Contract Compliance Programs (OFCCP) issued Frequently Asked Questions guidance about the use of salary history in setting compensation. The guidance does not, at least directly, impose new obligations on contractors, but does suggest that OFCCP will view an employer’s use of salary history in setting compensation as a potential indicia of pay discrimination. OFCCP’s guidance does not explicitly take the position that contractors may not use or rely upon salary history in setting compensation. Rather, the guidance states that “the practice may contribute to unlawful discrimination, depending on the specific facts and circumstances at issue.” The guidance also does not treat the use of salary history data voluntarily provided by an applicant in negotiations as different from information collected or required to be provided by the employer. The guidance suggests that the use of salary history by a contractor may be reviewed by OFCCP in compliance evaluations as part of its examination of the employer’s broader compensation policies. The FAR Council is accepting comments on its proposed rule until April 1, 2024, which could lead to changes in its scope prior to implementation. Still, federal contractors and subcontractors should review their compensation and recruiting practices to identify whether salary history data is collected and how it is used in setting compensation, as even absent these proposals, the use of salary history in setting compensation is a potential vulnerability that may expose an employer to equal pay claims.

On January 9, 2024, Shareholders in our Restrictive Covenant and Trade Secret Practice Group conducted a webinar covering “What Employers Need to Know About Non-Competes in 2024.” A recording of that webinar is available here. Below, the Team addresses some of the additional questions concerning the status of the FTC Proposed Rule, anticipated challenges to the Proposed Rule, FTC Lawsuits Against Employers for Imposing Non-Competes, Exceptions to Non-Compete Bans, Employee “Theft,” and Hiring Employees Subject to Non-Competes that were posed during the webinar. 1. The Status of the FTC Proposed Rule Banning Non-Competes The comment period ended on April 19, 2023, and we are now waiting on the FTC to issue a Final Rule. There is no deadline for the FTC to issue a Final Rule, though the general consensus is that the FTC will issue a Final Rule in April 2024. No one knows with certainty what the Final Rule will say, and the FTC is not restricted by the proposed rule or comments. It can adopt the proposed rule as is, modify, or even implement an entirely different rule without any additional rulemaking process. The FTC’s advocacy for a full ban since the comment period closed suggests it does not intend to change course, and employers would be wise to prepare for a Final Rule substantially similar to the proposed one. 2. Anticipated Challenges to the FTC Final Rule Regardless of what the Final Rule looks like, it will be immediately challenged in court (similar to the vaccine mandate challenges), with the Final Rule taking effect unless and until it is enjoined. The prevailing opinion is that there are very strong arguments to attack the FTC’s authority to issue the rule, primarily that the FTC exceeded its rule-making authority. Regardless of the ultimate success of the legal challenges, it will still generate uncertainty in the interim and give rise to public policy arguments against enforcement in current disputes (which some judges may find persuasive). Moreover, the rulemaking effort is merely another example of growing hostility towards non-compete covenants, and we will likely see Congress and states, including New York, revisit this issue. 3. FTC Lawsuits Against Employers for Imposing Non-Competes During 2023, even without the authority of a Final Rule, the FTC filed three complaints against employers over their use of non-competes. The claims alleged the employers imposed non-competes on employees in an unfair manner that tended to harm competition, consumers, and workers, thus violating antitrust laws. The Complaints were unrelated to any enforcement efforts by the employers at issue, but the FTC argued that the noncompetition agreements at issue had the effect of prohibiting workers in the affected industries from earning higher wages and were therefore unfair labor practices. This ties into the cooperation agreements entered into between the FTC, the NLRA and DOL in 2023, which make it more likely that employers’ non-competes may come under scrutiny as a result of an unrelated audit or investigation. 4. Exceptions to Non-Compete Bans in the Proposed Final Rule The FTC Proposed Rule is very broad and applies to all kinds of paid and unpaid workers, while some state laws are more narrow (bans for employees only) or are less clear in whether they are intended to apply to other categories of workers beyond employees. Similarly, the FTC Proposed Rule did not contain a carve out for highly compensated workers. Other state laws, like Illinois, Colorado, Maryland, Maine, Nevada, Oregon, Rhode Island, Virginia, Washington and Washington D.C., allow for non-competes if an employee makes above a certain salary threshold. It is best practice to evaluate each case based on its facts and review the applicable law, since there is no one-size-fits-all approach to non-compete guidance at this time. 5. Employee “Theft” Most of the laws voiding non-competes do not impact the enforceability of non-solicitation clauses, though some do (e.g., Colorado and Illinois). However, with the federal government’s recent focus on antitrust, non-solicitation clauses purporting to prohibit the hiring of employees by a competitor or business partner may come under closer scrutiny. Employers should be wary of any agreement that could be interpreted as restricting the ability to hire employees. 6. Hiring Employees Subject to Non-Competes Even with the changes in the law, hiring employees subject to non-competes can still be risky. Generally, non-competes are not per se invalid, and lawsuits to enforce non-competes can be made even if the covenant in question is likely to ultimately be found overbroad or unenforceable. Unfortunately, the path to proving a non-compete is unenforceable in court, and arbitration is disruptive, time-consuming and expensive. Polsinelli attorneys are available to help you evaluate the facts of each particular situation on a case-by-case basis to develop a risk management strategy for hiring and retaining employees.

