Yesterday, Judge Ada E. Brown of the U.S. District Court for the Northern District of Texas in Ryan v. The Federal Trade Commission upheld a challenge by business groups to the FTC’s non-compete ban. In addition to confirming her earlier ruling that the FTC non-compete ban was not a valid exercise of agency power, the judge also expanded the limited, temporary injunction entered on July 3, 2024 to hold unlawful and set aside the noncompete-ban in a ruling with a “nationwide effect” that is not limited to the parties in the lawsuit. In other words, the FTC’s non-compete ban will not take effect on September 4 for anyone. The Court concluded that: (1) the FTC lacked statutory authority to promulgate substantive rules concerning unfair methods of competition, i.e. the non-compete ban; and (2) the non-compete ban is arbitrary and capricious because it is “unreasonably overbroad without a reasonable explanation.” As a result, the Court found the non-compete ban to be an unlawful agency action. In deciding the appropriate relief, the Court relied on recent precedent from the Fifth Circuit to conclude its ruling must have a “‘nationwide effect,’ is ‘not party-restricted,’ and ‘affects persons in all judicial districts equally.’” Thus, the Court’s ruling prevents (1) the FTC from taking any action to enforce the non-compete ban against anyone; and (2) the FTC non-compete ban from taking effect on September 4, 2024—effectively vacating it. What happens next? In the wake of the ruling, the FTC’s spokesperson stated, “[The FTC is] seriously considering a potential appeal.” If the FTC decides to appeal, the decision would be reviewed by the U.S. Court of Appeals for the Fifth Circuit in New Orleans. Any decision rendered by the Fifth Circuit would likely be appealed to the U.S. Supreme Court—meaning the final fate of the FTC’s non-compete will be revisited and could change. Importantly, even though the FTC non-compete ban will likely not go into effect in the immediate future, the FTC still has the power in the interim under Section 5 of the FTC Act to pursue enforcement actions on a case-by-case basis. In reacting to the ruling, an FTC spokesperson stated, “Today’s decision does not prevent the FTC from addressing noncompetes through case-by-case enforcement actions.” If the FTC is to be taken at its word, it appears ready to amplify such enforcement actions in the future. The FTC’s posture could change after the November election depending upon the policies of the next administration. How should employers approach non-competes? Notwithstanding yesterday’s ruling, employers should still be mindful of the enforceability of their non-competes now and in the future. Several states have limited or outright banned the use of non-competes. The move by the FTC could spark additional state legislatures to revisit state-level restrictions as they return from recess and begin new legislative sessions this Fall. The U.S. Congress could also decide to enact legislation of its own; and, it’s conceivable that yesterday’s ruling will serve as a catalyst for Congress to revisit such legislation. Polsinelli attorneys are continually monitoring the evolving landscape of restrictive covenant law and are available to help you evaluate your use of non-competes and other restrictive covenants to protect competitive information.

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.

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.

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.

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.

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.

On July 9, 2021, President Biden made good on a campaign promise to address non-compete agreements by issuing a sweeping executive order that specifically targets barriers to competition. Specifically, the executive order encourages the Federal Trade Commission and other federal agencies to ban or limit non-compete agreements. However, no specifics are offered as to the breadth of any restrictions the Biden Administration would ultimately like to see. And even assuming those agencies respond to this encouragement, we expect the rulemaking process will not yield actionable results for a considerable period of time and is unlikely to result in a complete ban on the use of non-competes. In a press conference, the President stated that the executive order is in response to the growing number of employers utilizing non-competes in recent years – estimating that between 35 million and 60 million private-sector individuals are subject to non-competition agreements. The Biden Administration believes limiting or banning the use of non-competition agreements will increase economic growth and increase wages to allow workers mobility to switch to better-paying jobs. The executive order could prove to be an accelerant for states to initiate their own legislation limiting the use of non-competes – a recent state-law trend that has been gaining traction across the country, in which we have been closely monitoring over the last few years. Regardless of how broadly the executive order is written or when federal agencies ultimately issue new rules, the writing on the wall for years has indicated that the broad use of traditional non-compete agreements will continue to be limited. Employers would be wise to revisit the protections they have in place to protect trade secret and confidential information and their investments in employee training to ensure such protections are narrowly tailored to obtain court enforcement if challenged. One solution has been to move away from traditional non-compete agreements toward customer-based restrictions for the majority of employees. Polsinelli attorneys continue to monitor actions taken by federal agencies to enforce President Biden’s executive order and are prepared to assist employers with navigating the evolving non-compete landscape.

Illinois employers have long been prohibited from using arrest records as the basis for employment decisions under Section 103 of the Illinois Human Rights Act (“IHRA”).  On March 23, 2021, Illinois Governor J.B. Pritzker signed Senate Bill (SB) 1480 (the “Amendment”) into law, which added a new Section 103.1 to the IHRA that severely restricts the ability of employers to rely on conviction records in making employment decisions.  Section 103.1 is effective immediately, and prohibits use of a conviction record as the basis for an employment decision unless (1) there is a “substantial relationship” between one or more of the candidate’s prior convictions and the job at issue; or (2) employment would involve an “unreasonable risk to property or to the safety or welfare of specific individuals or the general public.” To determine whether a “substantial relationship” exists, employers are required to evaluate six factors set forth in the Act: (1) the length of time since the conviction; (2) the number of convictions that appear on the conviction record; (3) the nature and severity of the conviction and its relationship to the safety and security of others; (4) the facts or circumstances surrounding the conviction; (5) the age of the employee at the time of the conviction; and (6) evidence of rehabilitation efforts.  If an employer determines that such a relationship exists, it must then engage in an interactive process comparable what is required under the federal Fair Credit Reporting Act (“FCRA”). The Illinois Department of Human Rights has provided additional guidance through an FAQ, but it still leaves a number of open questions.  Ultimately, an employer will need to be prepared to offer a thoughtful, well-reasoned explanation for why it considered a conviction disqualifying. One final point for consideration is the opening clause of Section 103.1, which prefaces the prohibition with the words “Unless otherwise authorized by law….”  There may be other legal obligations that require an employer to disqualify an employee based on certain convictions.  For example, the Illinois Health Care Worker Background Check Act establishes a number of “disqualifying offenses” that would likely fall within the parameters of the Amendment’s prefatory language. Ultimately, the legal pitfalls for Illinois employers seeking background information regarding applicants and employees continue to multiply.  In addition to the Amendment and the FCRA, Illinois employers should remember that the Illinois Employee Credit Privacy Act places restrictions on an employer’s ability to take action based on an employee’s credit history.  As this landscape continues to get more complex, it is wise for employers to get legal assistance both in terms of developing background check processes and navigating next steps following receipt of a negative background check.

