Employers Get a 2-Year Breather on Complying with the Secure 2.0 Change to Catch-Up Contributions

Daniel L. Morgan ●

Professional photo of Daniel L. Morgan

The Internal Revenue Service (“IRS”) issued Notice 2023-62 last week, which addresses a change made by the SECURE 2.0 Act of 2022 (“Secure 2.0”) to the 401(k) plan rules applicable to so-called “catch-up contributions” that may be made by older plan participants.

Background—Catch-Up Contributions and Roth Contributions

Employers are permitted to write their 401(k) plans to allow employees who are age 50 or older to make catch-up contributions in excess of the annual limit on elective contributions. Therefore, for example, someone who is at least 50 years old in 2023 can elect this year to contribute an additional $7,500 on top of the normal limit of $22,500 that a person who is younger than 50 can elect to contribute.

Employers are also permitted to allow 401(k) plan participants to make their elective contributions as Roth contributions, which go into the plan on an after-tax basis. If these Roth contributions satisfy requirements on how long they must be held in the plan, they ultimately can be distributed, along with earnings on the contributions, tax free.

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Oops, the NLRB Does It Again—The Handbook Police Are Back!

Jason E. Reisman ●

Just yesterday, the National Labor Relations Board (“NLRB”) issued a decision (Stericycle Inc.), which overrules its own 2017 Boeing Co. decision and establishes a new standard for evaluating employer handbook policies and rules under the National Labor Relations Act (“NLRA”). Welcome (back) to what is the revolving door decision-making process that is the political machine of the NLRB.

Effectively, the current Biden NLRB has reversed one of the hallmark decisions of the Trump NLRB. When the Trump NLRB decided Boeing Co., it seemed to strike a balance in evaluating workplace rules, weighing the rule’s impact on workers’ NLRA rights against the employer’s legitimate business justification for the rule.

Although the concept of balancing those two potentially competing interests seems rational, the current NLRB Chair, Lauren McFerran, said that “Boeing gave too little consideration to the chilling effect that work rules can have on workers’ Section 7 rights.” NLRB Press Release 8/2/23. Taking that view to the extreme, the NLRB has shifted the bulk of the burden to employers to establish the legitimacy of the work rule. Under Stericycle, the most important consideration in evaluating a workplace rule is how an employee would understand it—not how the employer or a neutral third party might. The NLRB’s new approach is evident in this passage from the decision:

We clarify that the Board will interpret the rule from the perspective of an employee who is subject to the rule and economically dependent on the employer, and who also contemplates engaging in protected concerted activity. Consistent with this perspective, the employer’s intent in maintaining a rule is immaterial. Rather, if an employee could reasonably interpret the rule to have a coercive meaning, the General Counsel will carry her burden, even if a contrary, noncoercive interpretation of the rule is also reasonable.

372 NLRB No. 113, p.2 (emphasis added). Incredibly, if an employee could interpret the rule to chill the exercise of NLRA rights, the rule is presumed unlawful. The only way for an employer to rebut that presumption is “by proving that the rule advances a legitimate and substantial business interest and that the employer is unable to advance that interest with a more narrowly tailored rule.” Id. If the employer can prove both of those, the work rule will be found lawful. Good luck.

The deck is now stacked against employer work rules that have any potential ambiguity in the mind of an employee. Given the energy and zeal demonstrated by the NLRB General Counsel in seeking to hold employers accountable, it is reasonable to presume that the NLRB “handbook police” will return, leaving almost no handbook completely safe from attack. Employers should expect to see more scrutiny given to work rules and policies, especially those particularly sensitive ones such as anti-harassment and workplace conduct policies.

SCOTUS Increases Burden on Employers to Deny Religious Accommodations


Garrett P. Buttrey ●

On June 29, 2023, the United States Supreme Court (“Court”) issued a unanimous opinion in Groff v. DeJoy, finding that the employer-friendly de minimis standard for determining whether an employer would suffer an undue hardship by granting a religious accommodation to an employee is incompatible with the text of Title VII, and that federal law requires employers to instead show that such an accommodation would impose “substantial additional costs” on the employer.

After the United States Postal Service (“USPS”) began delivering packages for Amazon on Sundays in 2013, Gerald Groff, a former mail carrier with the USPS, requested a religious accommodation, claiming that according to his Evangelical Christian faith, Sundays were to be devoted to worship and rest, and that delivering packages on Sundays would violate his religious convictions. The USPS, however, continued to schedule him for Sunday shifts and, when he continued to refuse to work on Sundays, the USPS redistributed those shifts to other USPS staff and issued Groff progressive discipline for his refusals to work. Eventually, Groff resigned his position and sued the USPS, claiming that it could have accommodated his religious practice without an undue hardship on the conduct of its business.

