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.
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).
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).
The U.S. Department of Commerce’s National Institute of Standards and Technology (“NIST”) last week released an Artificial Intelligence Risk Management Framework (“AI RMF 1.0”). Calling it a guidance document for voluntary use by organizations in designing, developing, deploying, or using AI systems, the framework can be used to contextualize and manage the potential risks of harm posed by AI systems, technologies, and practices in all areas where they may be used.
AI-related risk management is an increasingly important issue. Documented harms traceable to AI technologies have been widely reported and threaten to undermine people’s trust in AI. Companies that make AI systems, and those that use AI to automate decisions across their organizations or enterprises, may have policies and procedures for evaluating general corporate risks from AI. But with several states and localities implementing laws requiring data-centric risk assessments, data privacy impact assessments, and bias audits around data-based technologies like AI (including New York City’s Law No. 144 that requires audits by those who use automated employment decision tools), and with Congress poised to consider national data privacy legislation containing economy-wide risk provisions, it is important for companies and organizations that make or use AI to review to ensure their approaches to risk management around AI are comprehensive and comply with applicable laws and regulations.
As reported by the Pennsylvania Chamber of Business and Industry (see here), the planned significant increases to the salary threshold for exempt executive, administrative, and professional (“EAP”) employees under the Pennsylvania Minimum Wage Act (“PMWA”) will not go into place this fall.
As you may recall (see our blog post here), last October, the Pennsylvania Department of Labor and Industry (“DOLI”) finalized new regulations that set in motion periodic increases in the EAP exempt salary threshold under the PMWA. The goal was to dramatically expand the range of employees eligible for overtime pay. Those PA increases were designed to surpass the current federal salary threshold under the Fair Labor Standards Act (“FLSA”) and looked like this:
$35,568 ($684 per week) effective 10/3/2020 (which matched the FLSA threshold that was effective 1/1/2020—see our prior post here);
$40,560 ($780 per week) to be effective 10/3/2021;
$45,500 ($875 per week) to be effective 10/3/2022; and
On 10/3/2023, and every third year thereafter, the minimum salary will experience automatic adjustments.
However, as part of an overall budget deal reached last week between Governor Wolf and the Republican-controlled legislature, the DOLI regulations will be repealed. This “gift” comes through a one-sentence provision in the budget-related legislation.
As a result, at least for now, the PA salary threshold will not increase in October (or in the foreseeable future) and will continue to match the current threshold under the FLSA … unless/until the Biden administration’s Department of Labor follows through on its latest plan to further increase the federal salary level for the EAP exemptions.
Stay tuned—you just never know what the government might do, especially in the budget process.
For all of those employers with employees based in Colorado, we wanted to update you on some sweeping changes to Colorado wage and hour laws that went into effect on March 16, 2020. As you know, employers generally must comply with both state and federal wage and hour laws—essentially meeting the requirements that are most protective of employees. To date in Colorado, the state law’s applicability has been limited—but that’s not going to be the case any longer.
The new law, known as the Colorado Overtime & Minimum Pay Standards (“COMPS”) Order #36, replaces all prior Colorado Minimum Wage Orders. The most significant changes include: (1) extending Colorado’s wage and hour laws to even more employers than before; (2) adjusting the salary thresholds required for eligibility under the federal overtime exemptions for executive, administrative, and professional employees; (3) changing employee rest period requirements and requiring meal periods; (4) clarifying the definition of “time worked” for purposes of being considered “compensable time”; (5) imposing new posting and distribution requirements that will require changes to employee handbooks; (6) creating new earnings statement requirements that may require payroll to update your earnings statements; and (7) modifying the calculation of overtime so that it is based not only on a weekly basis, but on a daily and consecutive hourly basis too. More details are below, and a copy of the COMPS Order can be found here. Continue reading “Colorado Goes “Wage & Hour” Crazy—Enhances Employee Protections a la California”
UPDATE: Today, a federal court preliminarily enjoined the enforcement of AB-51 (California’s anti-arbitration law discussed here, here, and here) as it relates to arbitration agreements governed by the Federal Arbitration Association (“FAA”). We will get a detailed order from the court soon, but the minute order issued today is below. A great reminder to employers who wish to implement arbitration that the agreement should always expressly state it is governed by the FAA. Continue reading “Breaking: California Grants Preliminarily Injunction of AB-51”
In July, we reported that the New York State Legislature had passed a bill that could substantially alter the legal landscape of wage disputes by allowing employees with wage claims to file liens against their employers’ assets in the amount of the claim. The lien could be filed without any court order or determination of probable liability. The bill further permitted attachments of the employer’s property and would have expanded the personal liability of the 10 largest shareholders of non-public companies by making them liable not only for wages, but also for interest, penalties, liquidated damages, attorneys’ fees, and costs.