On April 1, 2020, the United States Department of Labor (DOL) issued a Final Rule implementing the Families First Coronavirus Response Act (FFCRA).  Shortly thereafter, the State of New York filed suit against the DOL, arguing that several features of the Final Rule exceeded the DOL’s authority under the FFCRA. Yesterday, the United States District Court for the Southern District of New York granted partial summary judgment in favor of the State of New York and “vacated” four aspects of the Final Rule. Specifically: (1) the “work-availability requirement”; (2) the definition of “health care provider” for purposes of the “health care provider or emergency responder” exemption; (3) the requirement that an employer consent in order for an employee to take intermittent leave under the FFCRA; and (4) the requirement that an employee submit documentation to their employer as a pre-condition to leave. The Court’s ruling could have a significant impact on how FFCRA leave is administered in New York, and potentially across the Country if other states follow in New York’s footsteps. First, without the “work-availability requirement,” an employee is entitled to paid FFCRA leave even if an employer is temporarily closed or they are placed on furlough because the employer does not have work.  The Court analogized a furloughed employee to a teacher on paid parental leave who would still be considered to be on “leave” even if school is called off for a snow day. Although the Court invalidated the requirement, on this issue the Court acknowledged that the statutory language on this point was ambiguous, and that the DOL has the authority to issue guidance on the matter.  Further, while the Court held that the DOL’s “barebones explanation for the work-availability requirement is patently deficient,” it did not find that the conclusion was inconsistent with the statute.  As a result, even leaving aside the possibility of a different outcome on appeal, the DOL may be able to address the Court’s concern through a more thoroughly reasoned explanation of its interpretation. Second, the Court’s Order dramatically narrows the scope of the “health care provider or emergency responder” exemption, which allows an employer of an employee who is a health care provider or emergency responder to exclude the employee from taking leave under the FFCRA.  The DOL’s Final Rule defined a “health care provider” much more broadly than the statute as: anyone employed at any doctor’s office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy, or any similar institution, Employer, or entity.  This includes any permanent or temporary institution, facility, location, or site where medical services are provided that are similar to such institutions. The DOL’s broad definition provided many health care related employers the option to apply the exemption to virtually all of their employees. By vacating the Final Rule’s definition of “health care provider,” the only positions clearly included within the definition are those identified in the Family and Medical Leave Act’s (FMLA) definition of “health care provider,” which is limited to “a doctor of medicine or osteopathy who is authorized to practice medicine or surgery (as appropriate)” or “any other person determined by the Secretary to be capable of providing health care services.” (A listing of those other persons is available here).  In rejecting the DOL’s definition, the Court acknowledged that the DOL, though the Secretary of Labor, has authority to expand the definition of the term beyond what is set forth in the statute.  However, it required that there be “at least a minimally role-specific determination” with respect to the application of the exemption.  As a result, even absent an effective appeal, the DOL could take steps to refine this definition, in which case it will be more likely to receive deference from a reviewing court. The Final Rule permits employees to take FFCRA leave intermittently only if the employer and employee agree, and even then, only for a subset of qualifying reasons where there is a minimal risk that the employee will spread COVID-19 to other employees. On this point, the Court agreed with the limitation on the reasons for which employees may take intermittent leave but vacated the requirement that an employer must consent to intermittent leave. Accordingly, the ruling would not require employers to grant intermittent leave when there is a risk of spreading COVID-19 to other employees. However, this decision indicates that employers who do not currently permit intermittent leave under circumstances where there is not a risk of spreading COVID-19 may be at risk if they do not do so going forward. Finally, the Court found that the requirement that an employee submit documentation concerning the need for leave as a condition precedent to taking FFCRA leave was inconsistent with the notice provisions contained in the FFCRA. At this point, it is unclear whether the DOL will move to stay the order pending appeal to the Second Circuit.  What is clear, unfortunately, is that employers are once again faced with uncertainty as they evaluate whether and how to apply the FFCRA.  The Court’s opinion does not apply beyond New York, and it does not mean that the problems with the DOL’s Final Rule cannot be remedied, but employers should take notice and consult with counsel to determine the proper path forward for their organization.

As employers begin seeing rays of light at the end of the tunnel and start thinking of reopening, a question at the forefront of those preparations is whether they can test their employees for COVID-19. Such a test would qualify as a medical examination subject to restrictions under the Americans with Disabilities Act (“ADA”). Specifically, an employer would need to be able to establish that the test was job related and consistent with business necessity. The Equal Employment Opportunity Commission (“EEOC”) has now provided guidance making clear that employers can take this step. Before COVID-19 broke onto the scene, the EEOC had provided guidance for employers regarding how to respond in the face of a pandemic. That guidance served as the basis for employer decisions as they attempted to navigate a myriad of novel situations created by the novel coronavirus, but it did not specifically address COVID-19 testing. In its original guidance regarding COVID-19, the EEOC acknowledged that the spread of COVID-19 is a “direct threat,” and that temperature screenings were therefore appropriate. In guidance released on April 23, 2020, the EEOC expanded that guidance to clarify that employers may choose to administer COVID-19 testing to employees before they enter the workplace to determine if they have the virus. Nevertheless, employers must still ensure that any testing is consistent with ADA requirements, including that the tests being used are accurate and reliable. On this issue, the EEOC pointed employers to guidance from the U.S. Food and Drug Administration about what may or may not be considered safe and accurate testing. Additionally, while testing evaluates whether an employee is infected at the time of the test, it is really only a snapshot of that moment in time and employees who test negative could subsequently become infected. As a result, employers must still continue to implement other safety measures, such as social distancing and other hygiene requirements. In addition to ensuring accurate testing methodologies, employers should also receive written consent from employees before requiring mandatory testing. Polsinelli has worked with a number of testing providers, and can assist employers in implementing effective testing regimens.

