Workplace Laws and Regulations

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

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

Widely known as “Ban the Box” laws, California is among the many jurisdictions that have adopted laws limiting the use of criminal background checks in evaluating job candidates. Enacted in 2018, California’s Fair Chance Act generally prohibits employers, with five or more employees, from asking a job candidate about their conviction history before making a conditional job offer. Among other requirements, the Fair Chance Act also places an affirmative duty on employers to provide requisite notices to candidates and to evaluate several factors before withdrawing a job offer due to a candidate’s criminal history. Employers must also provide candidates with the opportunity to explain or provide mitigating information before making a final decision to rescind a job offer. In October 2023, California amended the Fair Chance Act to bolster these notice and evaluation requirements. The 2023 amendment also increased potential employer liability for failure to properly notify and evaluate a job candidate’s criminal history. Proposed legislation in California aims to place stringent requirements on when employers can request a criminal background check in the first instance and how the information obtained must be evaluated. Continue Reading Proposed California legislation may effectively ban criminal background checks

On March 14, 2024, Virginia Governor Glenn Youngkin (R) vetoed identical bills passed by the Virginia legislature barring employers from asking about a job applicant’s salary history and requiring pay information to be included in job listings.

Senate Bill 370 and House Bill 990, introduced by Senator Jennifer Boysko (D) and Delegate Michelle Maldonado (D), respectively, add a new “salary history ban” statute to the Chapter of the Virginia Code that provides protections for employees. The legislation passed along party lines, with support from Democratic majorities in both the House and the Senate.

The proposed legislation prohibits prospective employers from (i) asking job applicants for their wage or salary history; (ii) relying on that history in determining the applicant’s starting wage or salary; (iii) considering wage or salary history when making a hiring determination; and (iv) refusing to interview, hire, employ, promote, or otherwise retaliate against an applicant for not providing wage or salary history. It also requires prospective employers to disclose the wage, salary, or wage or salary range for public and internal job postings. The legislation also creates a cause of action for aggrieved applicants and employees and provides for statutory damages between $1,000 and $10,000 or actual damages, whichever is greater, reasonable attorney’s fees and costs, and other appropriate relief.Continue Reading Virginia governor vetoes “salary history ban” statute legislation