April and early May have been busy times for employment practitioners. From noncompete bans to agencies issuing new gender discrimination guidance, the spring “showers” of laws and regulations and court decisions discussed below will have employers “springing” into action in several ways!
1. Federal Trade Commission Issues Ban on New Noncompetes…But Legal Challenge Already Pending
As has been widely reported by major media news outlets, the Federal Trade Commission issued a rule that would impose a broad ban on new noncompetition agreements (also called “noncompetes”) and prohibit enforcement for existing noncompetes with a limited exception for that the rule defines as “senior executives” who are paid at least $151,164 per year (subject to adjustment). Noncompetes entered into in conjunction with the bona fide sale of a business or ownership interest in a business are not covered by the rule. Nondisclosure agreements (often called “NDA’s”_, nonsolicitation agreements, and similar covenants are not per se prohibited, but could be impermissible if they are written so as to “function” like a noncompete.
Employers are not required to formally rescind such agreements, but would be required to provide notice to any employee (or past employee) with a noncompete that may still be in effect, to confirm that it will not enforce any impermissible noncompete.
While the rule has already been challenged with cases pending in several federal courts, unless it is overturned or delayed, the rule will go into effect on September 4, 2024.
Key Takeaways for Employers
- Employers who have existing noncompetes or who are contemplating new agreements in the near term should standby for further guidance and be prepared to act swiftly to provide notice to affected employees if and when the rule goes into effect.
- Employers with NDAs, nonsolicits, and other similar covenants, may also want to have their agreements reviewed to ensure that they are narrowly tailored to better ensure enforceability.
2. U.S. Department of Labor Issues New Minimum Salary Requirements for Overtime Exemption
On April 23, 2024, under the authority of the Fair Labor Standards Act (FLSA), which establishes a worker’s right to overtime payments, the U.S. Department of Labor issued new administrative rules increasing the minimum salary requirements for executive, administrative, and professional employees to be exempt from mandatory overtime payment. The new regulations, which take effect July 1, 2024, increase the minimum salary requirements to $844 per week, or $43,888 annually for the remainder of 2024. Beginning January 1, 2025, the minimum salary requirements will increase to $1,128 per week or $58,656 annually. Starting July 1, 2027, the minimum salary requirements for the executive, administrative, and professional employees’ exemptions will be adjusted every three years based on a wage data formula.
The Department of Labor also increased the minimum salary requirements for the “highly compensated employees” exemption. Beginning July 1, 2024, the minimum salary requirement is increased to $132,964. Beginning January 1, 2025, the minimum salary requirement is increased to $151,164. Starting July 1, 2027, the minimum salary requirement for the highly compensated employees’ exemption will be adjusted every three years based on a wage data formula.
Key Takeaways for Employers
- Employers should review and be sure all currently exempt workers based on the executive, administrative, and professional exemptions are still exempt under this new minimum salary requirement and based on applicable state or local law. This is also a good time to ensure that the position still satisfies one or more of the available duties tests, an additional requirement for exemption.
- If the workers no longer meet the exemption requirements, including the new salary requirement, then these workers will need to either have salaries raised to the new minimum salary requirements or else begin to be paid overtime starting July 1, 2024.
- Also, set a reminder to review the salaries of exempt workers again in December 2024, to meet the higher minimum salary requirements starting January 1, 2025.
3. U.S. Equal Employment Opportunity Commission Issues Broad New Harassment Workplace Guidance
On April 29, 2024, the U.S. Equal Employment Opportunity Commission (EEOC) issued a consolidated and revised Enforcement Guidance on Harassment in the Workplace. As a reminder, the EEOC enforces federal laws protecting workers from discrimination on the basis of protected characteristics under federal law, including race, color (including skin tone or complexion), religion, sex (including sexual orientation and gender identity), pregnancy/childbirth (including abortion, morning sickness, lactation, menstruation), national origin, disability, age (40+), and genetic information (including family medical history). The EEOC clarifies that sex discrimination can include intentional misgendering (using a name or pronoun not consistent with a worker’s gender identity) and can also include denying access to bathrooms consistent with a worker’s gender identity. The guidance states that the EEOC continues to recognize the current legal standard that, for harassment to be legally actionable, it must involve a change to the complainant’s employment such as termination or promotion denial or transfer or change in hours, or else must involve a “hostile work environment.”
The guidance confirms that the legal standard for finding a “hostile work environment” still requires the behavior to be so severe or pervasive that a reasonable person in the employee’s position would find the situation to be abusive, which is by necessity a case-by-case basis inquiry. However, the EEOC guidance states that the employee does not need to prove the behavior was severe and pervasive, and just one instance of severe misconduct can be sufficient to prove the existence of a hostile work environment. The guidance included the example of a supervisor using the “n-word” as a single instance that can be severe enough to constitute a hostile work environment. The instances of harassment can also occur in a work meeting, online chat, or any other work-related communication system, such as instant messaging. The guidance also confirms that a “hostile work environment” can be caused by any person, including not only supervisors and coworkers, but also customers, clients, vendors, and third parties.