Due to the COVID-19 pandemic, schools in the United States have generally suspended brick-and-mortar operations nationwide and are almost exclusively conducting classes through remote learning for the remainder of the academic year. Providing learning support and other care to children staying home due to school closures necessitates a meaningful level of adult supervision by parents who would often otherwise be working. Relatedly, parents of younger children are grappling with a need to work while supervising their toddlers as many child care facilities, including before and after school care programs, are also closed. In light of the ongoing nature of the pandemic, various summer programs for children are following suit. As the pandemic continues without a vaccine or other effective drug therapies, federal, state, and local governments are attempting to develop more advanced infection control plans for re-opening public activities including schools, child care facilities, and summer programs. Whether those programs do, in fact, re-open, many families may opt to keep their children home to minimize the risk of COVID-19 infection. As children idle longer at home and parents struggle with an ongoing gap in child care, U.S. employers and their workforce face significant uncertainty in addressing child care matters during this unprecedented pandemic. Juggling child care and work will likely continue to affect workforce productivity and adversely impact employers of all sizes well into the summer. The federal government attempted to provide some relief to families through the passage of the Families First Coronavirus Response Act (“FFCRA”), which requires most employers with fewer than 500 employees to provide certain pandemic-related paid leave benefits to employees. Details regarding the benefits provided under the FFCRA can be found here, but they include paid leave benefits for employees who are unable to work due to the need to care for one or more minor children whose school or place of care [1] is closed, or whose child care provider is unavailable, due to COVID-19 related reasons.  As it relates to child-care related leave connected to COVID-19, the FFCRA requires employers to foot the bill for up to 12 weeks of paid leave for eligible employees. The first two weeks of leave (up to 80 hours) may be paid under the Emergency Paid Sick Leave Act (“EPSLA”) [2].  After the initial two weeks of leave, an eligible employee may take up to an additional 10 weeks of paid leave under the Emergency Family and Medical Leave Expansion Act (“EFMLA”). The paid leave benefit is capped at $200 per day and $10,000 total for each eligible employee, and employers may take a dollar-for-dollar credit against their quarterly payroll tax payments. However, considering the pandemic may continue for many months, the paid leave provisions of the FFCRA are unlikely to be adequate in addressing the challenges employers and employees now face, and will continue to face as they head into summer. Unfortunately, the fact that the school year will be ending soon will not eliminate the need for child-care based leave if the pandemic persists. The FFCRA recognized this by including summer camps and summer enrichment programs. As a result, maintaining a flexible approach relating to the use of these paid leave benefits may prove crucial to allowing caregivers to effectively continue in the workforce into the summer.  Ultimately, however, it appears increasingly likely that employers need to prepare for longer term implications of children staying at home through the summer. While employees and employers must both agree for these paid leave benefits to be taken intermittently, reaching an agreement that allows for the pacing of a workforce’s utilization of EPSLA and EFMLA leaves may extend the benefit longer than it would otherwise be available. For example, an employee may be able to work half days over 20 weeks rather than take a full 10 sequential weeks off, or work two or three days a week, similarly extending the benefit. Where employers and employees can reach agreement on flexible scheduling, such staggering of leave may help struggling parents patch together a schedule that both allows productive time for their job every week as well as allows necessary supervision of their children while they are at home. However, unlike traditional FMLA, the Paid FMLA Leave is just that - a paid benefit, and therefore, employees may be less incented to stagger the use of this benefit. That said, staggering this benefit over the course of the remaining academic year and summer may be exactly what is required for employees to manage through what everyone hopes to be the worst of the pandemic. If your company has questions about the legal implications of their employees’ longer term child care challenges and those employees’ rights under the Families First Coronavirus Response Act, contact the authors of this article or the Polsinelli attorney with whom you regularly work. [1] “Place of care” is defined for purposes of the benefits described in this post as a physical location where care is provided for the child while the employee works for the employer.  Place of care is broadly defined as a physical location that does not have to be solely dedicated to such care and includes day care facilities, preschools, before and after school care programs, schools, homes, summer camps, summer enrichment programs and respite care programs. [2] This is provided the eligible employee has not already taken all or part of available EPSLA leave for a COVID-19 another qualifying reason.  If the eligible employee has exhausted such entitlement, the employee may utilize accrued but unused paid leave to cover the gap under EFMLA leave becomes available.

