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 U.S. Federal Trade Commission (FTC) to explore potential ways to limit the use of non-compete agreements. On January 5, 2023, the FTC followed through on the President’s directive by proposing a new rule that would effectively ban such agreements.

In short, the FTC’s proposed rule deems it an unfair method of competition for an employer to:

  • Enter into or attempt to enter into a non-compete clause with a worker;
  • Maintain a non-compete clause with a worker; or
  • Represent to a worker that the worker is subject to a non-compete clause where the employer has no good faith basis to believe that the worker is subject to an enforceable non-compete clause.

Notably, the proposed rule takes a broad view as to what constitutes a “non-compete clause.” To start, the FTC defines such a clause as “a contractual term between an employer and a worker that prevents the worker from seeking or accepting employment with a person, or operating a business, after the conclusion of the worker’s employment with the employer.”

The definition does not end there. The proposed rule then goes on to state that the term non-compete clause also “includes a contractual term that is a de facto non-compete clause because it has the effect of prohibiting the worker from seeking or accepting employment with a person or operating a business after the conclusion of the worker’s employment with the employer.” The FTC provides the following examples of potentially de facto non-compete clauses:

  • A non-disclosure agreement between an employer and a worker that is written so broadly that it effectively precludes the worker from working in the same field after the conclusion of the worker’s employment with the employer.
  • A contractual term between an employer and a worker that requires the worker to pay the employer or a third-party entity for training costs if the worker’s employment terminates within a specified time period, where the required payment is not reasonably related to the costs the employer incurred for training the worker.

The proposed rule would bar future workplace non-compete clauses with any paid or unpaid workers, including employees, independent contractors and interns. It would also invalidate any preexisting non-compete clauses and would in fact require business to (i) rescind such preexisting clauses and (ii) notify workers of the same in an individualized written communication. The same notification requirements would likewise apply with regard to former workers who remain bound by non-compete clauses, so long as the employer has the worker’s contact information readily available.

The lone exception to the proposed rule is for non-compete clauses that are “entered into by a person who is selling a business entity or otherwise disposing of all of the person’s ownership interest in the business entity, or by a person who is selling all or substantially all of a business entity’s operating assets, when the person restricted by the non-compete clause is a substantial owner of, or substantial member or substantial partner in, the business entity at the time the person enters into the non-compete clause.”

The proposed rule is far from being final and is merely the first step in the regulatory process. Once the proposed rule is published in the Federal Register, a 60-day public comment period will ensue. That said, employers will want to monitor the progress of the proposed rule over the coming months, as it could present a seismic change to the U.S. business landscape.

As we detailed in a recent Thomson Reuters article, wage transparency laws have become the latest trend in US workplace-related legislation. Such laws have, to date, been enacted in noteworthy locales such as California, Colorado and New York City. On December 21, 2022, New York State became the latest jurisdiction to adopt a wage transparency law.

The new law requires that virtually every job, promotion or internal transfer opportunity that is advertised by an Empire State business include the compensation or a “range of compensation” for such job, promotion or transfer opportunity. The law defines “range of compensation” as “the minimum and maximum annual salary or hourly range of compensation for a job, promotion or transfer opportunity that the employer in good faith believes to be accurate at the time of the posting of an advertisement for such opportunity.”

The law also requires that any such advertisement include the job description for the corresponding job, promotion, or transfer opportunity, if such description exists. This is a requirement that is not included in most of the other wage transparency laws that have previously been adopted nationwide.

Beyond the above, the law also includes provisions providing separate rules for job advertisements for roles that are paid solely on a commission basis; barring retaliation against individuals who exercise their rights under the law; and imposing additional recordkeeping requirements on employers.

Though the law does not take effect until September 17, 2023, employers will want to start preparing for compliance now. This is for a host of reasons, including that the law likely applies to any role that will or can be performed in New York State. This means that job advertisements for fully remote roles likely fall within the scope of the new law (though it is also likely that, between now and September 2023, the New York State Department of Labor will issue guidance in this regard).

Among a flurry of recent pro-union decisions, the National Labor Relations Board (Board) issued a decision on December 14, 2022 restoring an Obama-Era test for determining the appropriateness of a bargaining unit in representation proceedings. This recent decision is expected to give unions more power in determining the makeup of bargaining units and enable smaller bargaining units—so-called “micro-units.” Micro-units can give unions the chance to get a foot in the door at an employer where only a small number of employees want to be represented.

