The Federal Trade Commission (FTC) has reaffirmed that it will pursue noncompete enforcement through individual cases rather than sweeping rulemaking. In a recent public workshop featuring each of the sitting commissioners and panels of economists and current and former agency attorneys, the FTC stopped short of signaling that it will pursue a new national rule to govern all noncompetition agreements. Instead, the FTC emphasized it will continue to pursue enforcement on a case-by-case basis,1  with a focus on agreements that are overly broad in scope or duration and not narrowly tailored to protect legitimate business purposes. Key Takeaways The FTC indicated it is not pursuing a national rule to ban noncompetition agreements but will continue bringing targeted enforcement actions against agreements it deems overly broad or unjustified. The agency emphasized it views certain noncompetition agreements, particularly those involving lower-wage or non-specialized roles, as anticompetitive and legally suspect, especially when they lack a clear business justification. Employers should review existing noncompete agreements to ensure they are narrowly tailored, reasonable in scope and duration and grounded in a legitimate business interest. Read the full update here.

Key Takeaways FTC to revisit a national non-compete ban: The FTC will host a Jan. 27, 2026 workshop as it restarts efforts to regulate or potentially ban most non-competition agreements nationwide. Renewed effort follows prior rule’s collapse: The workshop comes after the FTC’s 2024 final rule banning non-competes was blocked in court, vacated and ultimately abandoned due to legal and administrative challenges. Future national standard possible: The workshop may signal the first step toward a new FTC rule, despite current non-compete enforceability continuing to vary significantly by state law. The FTC appears poised to renew its years-long effort to address, and potentially ban, most non-competition agreements on a national level. On Jan. 27, 2026, the Federal Trade Commission will host a workshop titled, “Moving Forward: Protecting Workers from Anticompetitive Noncompete Agreements.” The FTC reports that the workshop “will include public statements from FTC Commissioners, victims of unfair and anticompetitive noncompete agreements and leading experts in the field.” The workshop follows years of national attention and contentious litigation regarding the FTC’s prior attempt to impose a national ban on most non-competition agreements. The FTC’s effort started in January 2023, when the FTC proposed a rule to ban most non-competition agreements. In April 2024, the FTC issued a final rule banning most non-competition agreements nationwide effective Sept. 4, 2024, but employer groups quickly filed lawsuits challenging the rule. In August 2024, a Texas district court enjoined the final rule’s enforcement as arbitrary and capricious. The FTC appealed the injunction to the Fifth Circuit but subsequently vacated the final rule and dropped the appeal, citing legal issues and administrative changes. Now, it appears that the FTC is ready to take up the issue again — and the January workshop could be the first step towards issuing another rule that would provide a national standard for addressing non-competition agreements. Currently, the validity and enforceability of non-competition agreements are governed by state law, which varies widely from state to state. The workshop will be held from 1-5 p.m. ET on Jan. 27, 2026, and it will be open to the public. Attendees must register in advance to attend in person at the FTC’s headquarters or attendees may attend via livestream. Polsinelli Restrictive Covenant Attorneys will be in attendance at the workshop. If you currently have or are thinking about implementing non-competition agreements in your workforce, it is important to have an attorney well-versed in non-competition law review your agreements for compliance with all applicable state laws. Please contact your Polsinelli attorney for help reviewing or updating your agreements and broader non-compete strategy.  