On April 1, 2020, the Wage and Hour Division of the Department of Labor (“DOL”) issued temporary regulations (“Regulations”) to implement the Public Health Emergency Leave (“Emergency FMLA Leave”) and Emergency Paid Sick Leave (“Paid Sick Leave”) benefits available under the Families First Coronavirus Response Act (“the “Act”). The Regulations took immediate effect, on the effective date of the Act, and remain in effect through December 31, 2020, when the Act expires. The Regulations expand on the DOL’s guidance or “Families First Coronavirus Response Act: Questions and Answers,” which were issued late the week of March 23 and updated over the following weekend.  In some instances, the Regulations are inconsistent with the DOL’s former guidance – particularly with regard to: (1) The reasons an employee may take Paid Sick Leave, (2) The applicability of the integrated employer and joint employer tests which are used to determine the number of employees for purposes of coverage under the Act, and (3) The documentation employers may request to determine an employee’s eligibility for leave under the Act. The DOL updated its previous guidance or Questions and Answers on April 1, 2020 (here), to conform to the Regulations. A brief summary of several sections that (1) depart from the DOL’s former guidance or (2) provide new information the DOL did not previously address is below. Government Orders The Regulations expand the qualifying reasons for Paid Sick Leave to include containment, shelter-in-place and stay-at-home orders.  However, an employee is only entitled to Paid Sick Leave if the order “cause[s] the Employee to be unable to work even though his or her Employer has work that the Employee could perform but for the order.” Significantly, the Regulations further broaden “Subject to a Quarantine or Isolation Order” to include: when a Federal, State, or local government authority has advised categories of citizens (e.g., of certain age ranges or of certain medical conditions) to shelter in place, stay at home, isolate, or quarantine, causing those categories of Employees to be unable to work even though their Employers have work for them. Advice to Self-Quarantine The Regulations state that an employee has been “advised by a health care provider to self-quarantine due to COVID-19 concerns” for purposes of Paid Sick Leave if: (i) A health care provider advises the Employee to self-quarantine based on a belief that— (A) the Employee has COVID-19; (B) the Employee may have COVID-19; or (C) the Employee is particularly vulnerable to COVID-19; and (ii) following the advice of a health care provider to self-quarantine prevents the Employee from being able to work, either at the Employee’s normal workplace or by Telework. Similarly, the Regulations provide that an employee may take Paid Sick Leave to care for another who has received any of the same recommendations.  On that point, the Regulations explain that to qualify for Paid Sick Leave, the other person must be: an Employee’s immediate family member, a person who regularly resides in the Employee’s home, or a similar person with whom the Employee has a relationship that creates an expectation that the Employee would care for the person if he or she were quarantined or self-quarantined. For this purpose, ‘individual’ does not include persons with whom the Employee has no personal relationship. Seeking a Diagnosis With respect to people who suspect that they are ill, the Regulations clarify that if an employee is taking leave because they are “experiencing COVID-19 symptoms and seeking medical diagnosis,” the employee’s Paid Sick Leave “is limited to the time the Employee is unable to work because the Employee is taking affirmative steps to obtain a medical diagnosis, such as making, waiting for, or attending an appointment for a test.” Employer Coverage The Regulations provide that all common employees of joint employers or all employees of integrated employers must be counted together to determine coverage under the Act.  We have covered this issue in more detail here. Notice of Need for Leave and Documentation of Need for Leave The Regulations regarding documentation of the need for leave are a departure from the DOL’s former guidance, which suggested that an employer could require a variety of documents with a request for Paid Sick Leave or Emergency FMLA Leave.  The Regulations provide that an employer may not require a notice of the need for leave to include documentation beyond what is listed below. Before taking either Paid Sick Leave or Emergency FMLA Leave, all employees must give their employers documentation that includes: (1)  The employee’s name; (2)  The date(s) for which leave is requested; (3)  The qualifying reason for the leave; and (4)   A written or oral statement that the employee is unable to work because of the qualifying reason for leave. Before taking a Paid Sick Leave or Emergency FMLA Leave, some employees must additionally provide: o   For an employee subject to a federal, state or local quarantine or isolation order related to COVID-19: the name of the government entity that issued the Quarantine or Isolation Order o   For an employee advised by a health care provider to self-quarantine due to COVID-19 concerns: the name of the health care provider who advised the employee to self-quarantine due to concerns related to COVID-19. o   For an employee caring for an individual subject to a federal, state or local quarantine or isolation order or a health care provider’s advice to self-quarantine due to COVID-19 concerns: either (a) the name of the government entity that issued the Quarantine or Isolation Order to which the individual being cared for is subject or (b) the name of the health care provider who advised the individual being cared for to self-quarantine due to concerns related to COVID-19. o   For an employee caring for the employee’s child whose school or place of care is closed or the child’s care provider is unavailable due to a public health emergency) or Emergency FMLA Leave: the name of the employee’s child (or children), the name of the closed or unavailable school or child care provider, and a representation that no other suitable person will care for the employee’s child when the employee takes Paid Sick Leave or Emergency FMLA Leave. In addition to the information specifically identified, the Regulations generally state that an employer may request that an employee provide additional material as needed to support the employer’s request for tax credits pursuant to the Act.  And, the Regulations state that employers are not required to provide an employee’s request for leave if the employee fails to provide materials sufficient to support the applicable tax credit.  With respect to documents required for tax credits, the Regulations refer to https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-required-paid-leave-provided-by-small-and-midsize-businesses-faqs (“IRS FAQs”) for more information. Significantly, neither the Regulations nor the IRS FAQs specify any additional information employees must provide an employer to take Paid Sick Leave based on experiencing COVID-19 symptoms and seeking medical diagnosis or for employees experiencing any other substantially similar condition specified by the federal government. While the Regulations answer questions about the process of requesting leave under the Act, the Regulations leave open questions about: Whether employers can require additional documentation substantiating the need for leave after a Paid Sick Leave or Emergency FMLA Leave is approved. Whether the DOL will issue additional Regulations or the IRS will issue additional guidance on the documentation process in the coming weeks. Recordkeeping Finally, under the Regulations, an employer must: Retain all documentation related to an employee’s request for or entitlement to Paid Sick Leave or Emergency FMLA Leave for four years, regardless of whether the leave was granted or denied. Document and keep any oral statements an employee provided to support a request for Paid Sick Leave or Emergency FMLA Leave for four years. Have an authorized officer document that the employer is eligible for the small employer exemption to the Act when the employer denies an employee’s request for Paid Sick Leave or Emergency FMLA Leave (and keep such documentation for four years). Notably, the Regulations provide that a small employer must post a notice regarding the Act, even if the employer determines that it is exempt.