Late last year, the EEOC quietly announced its most recent Strategic Enforcement Plan, covering 2024–2028. To no surprise, the EEOC has indicated that it will implement a concerted effort to focus its resources on employment practices that often result in class and collective action lawsuits. More specifically, the EEOC announced the following “subject matter priorities” for the next four years: “Eliminating Barriers in Recruitment and Hiring” (including use of artificial intelligence for hiring, apprenticeship/internship programs, online-focused application processes, screening tools for hiring—such as pre-employment tests and background checks, and the underrepresentation of women and workers of color in industries such as manufacturing, tech, STEM, and finance, for example); “Protecting Vulnerable Workers and Persons from Underserved Communities from Employment Discrimination” (including immigrant workers, persons with mental or developmental disabilities, temporary workers, older workers, and workers traditionally employed in low-wage jobs); “Addressing Selected Emerging and Developing Issues” (including the use of qualification standards or other policies that negatively affect disabled workers, protecting workers affected by pregnancy, childbirth or related medical conditions, preventing discriminatory bias towards religious minorities or LGBTQIA+ individuals, and the use of artificial intelligence or automated recruitment tools for hiring); “Advancing Equal Pay for All Workers” (including a focus on employer policies that prevent or attempt to limit workers from asking about pay, inquiring about applicants’ prior salary histories, or prohibiting workers from sharing their compensation with coworkers); “Preserving Access to the Legal System” (including the use of overly broad releases or nondisclosure agreements, the implementation of unlawful mandatory arbitration provisions, and any failure to keep records required by statute or EEOC regulations); and “Preventing and Remedying Systemic Harassment.” The EEOC has indicated that it will focus on Charges that touch on the above topics while also intentionally prioritizing systemic enforcement actions and impact litigation to eradicate what it perceives to be discriminatory employment practices. As demonstrated briefly above, the EEOC has a keen interest in scrutinizing artificial intelligence and mass hiring practices via automatic recruitment tools, in addition to a renewed focus on employment practices that could have an adverse impact on those with intellectual or health-related disabilities, among other things. This could directly lead to an increase in Commissioner Charges, systemic investigations, pattern or practice lawsuits, and class action litigation regarding the topics listed in its Strategic Enforcement Plan. Employers should be vigilant in monitoring these key areas of risk related to the EEOC’s new Strategic Enforcement Plan, as EEOC investigations can quickly escalate to regional or even nationwide systemic investigations and corresponding litigation. Contact your Polsinelli attorney for further guidance on how you can bolster your employment practices to minimize the risk of potential EEOC enforcement actions, as well as class and collective actions, in your workplace.

