Court Blocks FTC Noncompete Ban

 While this is not shocking, it is still big news - the Northern District of Texas struck down the FTC's proposed ban on noncompetes, which was to take effect on September 4, 2024. You can read the Court's Opinion and Order in Ryan LLC v. Federal Trade Commission here.

In short: "The Non-Compete Rule, 16 C.F.R. § 910.1–.6, is hereby SET ASIDE and shall not be enforced or otherwise take effect on September 4, 2024, or thereafter." The Court held that "the FTC lacks statutory authority to promulgate the NonCompete Rule, and that the Rule is arbitrary and capricious."

What now? Well, for now noncompetes remain as enforceable as they were before the FTC rule, and employers can hold off on sending those notices of unenforceability to employees with noncompetes. We will likely see an appeal from the FTC. It is possible (but in my opinion unlikely) that an appellate court will take swift action to reinstate the rule. Longer term, there will be some appellate action and other pending litigation playing out. Yes, the ol' "stay tuned." 

Video from Wage and Hour Presentation (FLSA Overtime Regulations)

On August 1, 2024, Jens Thorsen and Valhalla Business Advisors invited me to speak about recent developments in wage and hour law. It was a solid mix of fundamentals, and the new FLSA overtime regulations (with some Pennsylvania Minimum Wage Act thrown in for good measure). You can view the recording of Emerging HR Updates Seminar Overtime Rules '24. 

FTC announces final rule banning noncompetes

Yesterday, the FTC released its final rule banning noncompetes (Announcement | Final Rule). Of course, we had some idea of what to expect from the proposed rule. But, as always, there were a few teaks in the final version. The final rule is 570 pages, so I haven't digested the whole thing yet, but here are some highlights:

The Gist

Employee noncompetes are an unfair method of competition and therefore unenforceable. In other words, it bans new noncompetes *and* renders existing noncompetes unenforceable. 

Effective Date

120 days after publication in the Federal Register - probably late August-ish, 

Changes from Proposed Rule

• Existing noncompetes can still be enforced against "Senior Executives" (workers earning more than $151,164 who are in a "policy-making position"), but no new noncompetes. 
• Employers are no longer required to formally rescind existing noncompetes. Instead, they can simply provide notice to the employee that the existing noncompete will not be enforced. The rule includes a model notice. 

Notable Exceptions

• A noncompete in connection with the sale of a business (note that the Final Rule drops the 25% ownership requirement from the proposed rule).
• Causes of action that accrue prior to the effective date.   

  

  Not official use. 

  
  

Alternatives 

• Non-Disclosure Agreements (NDAs);
• Non-Solictation Agreements (client and employee); and
• Training Repayment Agreement Provisions (TRAPs). 

Note that all of these come with the caveat that they must be narrowly tailored and not so broad as to effectively serve as noncompetes.

Of course, this entire thing comes with the giant caveat that there will likely be legal challenges to the FTC's authority to implement this rule. I plan as though it's happening, but wait until the last minute to actually implement (lesson learned from the salary threshold debacle of 2016).  

SCOTUS sheds light on discriminatory job transfer claims under Title VII

The Supreme Court published its opinion in Muldrow v. City of St. Louis. The syllabus succinctly describes the holding as:

An employee challenging a job transfer under Title VII must show that the transfer brought about some harm with respect to an identifiable term or condition of employment, but that harm need not be significant.

Some Circuit Courts had been applying a heightened standard, requiring "significant" harm. The facts in this case are illustrative of the kinds of close calls that will now come out in favor of the plaintiff/employee. The plaintiff was a police officer in the police department's Intelligence Division, who was transferred to a uniformed job in the Fifth District:

Justice Kagan

While Muldrow’s rank and pay remained the same in the new position, her responsibilities, perks, and schedule did not. Instead of working with high-ranking officials on the departmental priorities lodged in the Intelligence Division, Muldrow now supervised the day-to-day activities of neighborhood patrol officers. Her new duties included approving their arrests, reviewing their reports, and handling other administrative matters; she also did some patrol work herself. Because she no longer served in the Intelligence Division, she lost her FBI status and the car that came with it. And the change of jobs made Muldrow’s workweek less regular. She had worked a traditional Monday-through-Friday week in the Intelligence Division. Now she was placed on a “rotating schedule” that often involved weekend shifts.

This was sufficient to meet the Supreme Court's new "some harm" standard - as Justice Kagan notes "with room to spare."

DOL Issues Final Rule: Employee or Independent Contractor Under the FLSA

On Tuesday, the U.S. Department of Labor announced its Final Rule: Employee or Independent Contractor Under the Fair Labor Standards Act. A quick overview:

Effective Date: 

March 11, 2024

Why it matters: 

The FLSA sets a minimum wage and requires overtime pay (time and a half for hours over 40 worked in a workweek). It also imposes certain recordkeeping requirements, and prohibits retaliation for filing complaints about violations. Simply put, this all applies to employees but not independent contractors. 

Not official use.

Shut up and tell me the test!

The final rule utilizes the "economic realities test," examining the "totality of the circumstances" where "economic dependence is the ultimate inquiry." The rule provides a non-exhaustive list of six factors, none of which is dispositive on its own:

1. Opportunity for profit or loss depending on managerial skill;
2. Investments by the worker and the potential employer;
3. The degree of permanence of the work relationship; 
4. The nature and degree of control; 
5. The extent to which the work performed is an integral part of the potential employer’s business; and 
6. Skill and initiative.

If you're looking for more in-depth guidance on applying these factors - great news! - the final rule is 339 pages long. Sorry, too much? Check out the FAQ page for something in between this very brief overview and the full 339-page rule. 

Overtime and Noncompete Regulations to Plan for in 2024

What better way to kick off the new year than with my latest article in Pennsylvania Business Central? The article addresses Overtime and Noncompete Regulations to Plan for in 2024. Will they actually take effect? We don't know yet. But, employers should start planning just in case.

EEOC publishes proposed rule for Pregnant Workers Fairness Act

This week, the EEOC published a Notice of Proposed Rule Making (NPRM) for the Pregnant Workers Fairness Act (PWFA). The PWFA went into effect on June 27, 2023. In a nutshell:

Not official use.

The PWFA requires covered employers to provide reasonable accommodations to a worker’s known limitations related to pregnancy, childbirth, or related medical conditions, unless the accommodation will cause the employer an undue hardship.

 Employers may find the following resources helpful:

• Press Release: EEOC Issues Proposed Rule to Implement the Pregnant Workers Fairness Act;
• What You Should Know About the Pregnant Workers Fairness Act; and
• The actual NPRM.

Comments are due on or before October 23, 2023, and the Final Rule will follow sometime after that.