In its recent American Steel Construction, Inc., 372 NLRB No. 23 (2022) decision, the Board’s majority stated that an employer attempting to expand a bargaining unit beyond the proposed unit must establish that employees outside of the proposed unit share an “overwhelming” community of interest with the employees in the proposed unit. The decision restores the Board’s 2011 standard, which had been overturned by PCC Structurals, a Trump-era ruling that lowered the bar for employer seeking to expand bargaining units beyond a union’s proposed unit.

The Board’s decision in American Steel, specifically struck down its prior ruling in PCC Structurals and The Boeing Co. for determining the appropriateness of a bargaining unit. In PCC Structurals, the Board established a new standard under which a petitioner would need to demonstrate that employees in the proposed unit shared interests that were “sufficiently distinct” from excluded employees. The Boeing Co. further clarified this standard and provided a three-pronged approach. Under this test, agency officials would (1) examine the shared interests of workers in the proposed unit, (2) weight these interests against the common interests employees in the proposed unit have with excluded employees, and (3) apply industry-specific rules.

The Board on Wednesday stated that the PCC-Boeing framework suffered from significant flaws. First, the Board stated that the “sufficiently distinct” standard was “vague, confusing and has no support in board precedent” and fails to adequately “articulate a workable alternative to the ‘overwhelming community of interest’ standard.” Second, in eliminating the “overwhelming community of interest” standard, the PCC-Boeing standard removed “an important safeguard that provides employees with the fullest freedom to organize in units of their choosing.” Finally, the Board stated that the PCC-Boeing standard “provided no compelling rationale for why the Board should add employees to units that otherwise possess a rational basis and the requisite mutuality of interests to bargain collectively.”

Under the new standard, which restored the Obama-era standard from 2011 established in Specialty Healthcare, the Board’s regional offices should approve a proposed unit if the petitioner establishes the unit shares an “internal community of interests” and the unit is readily identifiable as a group and sufficiently distinct. An employer may challenge the appropriateness of the proposed unit by establishing that excluded employees share an “overwhelming community of interest” with employees in the proposed unit – a high burden to prove.

In light of the Board’s return to a more union-friendly and deferential standard, employers should prepare for the possibility of micro-units within their workplaces and obtain counsel to determine how to best train managers, mitigate against potential micro-units, and approach union campaigns in their workplace.

On December 7, 2022, President Biden signed into law the much-heralded “Speak Out Act.” As the name suggests, the Act is designed to “empower survivors [of sexual harassment and sexual assault] to come forward” and “hold perpetrators accountable for abuse” while improving the safety and productivity of the workplace. The Act notes that “nondisclosure and nondisparagement provisions…can perpetuate illegal conduct by silencing those who are survivors of illegal sexual harassment and assault or illegal retaliation, or have knowledge of such conduct, while shielding perpetrators and enabling them to continue their abuse.” Supporting the need for the law, Congress noted that “[e]ighty-one percent of women and 43 percent of men have experienced some form of sexual harassment or assault.”

The Act prohibits employers from enforcing pre-dispute non-disclosure or non-disparagement agreements to prevent employees from speaking freely about sexual harassment or sexual assault claims. The law takes effect immediately and applies to any claim of sexual harassment or sexual assault that is filed on or after December 7, 2022.

Employers who routinely ask employees to sign confidentiality agreements should note the following key terms defined in the Act:

  1. A “nondisclosure clause” is a “provision in a contract or agreement that requires the parties to the contract or agreement not to disclose or discuss conduct, the existence of settlement involving conduct, or information covered by the terms and conditions of the contract or agreement.”
  2. A “nondisparagement clause” is a “provision in a contract or agreement that requires [one] or more parties to the contract or agreement not to make a negative statement about another party that relates to the contract, agreement, claim, or case.”
  3. A “sexual assault dispute” is a “dispute involving a nonconsensual sexual act or sexual contact, as such terms are defined” under federal, tribal, or state law.
  4. A “sexual harassment dispute” relates to “conduct that is alleged to constitute sexual harassment” under federal, tribal or state law.

Agreements that contain nondisclosure clauses or nondisparagement clauses as defined in the Act cannot be used going forward to silence employees with respect to claims of sexual harassment or sexual assault as defined above.