The U.S. Department of Labor is set to issue a Proposed Rule that will have a significant impact on the test used to determine whether someone is an independent contractor or an employee under the Fair Labor Standards Act (“FLSA”). The DOL’s intent in issuing this Proposed Rule is made clear by Secretary of Labor Marty Walsh’s comments: “While independent contractors have an important role in our economy, we have seen in many cases that employers misclassify their employees as independent contractors, particularly among our nation’s most vulnerable workers.  Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages. The Department of Labor remains committed to addressing the issue of misclassification.” An unpublished version of the Proposed Rule indicates it will make it easier for the DOL to find that workers have been misclassified as independent contractors rather than employees. The current test, in effect since March, 2021, analyzes five factors and places the greatest weight on two “core factors”: the nature and degree of control over the work and the worker’s opportunity for profit or loss based on personal initiative or investment.  The DOL now seeks to rescind the 2021 test and replace it with the new Proposed Rule. The new Proposed Rule will focus on the “economic reality” of the worker’s situation, ultimately asking – Are the workers economically dependent upon an employer for work (and therefore an employee) or are they in business for themselves (and therefore an independent contractor)? The economic reality test in the Proposed Rule will return to a “totality of the circumstances” analysis, under which no specific factors have greater weight, and all are considered in view of the economic reality of the whole relationship. The DOL is further proposing to return the consideration of investment as a stand-alone factor, and to provide additional analysis of the control factor, including detailed discussions of how scheduling, supervision, price-setting, and the ability to work for others should be considered. Furthermore, the Proposed Rule will not limit control only to control that is actually exerted. The Proposed Rule will also re-focus the analysis on the “integral” factor, which considers whether the work is integral to the potential employer’s business. The permanency of the relationship is another factor under the Proposed Rule that often weighs against independent contractor status for many workers who provide services for the same entity over an extended period of time. The Proposed Rule is scheduled to be published in the Federal Registry on October 13, which will begin a 45-day comment period. For more information regarding the anticipated Proposed Rule, contact your Polsinelli attorney.

In an unpublished opinion, the Colorado Court of Appeals recently held that a departing employee's right to vacation pay at separation is dependent on the company's policies.  Nieto v. Clark’s Market, Inc., 2019 COA 98. In this case, the employer had a policy stating than an employee was not entitled to payment for unused vacation time if the employer discharged her or if she voluntarily quit without giving two weeks' notice. The employee quit without giving the requisite two weeks' notice and the employer did not pay her for unused vacation pay.  Thereafter, the employee filed suit. In its decision, the Court rejected the employee’s claim that her vacation pay was "earned and determinable," and, thus, owed to her on discharge pursuant to the Colorado Wage Claim Act (“CWCA”). Therefore, the employer did not owe her for that vacation time. The Court observed: Nothing in the CWCA creates a substantive right to payment for accrued but unused vacation time.  Rather, "the employee’s substantive right to compensation and the conditions that must be satisfied to earn such compensation remain matters of negotiation and bargaining and are determined by the parties’ employment agreement rather than by statute." The Court concluded by writing: In sum, reading Sections 8-4-101(14)(a)(III), 109(a), and 121 together, we hold that the [employer’s] unused vacation policy doesn't violate the CWCA.  [The employee’s] right to compensation for approved but unused vacation pay depends on the party's employment agreement.  And that agreement unequivocally says that the vacation pay she seeks wasn't vested given the circumstances under which she left the [employer’s] employ." The Nieto case is certainly good news for employers.  Even if not binding precedent, its rationale can be used to support a “use it or lose it” policy.  However, it may be prudent to still rely on a "cap on accrual" policy as a way of controlling an employer's liability to a separating employee for vacation pay.  Employers with questions regarding vacation payout policies and other employment policies would do well to consult with able counsel.

On May 22, 2019, Colorado’s Governor Polis signed the Equal Pay for Equal Work Act (the “Act”), which brings significant changes to the existing Wage Equality Regardless of Sex Act. C.R.S. § 8-5-101 et seq.  Effective January 1, 2021, the Act will prohibit employers from paying an employee of one sex less than an employee of a different sex for substantially the same work. Employers will also be required to announce or post all opportunities for promotion to all current employees on the same calendar day, and include the hourly or salary compensation, prior to making a promotion decision. Additionally, employers will be required to keep records of job descriptions and wage rate history for each employee for the duration of employment plus two years after the end of employment. Note that wage differentials between employees of different sexes who perform substantially similar work are allowed where the employer can demonstrate that the difference in wages is based upon one or more factors, including: A seniority system; A merit system; A system that measures earnings by quantity or quality of production; The geographic location where the work is performed; Education, training, or experience to the extent that they are reasonably related to the work in question; or Travel, if the travel is a regular and necessary condition of the work performed. Also, the Act will prohibit an employer from: Seeking the wage rate history of a prospective employee or relying on a prior wage rate of a prospective employee to determine a wage rate; Discriminating or retaliating against a prospective employee for failing to disclose the employee’s wage rate history; Discharging or retaliating against an employee for asserting the rights established by the Act; Prohibiting employees from disclosing their wage rates; and Requiring an employee to sign a waiver that prohibits an employee from disclosing their wage rate information. Importantly, the Act will remove the authority of the Colorado Department of Labor and Employment to enforce wage discrimination complaints based on sex and permit aggrieved employees to file a civil action in district court, where a prevailing employee may recover liquidated damages and attorneys’ fees. Employers may wish to consider auditing their existing pay structures to make sure employees are receiving equal pay for equal work in compliance with the Act and would do well to post all opportunities for promotion to all current employees at the same time. Employers with questions regarding the Act, or pay audits generally, should consult with competent counsel.