On March 18, 2020, President Trump signed the Families First Coronavirus Response Act (the “Act”), requiring employers with fewer than 500 employees to provide paid leave benefits related to the COVID-19 pandemic under the Emergency Family and Medical Leave Expansion Act (“Paid FMLA Leave”) and Emergency Paid Sick Leave Act (“Paid Sick Leave”). The details of the Act are set out in our earlier Blog post here. Since the Act was passed, there has been much discussion about how employees across related companies should be counted for purposes of coverage. Today, the Wage and Hour Division of the Department of Labor issued a “temporary regulation” or rule that clarifies this issue, which can be found here.[i]  The temporary rule remains in effect through December 31, 2020 when these provisions sunset.  In evaluating this issue, it is important to note that the two leave requirements arise in different portions of the Act. The right to Paid FMLA Leave is set forth in Division C of the Act, which amends the existing statutory text of the Family and Medical Leave Act (“FMLA”). The right to Paid Sick Leave is set forth in Division E of the Act. While both Divisions of the Act set the threshold for covered employers at “fewer than 500 employees,” neither provides express direction on how this number should be calculated across related entities. Today’s rule specifically addresses this issue. Pursuant to § 826.40 of the rule, which addresses issues related to employer coverage, aggregation of employees will occur in relation to both benefits when an employer meets either the “Integrated Employer” or “Joint Employer” tests. As a general matter, the legal entity which employs the employee is the “employer.” Where one corporation has an ownership interest in another corporation, it is a separate employer unless it is an “Integrated Employer” or a “Joint Employer.”[ii] To determine whether separate entities are considered an “Integrated Employer,” the Department of Labor considers “the entire relationship” between the parties “reviewed in its totality” based on the following four factors: (i) Whether there is common management; (ii) Whether the entities’ operations are interrelated; (iii) Whether there is centralized control of labor relations; and (iv) The degree of common ownership/financial control of the entities. If the factors indicate the entities are an Integrated Employer, the employees of all entities making up the Integrated Employer are counted to determine employer coverage and eligibility for Paid Sick Leave and Paid FMLA Leave. Even if separate entities are not considered an Integrated Employer, the Department of Labor may consider separate entities a “Joint Employer” if the entities each exercise some control over the work or working conditions of an employee. Notably, the joint employer test does not require common ownership. Joint employers may be separate and distinct entities with separate owners, managers, and facilities. Nevertheless, if an employee performs work that simultaneously benefits two or more employers, or works for two or more employers at different times during the workweek, the separate entities may be considered a Joint Employer. To evaluate whether an employee’s work simultaneously benefits two employers, the DOL applies a four-factor balancing test assessing whether the potential joint employer: (i) Hires or fires the employee; (ii) Supervises and controls the employee’s work schedule or conditions of employment                              to a substantial degree; (iii) Determines the employee’s rate and method of payment; and (iv) Maintains the employee’s employment records. The potential joint employer must actually exercise—directly or indirectly—one or more of these indicia of control to be jointly liable under the Act; however the potential joint employer’s maintenance of the employee’s employment records alone will not lead to a finding of joint employer status.  DOL guidance on the Joint Employer test can be found here. If two entities are found to be joint employers, all of their common employees must be counted in determining whether the Paid Sick Leave and Paid FMLA Leave obligations apply. Employers should exercise caution in oversimplifying the Integrated Employer and Joint Employer analyses to avoid coverage under the Act. An employer who takes the position that they are an Integrated Employer or Joint Employer for purposes of avoiding coverage under the Act may later find they waived their ability to assert they are separate entities in litigation or other disputes. Employers are encouraged to consult with counsel to determine coverage under the Act. [i] This rule is different from guidance the DOL provided recently in the form of FAQs. [ii] 29 CFR 825.104(c)(1).

Since the Families First Coronavirus Response Act was signed on March 18, 2020, employers of health care providers have wondered how much of their workforce would be eligible for paid sick leave and emergency FMLA leave. (Our prior blog post on this topic is available here.) Just in time for the April 1 effective date of the FFCRA, the Department of Labor has provided new guidance. (The guidance is available here) While existing FMLA regulations provided exemptions for a number of specific provider types, many employees of health care facilities would not have been exempt. Under the DOL’s updated guidance, the health care exemption applies to everyone employed at a: doctor’s office hospital health care center health clinic pharmacy post-secondary educational institution offering health care instruction medical school nursing facility retirement facility nursing home home health care provider facility that performs laboratory testing facility that performs medical testing local health department or agency The guidance also includes a catch-all category for employers similar to the listed employers. Further, the guidance allows exemptions for employees of entities that provide services to or maintain the operations of any of the employers listed above. Accordingly, all clinicians and non-clinical staff members working for health care employers or their contractors / vendors are exempt – they do not qualify for either paid sick leave or emergency FMLA leave under the FFCRA. While the definition of health care provider is quite broad, the DOL urges employers to “be judicious” in exempting workers apparently based on its concern that employees could spread COVID-19 if leave is not available. This guidance is an important reminder to employers to consider how their policies may influence whether an employee who is sick will feel incentivized to come to work.

On March 18, 2020, President Trump signed the Families First Coronavirus Response Act (the “Act”), requiring employers with less than 500 employees to provide Public Health Emergency Leave and Paid Sick Time to employees impacted by the Coronavirus pandemic.  The details of the Act are set out in our earlier Blog post here. Health care providers and first responders on the frontline of the pandemic have a critical need to understand how this requirement impacts their operations during this critical moment.  In evaluating this issue, it is important to note that the two leave requirements, one for child care and the other for illness, arise in different portions of the Act.  The right to Public Health Emergency Leave is set forth in Division C of the Act, which amends the existing statutory text of the Family and Medical Leave Act (“FMLA”).  The right to Paid Sick Time is set forth in Division E of the Act, which creates a new statute known as the Emergency Paid Sick Leave Act. Both of these Divisions address the application of leave provisions to health care providers.  Specifically, the FMLA amendment provides that the Secretary of Labor may issue regulations excluding certain health care providers from the definition of “Eligible Employee”.  The Emergency Paid Sick Leave Act provides that the Secretary of Labor may issue regulations “to exclude certain health care providers and emergency responders from the definition of employee under section 5110(1) including by allowing the employer of such health care providers and emergency responders to opt out.” Additionally, both the FMLA amendments and the Emergency Paid Sick Leave Act allow an employer of an employee who is a health care provider or an emergency responder to elect to exclude a health care provider from coverage under these expanded worker benefits.  The Act provides that the term “health care provider” as it is used in the FMLA amendments shall have the same meaning given to the term under Section 101 of the FMLA.  There is no similar provision in the Emergency Paid Sick Leave Act.  However, employers may look to the FMLA for guidance. The term “health care provider” is defined in Section 101(6) of the FMLA to mean (A) a doctor of medicine or osteopathy who is authorized to practice medicine or surgery (as appropriate) by the State in which the doctor practices; or (B) any other person determined by the Secretary to be capable of providing health care services. The Secretary of Labor subsequently issued regulations expanding this definition to include the following: Podiatrists, dentists, clinical psychologists, optometrists, and chiropractors (limited to treatment consisting of manual manipulation of the spine to correct a subluxation as demonstrated by X-ray to exist) authorized to practice in the State and performing within the scope of their practice as defined under State law; Nurse practitioners, nurse-midwives, clinical social workers and physician assistants who are authorized to practice under State law and who are performing within the scope of their practice as defined under State law; Christian Science Practitioners listed with the First Church of Christ, Scientist in Boston, Massachusetts. Where an employee or family member is receiving treatment from a Christian Science practitioner, an employee may not object to any requirement from an employer that the employee or family member submit to examination (though not treatment) to obtain a second or third certification from a health care provider other than a Christian Science practitioner except as otherwise provided under applicable State or local law or collective bargaining agreement; Any health care provider from whom an employer or the employer's group health plan's benefits manager will accept certification of the existence of a serious health condition to substantiate a claim for benefits; and A health care provider listed above who practices in a country other than the United States, who is authorized to practice in accordance with the law of that country, and who is performing within the scope of his or her practice as defined under such law. The phrase “authorized to practice in the State” means that the provider must be authorized to diagnose and treat physical or mental health conditions. Based on these definitions, it is clear that a large number of employees in the health care industry may be excluded from coverage under the Act at the employer’s discretion. Less clear is whether the Secretary of Labor will adopt regulations excluding all health care providers or allowing health care employers to opt out of Emergency Paid Sick Leave. To date, the Secretary of Labor has not issued express guidance on this issue.

