By Michael Judd
FTC Whirlwind Swirls On—Did Your Non-Competes Just Turn
to Dust?
More than a year ago, the Federal Trade Commission (FTC)
proposed an attention-grabbing new rule—a full ban on
employee non-compete agreements. This past week, the FTC finally
brought its hammer down, releasing a 570-page final rule that amounts to an all-fronts
attack on non-compete agreements: a ban on future non-competes, a
prohibition on non-compete enforcement, and declaration that
virtually all existing non-competes will be voided.
Carve-outs to the rule remain stubbornly small. Non-competes
related to the sale of a business may remain enforceable, as may
non-competes associated with franchisor–franchisee
relationships. Even if non-competes are banned going forward,
existing non-competes with well-compensated senior executives
(workers earning more than $151,164 in a “policy-making
position”) will not be voided by the new rule.
For employers who have used non-competes as a blunt-force tool
to protect company relationships and information or to improve
employee retention, the new rule seems to be cause for despair. But
employers should pause before making drastic changes. A lawsuit
challenging the rule was filed almost immediately, in north Texas,
the land of high-school football, cattle ranches and nationwide anti-agency-rule injunctions. The
U.S. Chamber of Commerce filed a similar lawsuit later the same
day, in east Texas. And until the rule goes into effect—which
won’t happen until late August, at the
soonest—non-compete violations may still trigger liability
that would linger even after the rule goes into effect.
While winds continue to swirl, then, employers should both keep
an eye on these court challenges and explore alternative routes to
protecting their interests, including through contractual
agreements that focus on protecting information rather than
restricting employee movement.
DOL Rule Adds Overtime-Pay Coverage for 4 Million Workers in
Looming Two-Stage Bump
Millions of workers are newly eligible for overtime pay under
another final rule issued last week, this one by the
Department of Labor (DOL). Are those your workers? If you
pay workers on a salary, and if those salaries fall between $35,000
and $60,000 per year, the answer is likely “yes.”
Employers know that the Fair Labor Standards Act (FLSA) mandates
overtime pay for work beyond the 40-hour weekly threshold. And
employers know that rule covers almost all hourly workers. But the
question is trickier for salaried workers who may fall within an
exemption for “executive, administrative, or
professional” employees. And even that exemption doesn’t
apply to the lowest-paid salaried employees. As of today, only
workers who are paid at least $684 per week ($35,568 per year) may
qualify for an overtime exemption. Put differently, even salaried
employees are entitled to overtime pay if their weekly pay falls
below that threshold.
When that threshold bumps up—as it’s now set to do
twice in the coming year—millions of workers receive
automatic entitlement to overtime pay. On July 1, 2024, the salary
threshold hops to $844 per week ($43,888 per year). And on Jan. 1,
2025, the threshold hops again, to $1,128 per week ($58,656 per
year). The DOL’s new rule anticipates that threshold updates
will continue every three years, based on earnings data, beginning
on July 1, 2027.
The bottom line, for employers, is that millions of salaried
employees making between $35,568 and $58,656 will qualify for FLSA
overtime-pay protections—some over the summer, the remainder
by the end of the calendar year. Employers should start compliance
efforts now, including a thorough reclassification analysis and
salary increases, to avoid ending up on the wrong side of the
FLSA.
Harmful Transfers Now Satisfy Title VII, as Supreme Court
Reworks Discrimination Standard
Three decades ago, Vernet Boone, a black woman working at NASA,
was reassigned—to work in a literal wind tunnel. Boone sued,
arguing that her reassignment to a more stressful job constituted
discrimination. A federal appeals court disagreed, ruling that
Title VII discrimination claims require an “adverse employment
action” like discharge or demotion, and that
reassignment—even to a wind tunnel—didn’t
qualify.
The U.S. Supreme Court, in a case called Muldrow v. City of St. Louis, has now
expanded the scope of that law, making discriminatory-transfer
claims (and potentially other retaliation claims) decidedly more
employee-friendly. In that case, Jatonya Muldrow alleged that the
St. Louis Police Department had transferred her to a less desirable
role, with less action and more administrative duties. Muldrow
insisted that she was transferred because she was a woman. Lower
courts ruled against Muldrow, based on findings that her rank and
pay remained the same.
The Supreme Court reversed, concluding that Muldrow didn’t
need to show a “significant employment disadvantage” to
sustain a Title VII claim—she only needed to show “some
harm from a forced transfer.” Employers may fairly ask what
the practical difference is between a “significant harm”
test and a “some harm” test. (Justice Alito certainly
asked that question in dissent.) District courts will now start the
hard work of answering that question.
What’s clear now, however, is that the kind of harm Muldrow
alleged—diminished “responsibilities, perks, and
schedule”—is enough to support a discriminatory-transfer
claim. That makes transfers more delicate than ever, and employers
transferring employees must now keep a careful eye on Title VII and
Muldrow when doing so.
Question Corner
Recouping Losses on Damaged Employer
Property
By Jason R. Mau
Q. We provide laptop computers to all our
personnel. Many employees damage them during employment or return
them with damage upon leaving employment. What are our options for
recouping from employees the costs of repairing or replacing the
damaged employer-owned materials?
A. Basically, the company’s two main
options for recuperating losses for damage to company property
include: previously-authorized deductions through payroll; or a
claim based on property or tort laws. While Idaho law does allow
for deductions to be made from an employee’s paycheck for
damage to company property, and for a lawsuit based on negligent or
intentional harm to company property, there are issues to consider
before pursuing such a course of action. These main options presume
the damage was not caused by criminal or willful intent, which
would need to be addressed separately through local
authorities.
The first considerations are related to payroll deductions. A
deduction from a non-exempt employee’s paycheck can only be
made where written authorization was given prior to the deduction
(i.e. an authorization form at the time the computer was issued)
and where the deduction would not cause the employee to receive
less than minimum wage for that pay period. For exempt employees,
even where written authorization was previously given, any
deduction would violate the salary-basis requirement under the Fair
Labor Standards Act, creating potential liability for an overtime
claim.
The remaining considerations are related to pursuing a remedy in
the Idaho court system. Even though a cause of action would be
available in a civil lawsuit or small claims court, litigation
costs may easily outweigh the available remedy. Further, the
company needs to be very mindful that the employee may decide to
pursue a counterclaim or discrimination charge in response, or even
that the timing of a lawsuit could be perceived as retaliating
against a former employee’s own lawsuit pursuing a wrongful
discharge claim or other right protected by law.
Of course, it is recommended that the company first have a
policy in place describing its expectations for the care of company
property and its intentions to hold employees responsible under
certain circumstances for damage to, or destruction of, the
employer’s property, whether that be through direct
disciplinary actions or seeking to recoup the company’s
losses.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
#Employment #Law #Update #April #Employee #Rights #Labour #Relations