Despite objections by thousands of employers and its continuing review of records, the OFCCP has been ordered by a federal court to produce all EEO-1 Type 2 reports of federal prime contractors and first-tier subcontractors from 2016-2020 as requested by the Center for Investigative Reporting (“CIR”) through multiple FOIA submissions. CIR filed litigation to enforce its FOIA request in December 2022 in the Northern District of California. On December 22, 2023, that court issued an order requiring OFCCP to produce the EEO-1 Type 2 reports, determining that the information included in the reports was not the type of “commercial” information protected from release under FOIA. Specifically, the court found that the reports were not exempt from disclosure under Exemption 4 of FOIA as the information in the reports is not “intrinsically valuable business information” and the headcounts in all industries and across broad job categories do not provide “commercial insight…specific to the operations of a federal contractor.” The court also rejected OFCCP’s assertion the data constituted trade secrets protected from disclosure and found no substantial risk of harm through the disclosure of competitive business secrets. While the court initially required OFCCP to produce the EEO-1 Type 2 reports by January 19, 2024, the parties agreed to extend the deadline to February 20, to give OFCCP an opportunity to determine whether to appeal the decision. It is anticipated that an appeal of the decision will delay any required disclosure of the reports. Contact your Polsinelli attorney for further guidance regarding this anticipated disclosure and other government contractor matters.

Around the world and across the United States, we see so many languages spoken. People around the world communicate in thousands of different languages. Given the wide origins of workers and companies with international operations, the question arises: to what extent should employers accommodate language needs, as in translating handbooks, policies, notices, or memos? Legally, the answer is murky: states and foreign jurisdictions adopt varying approaches. For example, in the United States, there is a varied patchwork of federal law that can apply requiring notices in languages besides English, while we have some states (Georgia, North Carolina, Michigan, Arizona, Missouri, etc.) that do not have any requirements for translating employment-related documents. In contrast, states like Ohio, Indiana, Maryland, and Washington encourage employers to provide translation or guidance for employment-related documents, while states like New York, Illinois, Virginia, and Massachusetts require notices and posters in languages besides English. Finally, some states like Tennessee, Colorado, Texas, and California have more specific laws and case law on requirements for translating employment-related documents. For employers with international operations, the answer will significantly vary based on an employee’s location. Some countries (like Australia and Switzerland) do not have any requirements, while many countries in Latin America, the United Kingdom, New Zealand, Singapore, etc. have recommended or preferred languages. Other countries like Israel, Denmark, India, South Africa, and Japan have requirements that employers ensure employees understand employment-related documents or that a document in a specific language will prevail in a dispute. However, many countries, such as Belgium, Canada, France, Romania, Ukraine, the United Arab Emirates, China, etc., do have specific language requirements, and some of them are based on regions within countries. It is clear that there is a lot of variety across the United States and around the world on whether employers must translate workplace documents. Employers should tread carefully with languages for employment documents, especially in light of ever-changing statutes across countries. Polsinelli is monitoring these requirements around the world. Contact our International Employment Law group for assistance with employment document translation in jurisdictions around the world, including those that may not have been discussed in this summary.

On January 9, 2024, the U.S. Department of Labor released the final details of their Independent Contractor test. This test addressing when companies can classify workers as independent contractors has been hotly debated since the last proposed rule by the Trump administration was struck down by the current DOL. The new rule will take effect on March 11, 2024. The new Independent Contractor focuses on the “economic realities of the working relationship” to determine if whether the worker is economically dependent on the company for work or if the worker is in business for themselves. The test is based on the “totality of the circumstances” and includes the following six factors: The opportunity for profit or loss depending on managerial skill; Investments by the worker and the company; Degree of permanence of the work relationship; Nature and degree of control of the worker – including whether the employer uses technological means of supervision (such as by means of a device or electronically), reserves the right supervise or discipline the worker, or places demands on a worker’s time that do not allow the worker to work for others or work when they choose; The extent to which the work performed is an integral part of the company’s business; and The skill and initiative of the worker – i.e., whether the worker possesses and uses specialized skills that they bring to the job, or is the worker dependent on training from the company to perform the work. While the DOL identified these six factors, it is clear that no factor has a predetermined weight, and also indicated that other “additional factors” may be relevant if they are indicative of whether the worker is in business for themselves. Pending the effective date, the DOL has issued FAQs which can be found at: https://www.dol.gov/agencies/whd/flsa/misclassification/rulemaking/faqs With this new test, companies should carefully review whether the workers they have classified as independent contractors meet the new requirements and take any appropriate action if they believe they are misclassified. Polsinelli attorneys are available to assist with this review and analysis.

