Over the past few years, we have been providing numerous updates on the changing landscape of COVID laws and policies affecting employers. As we approach the end of the first quarter of 2023, however, we wish to focus on several non-COVID related topics and issues impacting employers this year.
1. Expansion of Sexual Assault and Sexual Harassment Protections
On December 7, 2022, President Biden signed the Speak Out Act into law. The Speak Out Act makes non-disclosure and non-disparagement clauses agreed to prior to a dispute arising judicially unenforceable with respect to claims of sexual harassment and sexual assault. General non-disclosure and non-disparagement clauses that are not limited to trade secrets and confidential and proprietary business information may be in violation of the Speak Out Act. The restriction on these clauses is not limited to agreements with employees but encompasses agreements with independent contractors and between providers of goods and services and consumers as well.
In addition, earlier this year, Congress passed the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021. This law prohibits the enforcement of pre-dispute arbitration agreements when claims of sexual harassment or sexual assault are involved. It also prohibits any waiver of the right to bring sexual harassment and sexual assault claims jointly or on a class basis.
2. Additional Restrictions on Confidentiality and Non-Disparagement Provisions
On February 22, 2023, the National Labor Relations Board (the “Board”) issued its decisions in McLaren Macomb. The decision turned on whether confidentiality and non-disparagement provisions in the severance agreements provided to employees violated the employees’ Section 7 rights to engage in protected concerted activity under the National Labor Relations Act. In reaching its decision that the confidentiality and non-disparagement provisions did violate the employees’ Section 7 rights, the Board returned to an older standard that severance agreements that restrict Section 7 rights are unlawful.
Specifically, the Board determined that an employer may violate the National Labor Relations Act by simply giving an employee a severance agreement that contains an unlawful provision.
In determining that the confidentiality and non-disparagement provisions violated Section 7, the Board noted that both the confidentiality and non-disparagement provisions chilled the employee’s rights because it bars the employee from providing information to the Board and prohibits the employee from discussing the terms and conditions of employment, including the severance agreement, with former coworkers and future coworkers.
It is important to note that not all individuals are entitled to Section 7 rights under the NLRA. These individuals include supervisors, executives, independent contractors and federal employees. We anticipate that further guidance will be forthcoming on what may be a lawful severance provision.
Given the Speak Out Act, the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021, and the Board’s most recent decision in McLaren Macomb, employers should carefully review their employee agreements, arbitration provisions and handbooks to ensure that they are in compliance with these new standards.
3. An Uncertain Future for Non-Competition Agreements
The Federal Trade Commission (“FTC”) on January 5, 2023, announced its proposed rule that would make it illegal for an employer to enter into or attempt to enter into a non-competition agreement with a worker, maintain a non-competition agreement with a worker, or represent to a worker that the worker is subject to a non-competition agreement. The proposed rule would apply to both independent contractors and employees. In announcing the proposed rule, the FTC described non-competition agreements as “a widespread and often exploitative practice that suppresses wages, hampers innovation, and blocks entrepreneurs from starting new businesses”. The public comment period ends March 10, 2023. After the comment period ends, the FTC will work to publish the final rule, which would then become law. If a final rule is published, we expect significant legal challenges to the new law.
4. Further Protections for Pregnant Employees
As part of the most recent omnibus spending bill which was signed into law, Congress included the Pregnant Workers Fairness Act (“PWFA”) and the Providing Urgent Maternal Protections for Nursing Mothers Act (“Pump Act”).
The PWFA is modeled after the Americans with Disabilities Act (“ADA”) and requires employers with 15 or more employees to “make reasonable accommodations to the known limitations related to the pregnancy, childbirth or related medical condition” of an employee unless the employer can show that an accommodation would pose an undue hardship. A “known limitation” does not need to meet the definition of a disability under the ADA to require accommodation. The PWFA further requires employers to engage in the interactive process in connection with the reasonable accommodation. Finally, the PWFA prohibits employers from requiring employees to take leave, either paid or unpaid, if another reasonable accommodation can be provided, from denying employment opportunities based upon the need for a reasonable accommodation, and from retaliating against or taking an adverse action against the employee for requesting a reasonable accommodation.