Colorado appears poised to join a number of states that prohibit employers from inquiring into a job applicant’s criminal history on an initial employment application.  On April 30, 2019, the Colorado legislature sent House Bill 19-1025 (the “Bill”) to Governor Polis’ desk.  Assuming Governor Polis signs the Bill, Colorado will join a number of other states and “ban the box.”  If the Bill is signed into law, Colorado employers will be prohibited from: Stating in an employment advertisement that a person with a criminal history may not apply for the position; Stating on any form or application for employment that a person with a criminal history may not apply for the position; and Inquiring into or requiring an applicant to disclose any criminal history on an initial employment application. Employers may still obtain a publicly available criminal background report on a job applicant at any time. The above-listed prohibitions will not apply if: Federal, state, or local law or regulations prohibit employing a person with a specific criminal history to the position; The position is designated by the employer to participate in a federal, state, or local government program to encourage the employment of people with criminal histories; or The employer is required by federal, state, or local law or regulation to conduct a criminal background check for the position, regardless of whether the position is for an employee or an independent contractor. Critically, the Bill does not create a private cause of action or a new protected class under existing anti-discrimination laws.  However, the Bill does include staged penalties after the first violation. If signed into law as expected, the Bill’s provisions will become effective September 1, 2019 for employers with 11 or more employees, and September 1, 2021 for all other employers.

On January 23, 2019, the U.S. 7th Circuit Court of Appeals handed employers a welcome ruling and held that the Age Discrimination in Employment Act of 1967 (the “ADEA”) does not protect outside job applicants from disparate impact age discrimination.  Kleber v. CareFusion Corp., No. 1:15-cv-1994 (7th Cir. Jan. 23, 2019).  By way of background, disparate impact claims arise where an employer’s actions are facially neutral, but in practice adversely affect individuals in a protected class. Disparate treatment claims, on the other hand, focus on an employer’s intent to discriminate against an individual.                    When making its ruling, the 7th Circuit thoroughly examined the plain language of the statute and observed that the ADEA prohibits a covered entity from subjecting “any individual” to disparate treatment based on age. The Court further pointed out that the ADEA prohibits a covered entity from subjecting “employees” to discrimination based upon disparate impact.  This difference in language was dispositive; the Court held that the plain language of the ADEA demonstrated that only employees, and not individuals (i.e., applicants), are protected from disparate impact discrimination. Indeed, per the Court: The plain language of § 4(a)(2) makes clear that Congress, while protecting employees from disparate impact age discrimination, did not extend that same protection to outside job applicants.  This decision is good news for employers.  However, employment-law watchers suspect that the issue will ultimately come before the U.S. Supreme Court.  Stay tuned to Polsinelli at Work for further updates