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New York State Legislature Sends Broad Noncompete Ban to Governor’s Desk

Kevin M. Passerini and Anthony A. Mingione ●

On June 20, 2023, the New York Assembly passed a bill already passed by the Senate banning all post-employment noncompete agreements with workers. The bill is headed to Governor Kathy Hochul’s office for her approval. Governor Hochul has voiced her support for a much narrower, income-targeted ban on noncompetes, but she has not previously voiced support for this broad a measure. While it is possible she may decline to sign the ban and insist upon amendments, many expect her to sign it, particularly given the overwhelming vote it received in both legislative houses.

More specific details of the noncompete agreement ban include:

      • The ban has no compensation threshold or exception for executives.
      • The ban covers all employees and independent contractors (and, through the vague definition of “covered individual,” may include other service providers/consultants and even workers who are partners, members, or other equityholders).
      • The ban appears focused on only traditional noncompetition agreements, despite the odd prefatory language stating, “Every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” The sentence that follows that pronouncement focuses on “non-compete agreement” (the defined term in the act); and the act expressly indicates that it is not intended to apply to certain non-solicitation provisions, confidentiality agreements, and agreements providing for a “fixed term of service,” provided that those agreements “do not otherwise restrict competition in violation of” the act.
      • The ban appears not to be retroactive since the bill it is amending states, “This act shall take effect on the thirtieth day after it shall have become a law and shall be applicable to contracts entered into or modified on or after such effective date,” and comments on the floor of the Assembly during last week’s debate and vote confirm that.
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Deadlines Are Fast Approaching for Chicago and Illinois Employers

Krista P. McDonald ●

Several deadlines are on the horizon for Chicago and Illinois employers. Businesses should be aware of what they need to do to comply, or they may face significant daily penalties.

Employers Must Conduct Required New Sexual Harassment and Bystander Intervention Trainings for All Employees by June 30, 2023. The City of Chicago amended its Human Rights Ordinance last year to require all employers with employees in Chicago to provide the following annual training by June 30, 2023 (and annually thereafter):

      1. One hour of sexual harassment prevention training to all employees (with an additional hour of sexual harassment prevention training for all supervisors and managers, for a total of two hours); and
      2. One hour of bystander intervention training to all employees.

Template sexual harassment and bystander intervention trainings and other materials are available on the City of Chicago website. Employers must keep written records of the trainings for the longer of five years or the duration of any claim, action, or pending investigation. Employers that do not comply with the training and record-keeping requirements may be fined significant penalties for each day that the employer is not in compliance.

Illinois Adverse Judgments or Rulings Reports Are Due by July 1, 2023. By each July 1, every employer that had an adverse judgment or administrative ruling against it in the preceding year must disclose to the Illinois Department of Human Rights the following:

      1. The total number of adverse judgments or administrative rulings during the preceding year;
      2. Whether equitable relief was ordered; and
      3. The number of adverse judgments or administrative rulings entered against the employer within specific categories outlined in Section 2-108(B) of the Illinois Human Rights Act.

An “adverse judgment or administrative ruling” means any final and non-appealable judgment that finds sexual harassment or unlawful discrimination with the ruling in the employee’s favor and against the employer. This includes reporting adverse rulings outside of Illinois jurisdiction. The disclosure report form may be found here: Form IDHR 2-108.

For more information, contact any member of Blank Rome’s Labor & Employment practice group.

A Tall Order: NYC Prohibits Height and Weight Discrimination in Employment

Anthony A. Mingione  ●

On May 26, 2023, New York City Mayor Eric Adams signed a bill that will prohibit discrimination based on an applicant or employee’s actual or perceived height or weight. This bill amends the New York City Human Rights Law by specifically adding “height” and “weight” to its list of protected classes. These additions will become effective on November 22, 2023.

There are several exemptions, including where height or weight restrictions are:

      • Required by a federal, state, or local law or regulation;
      • Permitted by any regulation adopted by the City Commission on Human Rights that identifies certain jobs or job categories for which height or weight could prevent the person from performing the essential requirements of the job, and for which the Commission finds that no other reasonable alternative is available that would allow the person to perform the essential requirements of the job; or
      • Permitted by any regulation adopted by the Commission that identifies particular categories of jobs for which the use of height or weight as a criteria is reasonably necessary for the normal operations of the business.
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U.S. Supreme Court Grants Companies the Right to Sue Unions for Intentional Property Damage Resulting from Labor Strikes

Garrett P. Buttrey, Andrew I. Herman, and Anthony B. Haller  ●


On June 1, 2023, the Supreme Court of the United States issued an 8-1 opinion in Glacier Northwest, Inc. v. Teamsters, finding that conduct intentionally undertaken to cause damage to the employer’s property, or the failure to reasonably protect against such foreseeable damage, is not activity that is “arguably protected” under the National Labor Relations Act (“NLRA”) and that a union can be held liable for the damage caused.