The Speak Up Act provides for certain exceptions. Most important, the Act does not prohibit nondisclosure or non-disparagement agreements in settlement or separation agreements executed after allegations of sexual assault or sexual harassment have arisen. In addition, it does not prohibit the protection of company trade secrets or proprietary information. Finally, the law does not prohibit federal, state or local law that regulates nondisclosure and non-disparagement clauses so long as the law is as protective or more protective than the Speak Out Act, and it does not preempt or supersede current federal, state, or local law that allows for the use of pseudonyms when filing claims alleging sexual misconduct.

Employers should review their current agreements and ensure they have included exceptions to nondisclosure and non-disparagement clauses as they relate to disputes surrounding sexual assault or sexual harassment. Moreover, some states have enacted nondisclosure or non-disparagement laws with higher thresholds of protection and broader applicability. Therefore, employers should conduct a review of their agreements against federal, state and local law to ensure compliance.

Potential reform of the statutory flexible working regime has been on the agenda for several years but finally, after a consultation first launched in autumn 2021, the UK government has announced its intention to bring about some changes. Legislation will need to be introduced, and the timescale for that is currently unknown, but employers in England, Wales and Scotland will need to be prepared to review and amend their flexible working policies and procedures to ensure they comply with the new requirements.

Contrary to some headlines, the changes do not introduce flexible working as the default position.  The reforms fall short of flexibility being the starting point (i.e. only to be deviated from if there was a good reason) and instead retain the current principle that there is a right to request flexible working, but no right to work flexibly. This means that, like now, employers will still be able to turn down requests if there is a good business reason for doing so or if eligibility criteria are not met. The eight business reasons for rejecting requests (the burden of additional costs; detrimental effect on ability to meet customer demand; inability to reorganise work among existing staff; inability to recruit additional staff; detrimental impact on quality; detrimental impact on performance; insufficiency of work during the periods they propose to work; or planned structural changes) will remain the same.

Continue Reading Flexible working reforms: what do UK employers need to know?

In advance of the holiday season, it is common practice in many companies for the employer to show gratitude and to reward employees for their performance over the year. Typically, this is done by granting a bonus or similar one-time payment. Even though the legal basis of such payments often is a contractual agreement, a collective bargaining agreement or a works agreement, in many instances payment is made on an informal, “voluntary” basis. In such cases, employers often assume that they can decide whether to grant a bonus on a year-to-year basis without creating an obligation towards employees.

While this assumption can be correct, often employers are surprised when confronted with the idea of having established a “company practice”. According to German law, such company practice creates a legal entitlement of employees towards their employer for the same bonus granted during the last years. A typical situation for a company practice to surface is an employer who paid a year-end bonus to all employees, for example, the amount of one monthly salary for the last several years. After a change of ownership, the new management decides not to pay the respective bonus, only to find that employees successfully claim the previously paid bonus in German labor courts.

Continue Reading Year-end bonus and company practice in Germany

On December 8, 2022, three New York City Council Members proposed a workplace-related bill that would essentially do away with the concept of “at will” employment in the Big Apple. Suffice it to say, the proposed bill would, if passed, be an absolute game changer for businesses in one of the country’s largest commercial markets.

Perhaps most notably, the Secure Jobs Act (the Act) provides that a New York City employee who has completed their employer’s probation period, if there is one, could not be fired except for “just cause or a bona fide economic reason,” which the employer would bear the burden of proving. In assessing whether an employee has been discharged for just cause, the Act would require consideration of no less than seven specific factors, including whether (i) the employee know or should have known of the employer’s policy, rule, practice, or performance standard that is the basis for the discharge, (ii) the employer disciplined or discharged the employee based on that employee’s individual performance, irrespective of the performance of other employees, and (iii) the employer’s policy, rule, practice, or performance standard, including the utilization of progressive discipline, was reasonable and applied consistently.

The Act then goes on to state that, except where termination is due to an egregious failure by the employee to perform their duties, or for egregious misconduct, a termination would not be considered to be based on just cause unless the employer had first utilized progressive discipline with respect to the employee. And even then, the employer could only rely on such progressive discipline if the discipline was issued within one year prior to the purported termination and the employer had a written policy regarding progressive discipline that was provided to the employee.

Additionally, except in instances where the employment termination is for an egregious failure by the employee to perform their duties, or for egregious misconduct, an employer would be required provide 14 days’ prior notice of any discharge for just cause or a bona fide economic reason. Further, within five days following such notice, the Act would require the employer to provide a written explanation of the precise reasons for the employee’s discharge. (This would include providing a copy of any materials, personnel records, data, or assessments that the employer used to make the discharge decision.)