UPDATE: On December 29, 2019, the U.S. District Court for the Eastern District of California issued an order temporarily enjoining the enforcement of AB 51 (California’s anti-arbitration law discussed here and here) pending resolution of plaintiffs’ motion for a preliminary injunction, highlighting the “likelihood of irreparable injury” to California employers, and noting plaintiffs had “raised serious questions regarding whether the challenged statute is preempted by the Federal Arbitration Act as construed by the United States Supreme Court.”
The court will hear plaintiffs’ motion for a preliminary injunction on January 10, 2020.
As the new year approaches, California employer associations have taken action to prevent Assembly Bill (“AB”) 51 from taking effect. As referenced in this BR Workplace Post, AB 51, signed by Governor Gavin Newsom on October 10, 2019, prohibits mandatory arbitration in cases under the Fair Employment and Housing Act (“FEHA”) and California Labor Code, and also prohibits employers from retaliating against individuals who do not consent to arbitration agreements. AB 51 is in part motivated by the #MeToo movement, and part reflective of California’s ongoing battle against the U.S. Supreme Court’s unwavering support of arbitration. It is designed to ensure employees maintain the right to bring FEHA and wage-and-hour actions in court, rather than forced arbitration as a condition of employment.
As employers across the state stare down the barrel of AB 51, the California Chamber of Commerce filed a Complaint for Declaratory and Injunctive Relief in federal court in California last week seeking to prevent AB 51 from going into effect on the grounds that it is invalid and preempted by the Federal Arbitration Act (“FAA”). The FAA has a long-established policy favoring arbitration as a means for efficient and individualized alternative dispute resolution. The U.S. Supreme Court has also steadfastly refused to allow employees to circumvent the FAA and file actions in court.
The hearing on the motion for preliminary injunction is set for January 10, 2020, nine days after AB 51’s effective date. Only time will tell how the court will rule. In the meantime, employers should contact legal counsel to determine the best, tailored course of action given their specific operations, workforce, and overall risk tolerance.
New York is on the precipice of passing a law that would allow employees to easily file liens against an employer’s property in connection with pending wage disputes. The bill also would permit employee access to certain sensitive employer records and expand the scope of personal liability for owners in disputes over wages. Employers should monitor these developments and work with counsel to prepare an action plan should this bill become law.
The New York State Legislature has recently passed a bill that could substantially alter the legal landscape of wage disputes if signed into law by Governor Cuomo. The proposed Employee Wage Lien bill would allow employees to obtain liens against an employer’s real property and personal property based on allegations involving nonpayment of wages. If signed into law, the bill will become effective within 30 days. Similar laws have been enacted on other states.
The law will allow employees to file a notice of a lien up to three years following the end of the employment giving rise to the wage claim. Employees will be able to place liens up to the total amount allegedly owed based on claims relating to overtime compensation, minimum wage, spread of hours pay, call-in pay, uniform maintenance, unlawful wage deductions, improper meal or tip credits or withheld gratuities, unpaid compensation due under an employment contract, or a claim that the employer violated an existing wage order. In addition, the State Attorney General and Department of Labor will be able to obtain a lien on behalf of an individual employee—or a class of employees—against an employer that is the subject of an investigation, court proceeding, or agency action.