The International Brotherhood of Teamsters, Local 174, represented drivers for Glacier Northwest in its concrete mixing and delivery business. After the collective bargaining agreement expired without a reaching a new agreement, the union called a strike, but waited to commence the strike until after the company filled its trucks with wet concrete. The union then instructed the truck drivers to ignore the company’s orders to deliver the wet concrete, putting the trucks and the concrete in imminent, foreseeable danger of being damaged and lost if the concrete hardened. Several of the union drivers abandoned their trucks without giving Glacier any notice, causing the company to deploy emergency measures to salvage the trucks by dumping—and wasting—the large batches of concrete the company mixed.

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NLRB GC Declares (Virtually) All Non-Compete Agreements Illegal

Jason E. Reisman  ●

Snapshot Summary

Yes, the National Labor Relations Board (“NLRB”) General Counsel (“GC”) says virtually all non-compete agreements are illegal. However, although this is the GC’s strong personal view, she does not directly make the law or establish precedent—NLRB action is still required to start that process. Even if the NLRB acts, the National Labor Relations Act (“NLRA”) only covers non-supervisory employees. This is something to monitor, but not something that should cause you to automatically refrain from strategic and reasonable use of non-compete agreements. And, yes, it coincidentally aligns with the proposed rule from the Federal Trade Commission (see our prior alert here).

Background

Though employers uniformly do not enjoy listening to the ruminations of NLRB GC Jennifer Abruzzo, it is clear that all employers need to pay very close attention to what she says and how she says it. The latest off-the-wall proclamation came in a May 30 memorandum, where she asserted her position that non-compete provisions contained in employment contracts and severance agreements nearly always violate federal labor law by preventing former employees from working for competitors. Notably, she previewed this position in March when she issued another memo providing “guidance” on severance agreement provisions in the wake of the NLRB’s McLaren Macomb decision (see our prior blog post here).

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U.S DOL Offers Some Good News for Smaller Businesses with 401(K) Plans

Daniel L. Morgan ●

It’s not often that business owners get good news from the government, but small and even some medium-sized businesses with 401(k) plans got a helping hand from the U.S. Department of Labor (“DOL”) earlier this year when the DOL eased the rules for identifying which 401(k) plans are required to have audited financial statements.

Background

The Employee Retirement Income Security Act of 1974 (“ERISA”), everyone’s favorite federal law, has a dual reporting structure for 401(k) plans depending on the number of participants in the plan. Plans with 100 or more participants at the beginning of the year—so-called large plans—are required to prepare audited financial statements and file them with the plan’s Form 5500, Annual Return/Report of Employee Benefit Plan. Plans with fewer than 100 participants escape the audit requirement and, in most instances, can file a Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan.

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NLRB’s General Counsel Foreshadows More Expansive Restrictions on Separation Agreements Following the Board’s McLaren Macomb Decision

Andrew I. Herman, Garrett P. Buttrey, and Jason E. Reisman


Overview: On February 21, 2023, the National Labor Relations Board (“NLRB” or Board) found two routinely standard separation agreement provisions—confidentiality as to the agreement and non-disparagement—to be unlawful when included in an agreement offered to an employee. McLaren Macomb, 372 NLRB No. 58 (2023). This week NLRB General Counsel Jennifer Abruzzo issued guidance in an effort to clarify the scope and impact of that decision. The General Counsel’s guidance takes an expansive view of McLaren Macomb, foreshadowing more restrictions on separation agreement and other employment agreements.

In McLaren Macomb, the NLRB held that employers violate the National Labor Relations Act (“NLRA”) when they offer severance agreements with provisions that would restrict employees in the exercise of their NLRA rights. The Board explained that, where an agreement “unlawfully conditions receipt of severance benefits on the forfeiture of statutory rights, the mere proffer of the agreement itself violates the [NLRA] because it has a reasonable tendency to interfere with or restrain the exercise” of NLRA rights.

NLRB General Counsel Takes an Expansive View of McLaren Macomb

The guidance from General Counsel Abruzzo—the chief investigator and prosecutor of violations of the NLRA—is a warning to employers about her expansive views of the reach of the McLaren Macomb decision. In her memorandum, the General Counsel provides the following insight about McLaren Macomb’s broader implications:

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