Failure to timely and properly provide such written explanation would have drastic consequences. First, in determining whether an employer had just cause for discharge, a court would not be permitted to consider any reasons not included in such explanation. And second, if an employer failed to timely provide such explanation, then the employee’s discharge would automatically not be deemed to be based on just cause.

In short, the Act, which also includes cumbersome provisions relating to electronic monitoring of employees, has the potential, if passed, to change the entire business landscape in New York City. Although the Act was only just introduced, and Mayor Eric Adams has not signaled whether he supports the bill, every Big Apple employer will want to pay close attention to its progression before the legislature.

The deadline for California’s Governor to sign, approve without signing, or veto bills on his desk was September 30, 2022. We have compiled a comprehensive list of the major new laws and obligations that employers in the Golden State should know. As always, it is wise to consult with counsel to ensure that workplace policies and practices are in compliance.

Employers should consider reviewing these new laws to determine whether they need to revise their policies and practices to ensure they are compliant and to make sure they are not caught off guard. These new laws go into effect on January 1, 2023, with the exception of SB 951 and AB 2188.

The 2022 winter work party season is upon us, providing the first real opportunity in a few years for end-of-year celebrations. Whether at company, location, or team level, seasonal gatherings provide a chance for employers to thank staff for their hard work and for everyone to relax, socialise and have some fun with their colleagues. Yet without careful thought and planning, they can be problematic for employers who can find themselves faced with fallout from the festivities.

Here are our top tips and reminders for UK employers:

  1. See the party as an extension of the workplace: Just because an event is taking place outside working hours or at an external venue does not mean it is not ‘work’. Workplace policies continue to apply, and employers may find themselves vicariously liable for the actions of their employees, particularly in respect of discrimination and injury. 
  1. Work parties should not be compulsory: Inclusivity should be at the core of party organisation (see below) but there are a variety of reasons why someone may not want to, or be able to, attend (and for many events it could be impossible to schedule something which works for everyone). Any concerns about attendance should be addressed, and no-one should be put under pressure to go along or be treated differently as a result of attending (or not).
  1. Beware of discrimination risks when organising events: When planning events, organisers should be as inclusive as possible, remembering for example that days or times chosen may preclude certain people (e.g. with childcare or caring responsibilities or religious observances) from attending; locations will need to accommodate any disabled workers; and food and drink options should meet all religious, cultural and dietary requirements. 
  1. Respect different religions and cultures: Employers should remain mindful that the winter period coincides with festivals and events for different religions (e.g. Christmas and Hanukkah) but that not everyone will celebrate these for religious or other reasons. Employers should avoid focussing on any particular celebration, and be careful with language to promote inclusivity. 
Continue Reading Get the party started: Preventing HR issues at work events

The football World Cup takes place in Qatar between 20 November and 18 December 2022, and many workers across the UK will want to follow the tournament. However, with many of the matches taking place during the working day or on a weekday evening, there are potential implications in the workplace. Here are our top tips for employers:

  1. See the tournament as an opportunity: Handled correctly, embracing the World Cup could help with employee engagement without having a detrimental impact on productivity. Actively addressing how the tournament sits along work commitments means that a balance can be struck between getting work done without the football acting as a distraction.
  1. Be flexible: Where possible, and within reason, allow employees to adjust their hours or place of work to accommodate them watching certain matches. This may necessitate longer or later lunch breaks, adjusting start and finish times, tweaking rotas, or switching work from home days. The requirements for approval should be made clear, as should whether (and if so, how) any lost hours should be made up, or taken out of annual leave entitlements.
  1. Accommodate annual leave: Managers should be prepared for short notice requests for (or cancellations of) annual leave, particularly in the later stages of the tournament, and be timely, understanding and consistent when considering such requests, even if they fall outside any usual holiday approval protocols.
  1. Monitor sickness absence: Absence on days of, or the day after, certain matches may give rise to concerns about whether the sickness is genuine, or has been brought about by e.g. excess alcohol. While employers should not be quick to make assumptions, and a one-off may be tolerated, inappropriate, repeated or regular absences demonstrating a pattern of behaviour may need to be addressed through sickness or, if appropriate, disciplinary policies.
Continue Reading Avoiding an own goal: Managing employment issues during the World Cup