There is a growing trend to use biometric data for business purposes.  For employers, this often includes using fingerprints or facial recognition software for employees to clock-in and out.  Using an employee’s unique biometric data in this way helps reduce common problems, like one employee clocking-in for another.  However, it is not a panacea, as many states have begun to place restrictions on the use of biometric information.  Illinois is one of those states, and its Supreme Court just issued an opinion that should make all employers sit up and take notice. The Illinois Biometric Information Privacy Act (“BIPA”), 740 ILCS 14/1 et seq., places restrictions on the collection of “biometric identifiers,” which includes retina or iris scans, fingerprints, voiceprints, scans o hand or face geometry, or biometric information.  These restrictions extend to employers, and require specific compliance steps, including: Notice and Consent. BIPA prohibits any private entity, including employers, from collecting, capturing, purchasing, or otherwise obtaining a person’s biometric identifiers or information without (i) informing the person in writing of the collection or storage (including the specific purpose and length of term for which a biometric identifier or biometric information is being collected, stored, and used); and (ii) obtaining a written release from the person to do so. 740 ILCS 14/15(b). Written Retention & Destruction Policy.  A private entity in possession of biometric identifiers or biometric information must develop a written policy, made available to the public, establishing a retention schedule and guidelines for permanently destroying biometric identifiers and biometric information when the initial purpose for collecting or obtaining such identifiers or information has been satisfied or within 3 years of the individual’s last interaction with the private entity, whichever occurs first. Absent a valid warrant or subpoena issued by a court of competent jurisdiction, a private entity in possession of biometric identifiers or biometric information must comply with its established retention schedule and destruction guidelines.  740 ILCS 14/15(a). Prohibition on Disclosure or Redisclosure. BIPA prohibits any private entity in possession of biometric identifiers or information from disclosing, redisclosing or otherwise  disseminating such information unless (i) the person consents to the disclosure or redisclosure; (ii) the disclosure or redisclosure completes a financial transaction requested or authorized by the person; (iii) the disclosure is required by state or federal law or municipal ordinance; or (iv) the disclosure is required pursuant to a valid warrant or subpoena issued by a court of competent jurisdiction.  740 ILCS 14/15(d). Safeguarding. BIPA requires any private entity in possession of biometric identifiers or information to “store, transmit, and protect from disclosure all biometric identifiers and biometric information using the reasonable standard of care within the private entity’s industry,” which must be at least “the same as or more protective than the manner in which the private entity stores, transmits, and protects other confidential and sensitive information.” 740 ILCS 14/15(e). The failure to comply with BIPA creates a private right of action for the “aggrieved” party that, if successful, can result in monetary damages, attorneys’ fees and costs, and injunctive relief.  In evaluating what it meant to be “aggrieved” under BIPA in Rosenbach v. Six Flags Entertainment Corp., the Illinois Appellate Court held that while the “injury or adverse effect need not be pecuniary…it must be more than a technical violation of the Act.”  The Illinois Supreme Court disagreed. In Rosenbach, the plaintiff was required to submit a thumbprint in order to utilize a season pass and alleged that Six Flags collected and used that thumbprint without complying with BIPA’s requirements.  While there was no evidence that the plaintiff’s thumbprint had been improperly used or disclosed, the Illinois Supreme Court nevertheless held that the plaintiff qualified as an aggrieved party under the statute because his legal right was “invaded by the act complained of.” In other words, a technical violation of BIPA entitles a plaintiff to the remedies available under the statute, including the lesser of liquidated or actual damages.  BIPA provides for liquidated damages of $1,000 for negligent violations and $5,000 for intentional or reckless damages.  Given that violations of BIPA are likely to by systemic, claims under the statute lend themselves to class actions.  Consequently, any employer with Illinois employees using biometric data should audit its procedures to ensure BIPA compliance.

On March 5, 2018, in a decision styled Shell v. Burlington Northern Santa Fe Railway Company, Case No. 15-cv-11040 (N.D. Ill. Mar. 5, 2018), the U.S. District Court for the Northern District of Illinois suggested liability could attach where an employer regarded an obese individual as disabled, in violation of the Americans with Disabilities Act, as amended (“ADA”). As previously reported in this blog, courts have held that obesity is not a disability under the ADA.  To qualify as a disability, a physical or mental impairment must substantially limit a major life activity. However, the Equal Employment Opportunity Commission has issued interpretive guidance providing physical characteristics, such as weight, do not qualify as disabilities unless they are (a) outside of a “normal” range and (b) result from a physiological disorder. In this case, BNSF Railway (“BNSF”) maintained a policy prohibiting employees with a body mass index (“BMI”) over 40 from holding safety-sensitive positions based on its belief that such individuals are at a substantially higher risk of developing medical conditions that “can manifest as a sudden incapacitation or a serious impairment of alertness or cognitive ability.”  Ronald Shell applied for the position of the intermodal equipment operator, a job category that BNSF classified as safety-sensitive because it involves using heavy equipment.  However, a post-offer physical established that Shell’s BMI was 47.5 and his conditional job offer was withdrawn.  Shell filed suit, alleging discrimination under the ADA, and BNSF moved for summary judgment. In support of its Motion for Summary Judgment, BNSF argued that Shell was not protected by the ADA because obesity -- by itself -- is not a disability.  The Court acknowledged controlling precedent on this point and further found that BNSF did not regard obesity as a disability.  However, the Court pointed to the fact that BNSF’s policy is based on concerns that someone with a BMI over 40 “would develop sleep apnea, diabetes, or heart disease” and become incapacitated.  All of these conditions, the Court noted, are disabilities.  As a result, the Court held that BNSF was “acting based upon an anticipated worst case scenario derived from precisely the sort of myth, fear, or stereotype which the ADA is meant to guard against,” and denied summary judgment under the “regarded as” prong of the ADA. While this issue is likely to receive additional consideration from the appellate courts, in the meantime employers should continue to use caution when dealing with employment issues related to obesity. Shell v. Burlington Northern Santa Fe Railway Company, Case No. 15-cv-11040 (N.D. Ill. Mar. 5, 2018).