On December 22, 2023, New York Governor Kathy Hochul declined to sign legislation (S3100) that would have outlawed noncompete clauses in virtually all employment contracts. If it had gone into effect, New York would have been the fifth state to ban non-competes outright, joining California, North Dakota, Oklahoma, and, most recently, Minnesota. In vetoing the bill, however, Governor Hochul did not forgo the possibility of a future ban. Rather, she expressed concern with the current bill’s “one-size-fits-all” approach – particularly considering the varying industries that call New York home, and their interests and needs to retain high-paid workers. These comments and discussions between the Governor and the New York State Senate appear to signal that it is possible that a noncompete ban may still be possible in the near future – if a salary threshold can be met. Prior to the veto, the Governor and the Senate had discussed exempting workers earning more than $300,000 per year. New York business leaders gave feedback that even a lower threshold of $250,000 could be a workable number. Another issue not addressed by the most recent proposed legislation is the exemption of noncompete provisions between buyers and sellers in the sales of businesses. Many other states with such bans or restrictions on noncompete agreements have such a carve-out. While the recent veto is a victory for New York employers, the reality is that noncompete provisions are still heavily under attack. Employers should carefully evaluate their policies and practices that protect their confidential information, trade secrets, and other valuable business interests to ensure that even if noncompete agreements are one day banned, they are adequately protected. Contact your Polsinelli attorney if you have any questions or need assistance regarding this or other restrictive covenant issues.

As 2023 comes to a close, so did the notice-and-comment period for the U.S. Department of Labor’s (DOL) proposed rule increasing the minimum salary required for employees to be exempt under any of the “White Collar Exemptions” from overtime pursuant to the Fair Labor Standards Act (“FLSA”). With that period closing in November, it can be anticipated that steps will be taken in the upcoming election year to implement the new rule. As a reminder, and as explained in our previous blog post, the DOL has proposed the threshold salary level for exemption from overtime be raised from $35,568/year ($684/week) to $55,000/year ($1,059/year). It also proposes increasing the Highly Compensated Employee exemption threshold to $143,988 annually. The rule will not modify the duties necessary for exemption qualification. Employers may wish to keep these thresholds in mind as they review and implement compensation decisions in the new year. Employers should also take note that six states (Alaska, California, Colorado, Maine, New York, and Washington) have minimum salary requirements for overtime exemption that both exceed the current federal level and will further increase on January 1, 2024. Contact your Polsinelli attorney for further guidance regarding this potential rule change and other wage-and-hour matters.

As 2023 comes to a close, employers should be aware of the hourly minimum wage rate increases set to take effect in various jurisdictions on January 1, 2024. 22 states and more than 40 local jurisdictions will ring in the New Year with new minimum wage rates. Minimum wage employees in the following states will be impacted by the upcoming increases: Alaska, Arizona*, California*, Colorado*, Connecticut, Delaware, Hawaii, Illinois*, Maine*, Maryland*, Michigan, Minnesota*, Missouri, Montana, Nebraska, New Jersey, New York, Ohio, Rhode Island, South Dakota, Vermont, and Washington*. Those states identified with an asterisk also have local jurisdictions with minimum wage increases effective January 1, 2024, which are higher than the applicable state minimum wage. Employers should confirm that any minimum wage rates are adjusted properly.  In addition, employers with tip credit employees should review their tip credit notices to ensure full compliance with applicable laws (including cash wage being paid to the tipped employee and the amount of tip credit claimed by the employer). Contact your Polsinelli attorney if you have any questions or need assistance regarding your wage and hour compliance before the arrival of the New Year.