Employers take note: a provision contained in the recently-passed Tax Cuts and Jobs Act of 2017 (the “Act”) now limits tax deductions for certain types of settlement agreements. Specifically, Section 13307 of the Act, styled “Denial Of Deduction For Settlements Subject To Nondisclosure Agreements Paid In Connection With Sexual Harassment Or Sexual Abuse,” (“Section 13307”) prohibits employers from taking income tax deductions for: Any settlement or payment related to sexual harassment or sexual abuse if the settlement or payment is subject to a nondisclosure agreement; or Attorney’s fees related to such settlements. Previously, when the parties in a dispute involving allegations of sexual harassment or misconduct settled those claims, they agreed to a nondisclosure provision in the settlement agreement. In other words, both parties would be prohibited from disclosing the terms and amount of the settlement (with corresponding penalties resulting from any violation of the provision). The nondisclosure provision did not affect whether any monies paid pursuant to the terms of the settlement agreement were tax-deductible. Now, however, if a settlement agreement subject to Section 13307 of the Act contains a nondisclosure provision, then the parties to the settlement agreement may not take a tax deduction for the amount of the settlement or any corresponding attorneys’ fees. Another potential problem that employers may face relates to settlements that resolve multiple claims. Indeed, instances arise where employees and employers settle matters that resolve sexual harassment claims and non-sexual harassment claims in one fell swoop. Section 13307 does not define the terms “related to sexual harassment or sexual abuse” so careful drafting of the settlement agreement and/or ancillary agreements is recommended to maximize opportunities to deduct payments that are not subject to Section 13307. Furthermore, a portion of attorney’s fees attributable to non-Section 13307 claims may also be deductible. Stated simply, the scope and breadth of Section 13307 remains murky, and it will take time before clear answers to the above-listed questions emerge. Thus, employers defending against allegations of misconduct covered by Section 13307 would do well to discuss the implications of settling such claims with competent counsel.

The Fair Credit Reporting Act (FCRA) continues to cause issues for employers that run afoul of its provisions when reviewing consumer background reports as part of the hiring process. Most recently, a proposed class action was filed against Starbucks Corporation. On September 20, 2017, plaintiff Kevin Wills filed a proposed class action in federal court in Georgia, alleging that Starbucks rejected job applicants after reviewing the applicants’ respective consumer background reports without first providing them with a copy of their reports or notifying them of their rights, in violation of the FCRA. The plaintiff seeks to certify a nationwide class of Starbucks job applicants who were denied at least five days’ notice of an adverse employment action based on their consumer background reports. As a reminder, the FCRA requires employers to: Certify to job applicants that consumer background reports will be used for a “permissible purpose”; Provide written disclosure and receive written authorization from job applicants before obtaining consumer reports; Provide notice to job applicants, including a copy of the consumer background report relied upon and notice of the applicant’s rights under the FCRA, before making any adverse employment decisions; and Provide job applicants, orally, in writing, or electronically, with an adverse action notice after making any adverse employment decisions based on a consumer background report. In addition, state laws may restrict an employer’s use of consumer background reports, especially credit reports, when making employment decisions.

On April 3, the U.S. Supreme Court held that a district court’s decision whether to enforce or quash an Equal Employment Opportunity Commission (EEOC) subpoena should be reviewed only for an abuse of discretion, not de novo, by the Circuit Courts. The decision,  in McLane Co, Inc. v. Equal Employment Opportunity Commission,  explains that a reviewing court cannot reverse a district court’s decision regarding whether to enforce an EEOC subpoena absent a definite and firm conviction that the district court committed a clear error of judgment. BACKGROUND INFORMATION   Title VII of the Civil Rights Act of 1964 permits the EEOC to issue subpoenas to obtain evidence from employers that is relevant to pending investigations. If an employer believes that the information sought is too broad or indefinite, is being issued for an illegitimate purpose, or is unduly burdensome, the employer may petition the EEOC to revoke the subpoena.  If the EEOC declines to revoke the subpoena and the employer refuses to comply, the EEOC may then request that the district court issue an order enforcing the subpoena. THE COURT’S DECISION The case arose when McLane Co., a supply-chain services company, refused to comply with EEOC subpoenas seeking “pedigree information” such as names, Social Security numbers, addresses and telephone numbers of employees as part of its investigation into age and sex discrimination. The district court declined to enforce the subpoenas, finding that the pedigree information was not relevant to the charges.  The Ninth Circuit reversed after conducting a de novo review of the lower court’s decision. When deciding that abuse of discretion was the proper standard of review, the U.S. Supreme Court looked at the history of appellate practice when reviewing subpoenas and considered whether the district or appellate court was better positioned to decide the issue. The Court found that Title VII confers on the EEOC the same authority to issue subpoenas that the National Labor Relations Act (NLRA) confers on the National Labor Relations Board (NLRB), and that “[d]uring the three decades between the enactment of the NLRA and the incorporation of the NLRA’s subpoena-enforcement provisions into Title VII, every Circuit to consider the question had held that a district court’s decision whether to enforce an NLRB subpoena should be reviewed for abuse of discretion.” Moreover, the Supreme Court found that district courts have judicial expertise determining relevancy and are better suited to resolve the “fact-intensive, close calls” that subpoena enforcement cases raise.