Again, importantly, the guidance suggests that a single instance of an ethnic, racial, or sex-based slur, forwarding an offensive or derogatory “joke” email, sharing pornography including AI-generated and deepfake images or videos, mimicking a person’s disability, mocking a person’s accent, joking about a person’s religious attire or displays, or asking intrusive questions about a person’s gender or orientation including gender transitioning may be enough to constitute actionable harassment. It also confirms that “intersectional harassment” is actionable on multiple grounds, such as a Black female being harassed based on race and gender, and that harassment can occur between members of the same protected class, known as “interclass harassment.” Similarly, the EEOC clarifies that sex-based harassment does not need to be sexualized to be actionable, such as stating that a male who does not belong in a certain profession or job can still constitute sex-based harassment.
The guidance also reflects that the EEOC’s position is that an employer “knows” of harassment not only after harassment is officially reported or a complaint lodged, but also if any manager or supervisor witnesses the conduct, or if the conduct is “open and obvious” such that the owner, manager, or supervisor reasonably should have known it was happening.
Finally, the EEOC’s guidance seeks to ensure all notices and information about reporting discrimination and harassment are readily comprehendible to all employees, including requiring notices and reporting processes in other languages used at the worksite, orally (if workers are illiterate or vision-impaired), in braille, and other applicable means to ensure comprehension. Additionally, it offers new guidance for how to conduct appropriate workplace investigations or harassment and discrimination complaints, including ensuring the assigned investigator is impartial and unbiased and has training in harassment law and investigation of complaints, and that a particular process is followed for the investigation. The guidance also recommends that the investigation process include preparing and following an investigative plan, gathering testimony and evidence including electronic evidence (video cameras, text messages, cell phone data), updating the complainant and alleged person on the investigation status including the conclusions and actions taken (if any), and retaining records of the entire investigative process.
While this EEOC guidance is not established law or even an adopted administrative rule, it nevertheless guides the EEOC’s position on important legal issues and directs the EEOC to take action. The guidance document is effective immediately, meaning the EEOC is already implementing the guidance in its own practices. The EEOC guidance is facing legal challenges, although its success may be limited since the guidance is not a law or administrative rule. Approximately 20 states’ attorneys general have issued a joint letter with their intent to challenge the guidance with respect to free speech and religious discrimination challenges.
Key Takeaways for Employers
- Ensure all harassment and discrimination policies are reviewed and revised, including adding provisions for reporting and addressing harassment by customers, clients, vendors, and other third parties, as well as policies addressing gender identity protections, including the use of preferred names/pronouns and use of bathrooms consistent with a worker’s gender identity;
- Consider conducting a revised and then annual training on workplace harassment to incorporate the new EEOC guidance;
- Ensure policies and training reflect that all harassment and discrimination must be reported by all persons, including coworkers, even if the person is not directly involved in the harassment or discrimination, to avoid being charged with constructive knowledge;
- Ensure multiple persons are provided as options for reporting harassment or discrimination using an easy process, even if this requires a third-party vendor such as an HR services provider as a reporting option;
- Have all possible employee investigators attend special trainings on complaint investigations (Miller Nash provides these trainings, among others) and ensure any investigator assigned to investigate a complaint is unbiased and impartial (consider using outside investigators when needed, such as Miller Nash’s AWI-trained investigators).
4. U.S. Supreme Court Issues Broad Ruling on Federal Arbitration Act “Transportation Worker” Exemption
The U.S. Supreme Court’s April 12, 2024, ruling relating to arbitration agreement enforcement continues a pattern across the country limiting century-old protections for arbitration agreements. The Federal Arbitration Act (FAA) originally protected and favored arbitration agreements, including in employment, with few exceptions. One such exception was for “transportation workers,” including shipping workers, railroad workers, airlines, and others in transporting goods for interstate or foreign commerce. However, in Bissonnette v. LePage Bakeries Park St. LLC, the U.S. Supreme Court ruled that the “transportation worker” exception to the Federal Arbitration Act is much broader than previously interpreted. The case involved commercial drivers for a national bakery, Flower Foods, who were delivering and stocking baked goods at grocery stores. The Supreme Court expanded on its prior 2022 ruling in Southwest Airlines v. Saxon, where they held that workers who unload airline cargo were exempt from the FAA and did not need to arbitrate their claims.
In its new holding in Bissonnette, the Supreme Court ruled that courts must analyze the worker’s job duties, not the worker’s industry, to determine whether the worker is in “transportation” such that the exemption from the FAA may apply. Specifically, the high court held that, to be exempt, the worker must (a) be “‘actively’ ‘engaged in transportation’ of . . . goods across borders” using “channels of foreign or interstate commerce”; and (b) the worker must have “a direct and necessary role in the free flow of goods across borders.” The Supreme Court then sent the case back down to the lower court for further proceedings.