Chicago employers will soon need to ensure that they provide leave in accordance with a new Chicago law. Specifically, on December 31, 2023, the Paid Leave and Paid Sick and Safe Leave Ordinance will go into effect in the City of Chicago. This new law will require employers to provide Chicago employees up to 40 hours of paid sick leave to be available for use for specific sick leave purposes AND up to 40 hours of paid leave to be used for any reason each year. By December 31, 2023, employers must have a written policy in place, give notice of the policy to their employees, and post a notice to be provided by the City of Chicago. The Chicago ordinance applies to any employers with at least one employee who work at least two hours in a two-week period in the City of Chicago. Employers can choose for paid leave to accrue throughout the year or front-load the required leave for employees at the beginning of the year. If employees accrue leave throughout the year, each covered employee must accrue one hour of paid sick leave and one hour of paid leave to be used for any reason for every 35 hours an employee works. Under the ordinance, employers may have to pay out unused paid leave available for use for any reason upon separation of employment or transfer of employment outside Chicago, depending on the size of the employer. Specifically, employers with 100 or more employees must pay out accrued but unused paid leave that is available for use for any reason upon separation of employment or if the employee transfers to work outside of Chicago. Employers with 51-100 employees must pay out up to 16 hours of this leave through January 1, 2025. After January 1, 2025, these employees will have to pay out all accrued but unused paid leave available for use for any reason. Employers with 50 or less employees have no pay out requirements. Additionally, the pay out requirements do not apply to accrued but unused paid sick leave. Further, Chicago employees must be allowed to rollover up to 80 hours of accrued but unused paid sick leave and 16 hours of general paid leave at the end of the year. If you have questions or would like assistance preparing paid leave policies, contact your Polsinelli attorney.

Employee Handbooks are an important tool to help communicate policies, establish company culture, and protect an organization. However, they can also cause problems for a company if not drafted and implemented carefully, or used across borders without aligning with local law and custom. Join Polsinelli attorneys Harry Jones and Emily Tichenor next Tuesday, October 24, as they address what to include in a Handbook, what you may not want to include in a Handbook, important Handbook updates to make for 2024, and how to make the best use of your Employee Handbook. Register for the SHRM-KC webinar taking place on October 24 at 12:00 PM CT.

A recent case from the Eastern District of California emphasizes the importance of employers having facially neutral and lawful wage-and-hour policies – as such policies can help in defeating class certification. In Tavares, et al. v. Cargill, Inc., et al., the Plaintiff sought certification of a Rule 23 class consisting of all hourly and non-exempt employees who worked at the Defendants’ Fresno, California meat-processing facility. That proposed class included about 4,000 employees, most of whom were production employees. Plaintiff claimed, among other things, that those employees had not been properly compensated for minimum wage and overtime, largely due to purportedly having to perform tasks before and after clocking into the timekeeping system for which they were not paid. Those tasks included donning/doffing, pre-shift COVID health checks, cleaning lockers, and reading breakroom bulletin boards. Plaintiff claimed the Defendants had a uniform policy of requiring this work be performed off-the-clock. The court found, however, that the Defendants’ policies were facially valid – that such tasks were supposed to be occurring while clocked in, if they were required at all. To determine any violation of that policy – and thus, a potential violation of wage-and-hour laws – would require numerous individualized inquiries, including whether each class member wore PPE, whether they utilized their lockers, and whether they were required to look at any breakroom bulletin boards. The court’s willingness to reject class certification at a single work location based on the various individualized circumstances presented by the proposed class reflects the continuing trend of heightened scrutiny of granting class and collective certification in wage-and-hour cases. Contact your Polsinelli attorney or a member of the Employment Class & Collective Actions practice group for further guidance regarding this decision and other wage-and-hour matters.