As a general matter, many courts disfavor restrictive covenants in the employment context because they restrain trade. However, the law also seeks to prevent unfair competition. As a result, if an employer can point to a legitimate business interest in need of protection, it may be able to enforce a restrictive covenant agreement (RCA) that is narrowly tailored to protect that interest. What constitutes a protectable interest? This varies from state to state; however, courts typically recognize an employer’s need to protect the following: Confidential information and trade secrets Longstanding customer goodwill The value of specialized training Workforce stability. As with other considerations related to the enforceability of RCAs, what qualifies as a protectable interest will vary from state to state. To protect these interests, employers typically employ a combination of the following devices: Nondisclosure Noncompete Customer/client nonsolicitation Employee nonsolicitation. Of these, a non-compete is the most difficult to enforce and will receive the closest scrutiny from a court during an enforcement action. Unlike a nonsolicitation provision, which focuses on preventing a former employee from stealing an employer’s customers on behalf of a competitor, a non-compete provision prevents an employee from working for that competitor at all. Because a non-compete can significantly limit an individual’s ability to earn a living, courts will evaluate a number of factors to determine whether the non-compete is reasonably necessary to protect the employer's interest—commonly referred to as the “Rule of Reason.” Click through toread the full article regarding the enforceability of restrictive covenants in different states and best practices employers can take to maximize their chances to enforce restrictive covenants. Note: this article was first published in Employee Relations Today’s Fall 2017 Edition, 2018 Wiley Periodicals, Inc.

Reversing prior Seventh Circuit precedent, an en banc opinion from the United States Court of Appeals for the Seventh Circuit held that Title VII of the Civil Rights Act of 1964 extends to discrimination based on sexual orientation.  In doing so, the court did not add a protected class to the litany set forth within the statute; rather, it held that “discrimination on the basis of sexual orientation is a form of sex discrimination.”  The opinion acknowledges that it is reversing prior Seventh Circuit precedent on this issue, and is at odds with opinions from almost every other circuit on the issue, including an Eleventh Circuit opinion from March of this year.  The Seventh Circuit’s opinion is based on two Supreme Court opinions interpreting the protections of gender discrimination under Title VII.    In Price Waterhouse, a 1989 case, the Supreme Court held that making decisions based on gender stereotypes is sex discrimination under Title VII.  A decade later, in Oncale, the Supreme Court held that same-sex harassment is actionable under Title VII as gender discrimination.  Resting its analysis on these opinions, the Seventh Circuit held that while a policy that discriminates on the basis of sexual orientation would not impact every woman, or every man, equally, it would nevertheless arise out of the assumptions based on the proper behavior for someone of a given sex.  Specifically, “[a]ny discomfort, disapproval, or job decision based on the fact that the complainant—woman or man—dresses differently, speaks differently, or dates or marries a same-sex partner, is a reaction purely and simply based on sex,” and is therefore prohibited by Title VII. The Seventh Circuit also found support for its opinion under the associational theory, which holds that “a person who is discriminated against because of the protected characteristic of one with whom she associates is actually being disadvantaged because of her own traits.” Here, the court focused on the Supreme Court’s opinion in Loving v. Virginia, in which the Supreme Court invalidated a miscegenation statute under the Equal Protection Clause.  The Seventh Circuit extended the logic of Loving to establish that if changing the sex of one of the partners in a same-sex relationship would lead to a different result, it follows that the challenged action is because of sex and thereby discriminatory under Title VII. The Seventh Circuit’s opinion directly conflicts with established precedent from other Courts of Appeals.  However, it is consistent with the position currently taken by the Equal Employment Opportunity Commission (“EEOC”).  As a result, it may soon find its way before the Supreme Court.  The Supreme Court’s Oncale opinion, which held that any discrimination because of sex violated Title VII, was unanimous, and authored by the late Justice Scalia.  Additionally, even if the opinion were to split along the traditional conservative-liberal divide on the Court, Justice Kennedy’s opinions in Windsor and Obergefell, two recent same-sex marriage cases from the Supreme Court, suggest that the Seventh Circuit’s reasoning might be persuasive to him if he once again finds himself as the swing-vote.  Until the Supreme Court decides, however, given the EEOC’s position on the matter and the many state and municipal laws prohibiting discrimination based on sexual orientation, employers would be wise to view Title VII’s prohibition of discrimination based on sex as encompassing sexual orientation. Hively v. Ivy Tech Comm’y College of Indiana, No. 15-1720, --- F.3d --- (7th Cir. Apr. 4, 2017)

With the New Year just weeks away, employers with Illinois employees should be aware of several new statutory sick leave provisions that will go into effect in 2017. Specifically, Chicago, Cook County (which encompasses Chicago and many of its surrounding suburbs), and the State of Illinois have each provided employees with various sick leave protections scheduled to go into effect: Chicago – The Chicago Minimum Wage Ordinance was amended to provide eligible employees up to 40 hours of paid sick leave during each 12-month period. The eligibility threshold is relatively low: an employee need only (a) perform 2 hours of compensable work within the City of Chicago, and (b) work at least 80 hours for a covered employer within any 120-day period. To qualify as a “covered employer”, an entity must maintain a business facility within the City limits or be subject to any of the City’s licensing requirements. There is no minimum employee threshold. The leave provided is not in addition to any leave already provided by an employer, but any plan already in place must meet the Ordinance’s minimum requirements. Qualifying employees accrue one hour of leave for every 40 hours worked, up to the 40 hours during each 12-month period. The amendment goes into effect on July 1, 2017, and can be found here. Cook County – The Cook County Earned Sick Leave Ordinance also goes into effect on July 1, 2017, and largely mirror’s Chicago’s ordinance. A covered employee is anyone who, in any particular two-week period, performs at least two hours of work for an employer while physically present within the geographic boundaries of Cook County. Because Cook County encompasses the suburbs surrounding Chicago, a significant number of additional employees will qualify for the benefit. As with the Chicago Ordinance, employees can carry over 20 hours of accrued, but unused sick leave into the following year; provided, however, that if the employer is subject to the federal Family Medical Leave Act, the carryover limit is raised to 40 hours. The Cook County Ordinance can be found here. Illinois – The Illinois Employee Sick Leave Act does not establish a minimum sick leave benefit; rather, it allows employees to use accrued sick leave to care for a family member. An employee may use up to half of the employee’s accrued sick leave for absences related to the illness, injury, or medical appointments of a family member. The term “family member” is defined to include the employee’s child, spouse, domestic partner, sibling, parent, mother or father-in-law, grandchild, grandparent, or stepparent. The statute becomes effective on January 1, 2017, and can be found here. There are various exceptions and qualifications applicable to each provision. Employers should evaluate their coverage under each if they maintain employees and facilities in any of these locations.