This holding squarely opens the door for Amazon drivers, warehouse workers, and others to argue exemption from the FAA. Although the Supreme Court attempted to signal the “transportation worker” exemption remains limited, noting exempt workers must have a direct and necessary role in the flow of goods, in reality, many more workers in the transport and driving industries will rely on this holding to support exemption from the FAA.
Key Takeaway for Employers
- All employers who employ drivers, warehouse workers, cargo workers, longshore workers, and any other workers involved in transporting goods across state or international borders should be prepared to defend existing arbitration agreements against new challenges if enforcement relies upon the FAA.
- Furthermore, many states are prohibiting mandatory arbitration agreements for certain types of employment claims. Employers should review all dispute resolution and arbitration agreements involving employees to determine whether they are enforceable and consider revising these agreements to meet current state and federal limitations.
5. Washington State Court Jury Awards Over $100 Million for Time Clock Rounding Issues
On April 23, 2024, a Seattle jury ruled that workers at Providence Health & Services hospitals and other facilities, some 33,000 nurses and other hourly workers total, were entitled to $98 million in back wages for time clock rounding and meal break calculation errors. Providence had used a 15-minute rounding time-clock program, which has historically been referenced by Washington’s Labor & Industries Department as allowable, but discontinued the time-clock program in 2023. Theoretically, Providence’s time-clock program would round up and down to the nearest 15-minute increment, but the plaintiffs successfully argued to the jury that in practice the program systematically reduced the affected workers’ wages. The jury awarded $9.3 million for these time clock rounding errors. The jury also awarded $89 million in damages based on Providence’s alleged failure to provide second meal breaks to workers working shifts longer than 10 hours, as required by state law. Additionally, the judge in the case had previously ruled that Providence’s violations were “willful” and that any damages awarded would be doubled. Providence has stated it plans to appeal the verdict and court rulings.
Key Takeaways for Employers
- Employers must ensure that any time clocks in use (whether manual, electronic, or computer-based) either pay workers to the minute or, if rounding is involved, that the rounding is only in favor of the worker (i.e. always rounds up to benefit the worker);
- Employers must ensure that workers receive all meal breaks and rest periods required by state and federal law unless union collective bargaining agreements are legally permitted to (and do in fact) alter these mandatory meal breaks and rest periods.
6. Oregon Bureau of Labor & Industries Issues Rules Clarifying Transition from Oregon Family Leave Act to Paid Leave Oregon
As part of implementing Oregon’s SB 1515, which attempted to better align the Oregon Family Leave Act (OFLA) and Paid Leave Oregon (PLO) (previously discussed in our recent blog post), the Oregon Employment Department adopted new temporary rules to aid with the transition from OFLA to PLO coverage for most but not all types of leave. The new administrative rule OAR 839-009-0201 is effective from May 8, 2024, through July 1, 2024, only, and applies to leave that was previously protected by OFLA but after July 1, 2024, will instead be protected by PLO. The temporary rule allows employers to rescind approval or designation as OFLA leave beginning July 1, 2024, if the leave after that date will only be covered by PLO.
The notice to the affected workers must: (a) indicate that a previously approved or designated OFLA leave will no longer be protected by OFLA beginning July 1, 2024; (b) provide the affected workers with information on PLO including contact information for PLO or the administrator of the employer’s equivalent plan; (c) provide this notice by June 1, 2024; and (d) notice must be provided to the affected workers “in the language the employer typically uses to communicate with the employee.” Although this phrase is not defined in the rule, employers should assume it refers to using the language typically used between the employer and the affected employees, including the manner of communication, such as written notice by mail and/or email. The temporary rule also reiterates that employers may not retaliate against workers for inquiring about or taking OFLA leave.
Key Takeaways for Employers
- All employers desiring to transition workers currently approved for OFLA-covered leave, including OFLA-covered intermittent leave that will be covered by PLO after July 1, 2024, must provide those workers with written notice as described above by June 1, 2024.
- Employers should also have new policies in place reflecting the limited coverage OFLA provides after July 1, 2024, as well as PLO-compliant policies and procedures.
- Employers with approved equivalent plans should also ensure that policies and procedures are updated to reflect the limited scope of OFLA coverage after July 1, 2024.
- Employers can read the full temporary rule here.
The legal issues impacting this topic are and will continue to be ever-changing (Employment Law in Motion!), and since publication of this blog post, new or additional information not referenced in this blog post may be available.
This article is provided for informational purposes only—it does not constitute legal advice and does not create an attorney-client relationship between the firm and the reader. Readers should consult legal counsel before taking action relating to the subject matter of this article.