After the inauguration in January 2017, President-elect Trump will be presented with a number of regulatory issues that can change the labor and employment landscape. Congressional and administrative action are not required to effect all such changes in the way the federal government regulates private employers. Rather, the new administration can make significant and lasting changes in employment enforcement at certain federal agencies, including the Equal Employment Opportunity Commission (EEOC), the Department of Labor (DOL), the Occupational Safety and Health Administration (OSHA), and the National Labor Relations Board (NLRB). In this and upcoming blogs, we will examine ways in which the new administration can quickly and dramatically pivot the landscape of labor and employment laws simply by changing enforcement and litigation priorities. This first blog focuses on changes that might be made at the U.S. Department of Labor. Department of Labor Mr. Trump named Andrew Puzder as his pick to lead the U.S. Department of Labor (DOL). Mr. Puzder, the chief executive officer of the company that owns Carl’s Jr and Hardee’s restaurant chains, in his role as a business owner, has criticized higher overtime pay rules and opposed increasing the minimum wage to $15 per hour. The DOL could alter course for key priorities of the prior Obama administration: the Fair Labor Standards Act (FLSA) overtime rules, the “persuader rule,” and the fiduciary duties for retirement advisors. FLSA Overtime Rule On May 18, 2016 the Department of Labor published a new final rule updating the nation’s overtime regulations, which would automatically extend overtime pay protections to over 4 million workers if fully implemented. In November, 2016, a federal judge in Texas issued a nationwide injunction halting enforcement of the rule. That decision is currently being appealed by the Obama administration to the 5th Circuit Court of Appeals. The Trump administration could effectively terminate the litigation and end the overtime rule by withdrawing the government’s appeal, and thus leave the lower court’s decision intact. This course of action may be in the cards. Mr. Puzder has expressed his dislike of the new rule and “has argued that the Obama administration’s recent rule expanding eligibility for overtime pay diminishes opportunities for workers.”  The U.S. Court of Appeals for the Fifth Circuit granted an expedited appeal on the issue, with oral argument to be scheduled after January 31, 2017. With oral argument scheduled after the inauguration, the DOL, under the leadership of Mr. Puzder, could reverse position and withdraw the appeal before the court hears oral argument. If so, the injunction would stand and the new overtime rule would not take effect. Persuader Rule Similar to the overtime rule, the DOL currently faces an injunction barring the “persuader rule” from taking effect. The persuader rule “requires that employers and the consultants they hire file reports not only for direct persuader activities – consultants talking to workers – but also for indirect persuader activities – consultants scripting what managers and supervisors say to workers.” The U.S. District Court for the Northern District of Texas issued a preliminary injunction on June 27, 2016 and recently issued a nationwide permanent injunction against the rule on November 16, 2016. The DOL can appeal the permanent injunction to the Fifth Circuit, but even if it does, the Trump administration will have time to withdraw the appeal before it reaches a decision by the appellate court. Fiduciary Rule The Trump administration could also change course for the DOL’s new fiduciary rule, which requires financial advisors to act in the best interest of their clients with respect to retirement accounts. The DOL issued the final rule on April 6, 2016, to be applicable April 10, 2017. Although Mr. Puzder has not yet voiced an opinion on the fiduciary rule, his general remarks about less government regulation makes some experts believe the new administration “will kill or significantly weaken the fiduciary rule.” Edward Mills, an analyst at FBR & Co., “predicts the new administration will first delay the implementation of the rule through an administrative action and then repeal or overhaul it.”  Since the DOL has already issued a final rule, the new administration would have to go through the onerous public notice and comment process prior to making any changes. Although the fiduciary rule was not directly addressed during the campaign, an advisor to President-elect Trump suggested the President-elect could seek to reverse it. Republicans in Congress have expressed their desire to do so as well.