The scope of the Americans with Disabilities Act (“ADA”) was broadened through the ADA Amendments Act of 2008 (the “Amendments”). Prior to the Amendments, various Supreme Court holdings had narrowed the scope of what qualified as a disability under the ADA. The Amendments rejected a number of these rulings and expanded what qualified as a disability.  Since then, it had been an open issue as to whether obesity, in and of itself, could qualify as a disability under the ADA. The EEOC Compliance Manual has indicated that the EEOC believed extreme obesity could be a disability in and of itself. This was the issue presented to the Eighth Circuit Court of Appeals in Morriss v. BNSF Railway Company. Mr. Morriss, who was conditionally hired as a machinist for BNSF, was 5’10” tall and weighed over 270 pounds. As part of BNSF’s standard medical review, Mr. Morriss participated in two medical examinations, which resulted in findings that his body mass index (“BMI”) was 40.9 and 40.4, respectively. As a result, BNSF revoked the conditional offer of employment based on its policy of not hiring individuals for the machinist position who have a BMI of 40 or greater. Mr. Morris subsequently filed suit against BNSF alleging that his obesity was a disability under the ADA. Ultimately, the case hinged on the meaning of the term “disability” under the ADA. Rejecting Mr. Morriss’ claim that his obesity was a stand-alone disability, the Eighth Circuit noted that Mr. Morriss admitted that his obesity was not caused by an underlying condition, and that it did not result in any physical limitations. As a result, the Court focused on the EEOC’s interpretive guidance, which states that physical characteristics like weight do not qualify as disabilities unless they are (a) outside a “normal” range and (b) result from a physiological disorder. As a result, the court held that even severe obesity does not qualify as a disability unless it results from an underlying physiological disorder. The Eighth Circuit’s holding provides some much needed clarity on this issue following the Amendments. Nevertheless, the ruling is narrow. Specifically, whether extreme obesity is the product of an underlying physiological condition generally requires inquiry of the affected employee or a medical examination. As a result, employers must still use caution before making employment decisions based on an individual’s weight.

Yesterday in EEOC v. Abercrombie & Fitch Stores, Inc. the Supreme Court held that making employment decisions based on assumptions related to religion (or any other protected class for that matter) can trigger liability under Title VII.  In an 8-1 opinion, the Supreme Court ruled in favor of the EEOC and held that actual notice to the employer is not required to trigger a religious accommodation obligation under Title VII. Rather, the plaintiff need only show that his or her need for an accommodation (even if the employer “has no more than an unsubstantiated suspicion that accommodation would be needed) was a motivating factor in the employer’s decision not to hire. Takeaways for Employers: Ultimately, the Court's holding is not a surprise. Since its 1989 holding in Price Waterhouse v. Hopkins, the Court has made clear that decisions based on stereotypes and assumptions can get employers into trouble. In light of the Abercrombie holding, employers should ensure that its hiring managers understand not only religious discrimination is prohibited, but also that there may be an affirmative duty to adjust a facially neutral policy as an accommodation to the religious beliefs of an applicant or employee. For a more in-depth analysis on the ruling, please click here. Previous intelligence on the case:      Abercrombie & Fitch Drops "Look Policy"      Headscarf Heartache: Supreme Court Considers EEOC Case Against Abercrombie

On April 20, 2015, the EEOC issued a notice of proposed rulemaking (“Proposed Rule”) designed to clarify how employer wellness programs that are part of a group health plan interact with Title I of the Americans with Disabilities Act (“ADA”).  The Proposed Rule provides clarity to an area that had created a lot of confusion for employers.  Under the Health Insurance Portability and Accountability Act (“HIPAA”) and the Affordable Care Act, employers can provide “wellness programs” that vary benefits and/or premiums based on a health factor.  Under the ADA, however, an employer cannot require medical examinations that are not job related and consistent with a business necessity – in other words, to comply with the ADA, a wellness program needed to be voluntary.  The difficult question for employers was whether a wellness program became involuntary if the employer offered an incentive for participation. Under the EEOC’s Proposed Rule, this issue is clarified…a bit.  Specifically, an employer may offer incentives up to 30% of the cost of employee-only coverage under the employer’s health plan to employees who participate in a wellness program and/or for achieving health outcomes.  The guidance makes clear that the 30% cap is based on the total cost for coverage, not just the employee’s individual cost, and is an attempt to establish consistency between ADA and HIPAA regulations related to wellness program incentives.  It is unclear, however, how this cap will be applied with respect to individuals with family coverage. The Proposed Rule also provides detail as to what factors render a wellness program “voluntary”.  Specifically, (1) participation cannot be required; (2) access to health coverage cannot be denied or generally limited due to non-participation; and (3) there can be no adverse action against an employee resulting from non-participation.  It also provides a notice obligation on behalf of employers regarding the use of any medical information obtained in relation to the wellness program, and makes clear that such programs cannot be used as a subterfuge for discriminating under the ADA. However, some questions remain under the Proposed Rule.  Specifically, how does it interact with the Genetic Information Nondiscrimination Act of 2008 (“GINA”)?  As a general matter, GINA prohibits employers from discriminating based on, or collecting genetic information, which includes family health histories.  This type of information is routinely gathered in connection with wellness programs, and compliance with the ADA does not ensure compliance with GINA, or any other statutory obligation. The Proposed Rule is open for public comment until June 19, 2015, after which time some version of the new regulations will likely go into effect.