As we posted on Tuesday, the Federal Trade Commission (FTC) has at long last issued its final regulatory rule banning virtually all existing and future U.S. non-compete agreements. In this series, we will unpack some of the more nuanced questions surrounding the final rule. Although the series is generally applicable, today’s post is particularly geared toward non-profit organizations.

Does the final rule apply to entities claiming tax-exempt status as non-profits?

It depends. In the commentary to the final rule, the FTC explains that Congress empowered the agency to prevent “persons, partnerships, or corporations” from engaging in unfair methods of competition. To fall within the definition of “corporation” under the FTC Act, an entity must be “organized to carry on business for its own profit or that of its members.” These FTC Act provisions have been interpreted in commission precedent and judicial decisions to mean that the FTC lacks jurisdiction over corporations not organized to carry on business for its own profit or that of its members.

Continue Reading Unpacking the FTC’s ban on U.S. non-compete agreements: Impact on non-profit organizations

As we posted yesterday, the Federal Trade Commission (FTC) has at long last issued its final regulatory rule banning virtually all existing and future U.S. non-compete agreements. In this series, we will unpack some of the more nuanced questions surrounding the final rule. Although the series is generally applicable, today’s post is particularly geared toward private equity firms and financial institutions.

How does the sale-of-business exception work?

One of the exceptions to the final rule is that it does “not apply to a non-compete clause that is entered into by a person 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.”

This language is fairly similar to an exception included in the FTC’s January 2023 proposed non-compete rule – however, there is an important change in the final rule. Specifically, the proposed rule included an exception for certain non-compete agreements between the seller and the buyer of a business that applied only to a substantial owner, member, or partner, defined as an owner, member, or partner with at least 25 percent ownership interest in the business entity being sold. In the final rule, however, the FTC has dropped the 25 percent ownership interest requirement.

Continue Reading Unpacking the FTC’s ban on U.S. non-compete agreements: Impact on private equity and financial institutions

On April 23, 2024, the U.S. Department of Labor (DOL) announced a final regulatory rule that will raise the minimum salary threshold for employees who are classified as “exempt” under the white-collar exemptions to the Fair Labor Standards Act (FLSA) in two steps: first in July 1, 2024, and then again in January 1, 2025. The new rule also creates a mechanism for subsequent automatic increases every three years thereafter based on then-current economic data, with the next increase slated for July 1, 2027. 

This new rule comes after the DOL proposed these changes last year in August 2023. Under the FLSA and DOL regulations, for an employee to be properly classified as “exempt” from overtime, the employee must be paid at least the minimum salary threshold and the employee’s job position must also meet certain tests regarding their job duties (namely exemptions for job duties performed by executive, administrative, professional, outside sales and computer employees, commonly referred to as the “white collar” exemptions).

Continue Reading U.S. Department of Labor mandates two salary threshold increases for white collar FLSA exemptions and a mechanism for future automatic increases

As we discussed in an October 2021 article regarding the future of restrictive covenant agreements in the U.S., President Biden in July 2021 directed the Federal Trade Commission (FTC) to explore potential ways to limit the use of non-compete agreements. In January 2023, the FTC followed through on the President’s directive by proposing a regulatory rule that would effectively ban such agreements.

And on Tuesday afternoon, more than 15 months after publishing the proposed rule and after receiving more than 26,000 public comments on the January 2023 proposal, the FTC at long last unveiled and approved its final non-compete rule (the final rule) in a party line 3-2 vote.

Continue Reading BREAKING: FTC bans virtually all existing and future U.S. non-compete agreements

On Wednesday April 17, 2024, the US Supreme Court in Muldrow v. City of St. Louis, Missouri, et al. issued a precedential ruling that will likely pave the way for more employee discrimination claims under Title VII. In a unanimous decision, the Court held that Title VII prohibits discriminatory job transfers even if they do not result in a “materially significant disadvantage” to the employee. The Court clarified that an employee challenging a job transfer under Title VII must establish “some harm” with respect to the terms and conditions of employment, but that such harm “need not be significant.”

Continue Reading U.S. Supreme Court clarifies standard for job transfer discrimination under Title VII

On April 15, 2024, the U.S. Equal Opportunity Commission (EEOC) issued its final rule implementing the federal Pregnant Worker’s Fairness Act (PWFA). The PWFA, which went into effect in June 2023,1 requires covered employers to provide reasonable accommodations for employees’ known limitations relating to pregnancy, childbirth, or related medical protections. The PFWA builds on existing pregnancy-related protections and employer obligations under Title VII, the Americans with Disabilities Act, and many state and local laws.

Continue Reading EEOC issues final rule on the Pregnant Workers Fairness Act

As of March 12, 2024, New York employers are prohibited from requesting or obtaining access to the personal social media accounts of employees and applicants. Specifically, employers are not permitted to require employees or applicants to: (i) disclose their user names, passwords, or log-in information, (ii) access personal accounts in the presence of the employer; or (iii) reproduce any posts, including photos and videos, from personal accounts. In addition, employers may not discharge, discipline, or otherwise penalize an employee or applicant because of their refusal to disclose such information. 

Continue Reading New York places limitations on employer access to employee social media

On February 27, 2024, U.S. District Judge James Wesley Hendrix of the Northern District of Texas, Lubbock Division blocked enforcement of the Pregnant Workers Fairness Act (PWFA) against the state of Texas and its divisions and agencies, finding passage of the PWFA violated the U.S. Constitution’s quorum requirement. Below we discuss the terms of the PWFA, its enactment, and the subsequent legal challenge.

Continue Reading Texas federal court blocks enforcement of Pregnant Workers Fairness Act

If an employment relationship is to be terminated unilaterally, employers in Germany often find themselves between a rock and a hard place. The protection against Unfair Dismissal Act (Kündigungsschutzgesetz, KSchG), if applicable, sets high thresholds for validly terminating an employment relationship. Due to this, if a notice of termination is issued by the employer, employees in most cases file a claim for protection against unfair dismissal with German labour courts. As German labour courts can only decide whether an issued notice of termination is valid or invalid, a successful claim for protection against unfair dismissal means that the employee is reinstated into the employment relationship. In this case, the employee is generally entitled to backpay of the contractual compensation from the end of the notice period to the close of the court proceeding.

The financial risk for employers therefore increases with the length of the litigation. A typical proceeding in first instance takes between six to nine months and possibly longer. A subsequent proceeding in second instance can take additional six months or more. In some (luckily rare) instances legal proceedings can take several years. Depending on the salary of the employee in question, the financial exposure can easily reach six-figure amounts, not including the legal fees.

Continue Reading Between a rock and a hard place – not so much anymore?

In the dynamic arena of labor laws and regulations, New York City is once again leading the charge with proposed changes that could have profound workplace implications. On February 28, 2024, the New York City Council introduced a trio of bills aimed at significantly curtailing the use of noncompete agreements in the Big Apple. Though these bills are currently pending, and it remains to be seen whether they will ultimately be enacted, employers should nevertheless take note of the bills given that they are part of a broader movement to rein in noncompete agreements across the U.S.:

Continue Reading NYC legislators propose three bills to curtail noncompete agreements