The Pump Act expands protections for lactating employees to express milk in the workplace. Specifically, the Pump Act now provides protections for all employees, not just non-exempt employees (crewmembers of air carriers remain exempt from the law). The Pump Act also makes clear that employers must provide adequate time and space (i.e. a space that is not a bathroom and that is shielded from view and private) for employees to express milk. Non-exempt employees must be paid for this break time unless they are completely relieved of duty. For example, if a non-exempt employee is responding to emails on their phone while expressing milk, the employee would need to be compensated for this time. Non-exempt employees should be paid their full salary and no deductions should be made for time used to express milk. The Pump Act adds that employees may seek relief from the courts for violations of the Pump Act, provided that the employee gives the employer a 10-day cure period before filing suit in certain circumstances. Finally, employers with fewer than 50 employees may be exempt from the requirements of the Pump Act if the requirements would impose an undue hardship.
5. A Renewed Focus on Misclassification
The Internal Revenue Service and the Department of Labor recently published a Memorandum of Understanding for Employment Tax Referrals (the “MOU”) which establishes “a joint initiative to improve compliance with laws and regulations administered by DOL-Wage and Hour Division (WHD) and the IRS Small Business/Self Employed Specialty Employment Tax (SB/SE)”. While the MOU largely discusses the specifics of sharing information, Appendix B to the MOU specifically states that “improving information available on DOL referrals can improve results of the Joint Worker Misclassification Initiative”. This is consistent with the current administration’s focus on workers’ rights, including misclassification. Given this coordination between the DOL and the IRS, employers who have independent contractors should carefully review whether the individual in question meets the requirements to be an independent contractor or whether the individual is more properly classified as an employee.
6. Required Compliance with Salary Basis Requirements
On February 22, 2023, the United States Supreme Court issued its decision in Helix Energy Solutions Group, Inc. v. Hewitt, which found that even though Hewitt earned over $200,000 per year and supervised 12 to 14 employees, he was entitled to overtime for each and every hour worked over 40 in a workweek because he was paid a “day rate” rather than a salary. An employee is be paid on a salary basis “if the employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed”
The Court concluded that daily-rate workers, of whatever income level, could only qualify as paid on a salary basis if the conditions set out in 29 CFR §541.604(b) are met. 29 CFR §541.604(b) does allow an employee to be paid “on an hourly, a daily or a shift basis, without losing the exemption or violating the salary basis requirement, if the employment arrangement also includes a guarantee of at least the minimum weekly required amount paid on a salary basis regardless of the number of hours, days or shifts worked, and a reasonable relationship exists between the guaranteed amount and the amount actually earned.” (emphasis added).
Because Hewitt did not meet the requirements of being paid on a salary basis, the Court determined that he was not exempt from the requirements of the Fair Labor Standard Act (“FLSA”) and was entitled to overtime pay.
Employers should be reminded that in FLSA cases, prevailing plaintiffs are often entitled to liquidated damages and to recover their attorney’s fees and costs. As such, employers should carefully review their compensation plans for exempt employees to ensure that they are in compliance with the FLSA and that their employees are appropriately classified as exempt from overtime payments.
7. New Hot Button Issues for the EEOC
The Equal Employment Opportunity Commission (“EEOC”) recently released its Strategic Plan for Fiscal Years 2022-2026 (the “SEP”), which serves as a framework for the EEOC’s enforcement activities.
Of particular importance, as employers rely more on computer based applications and communication, is the EEOC’s focus on Artificial Intelligence (“AI”) in the workplace which could disproportionately impact certain groups of individuals, such as those with physical and mental disabilities. AI could include the use of “resume scanners that prioritize applications using certain keywords; employee monitoring software that rates employees on the basis of their keystrokes or other factors; “virtual assistants” or “chatbots” that ask job candidates about their qualifications and reject those who do not meet pre-defined requirements; video interviewing software that evaluates candidates based on their facial expressions and speech patterns; and testing software that provides “job fit” scores for applicants or employees regarding their personalities, aptitudes, cognitive skills, or perceived “cultural fit” based on their performance on a game or on a more traditional test”.
The EEOC will also be focusing on enforcement of the PWFA and other issues relating to pregnancy discrimination, as well as pay equity issues. Finally, the EEOC will target its resources to combat discrimination influenced by or arising in backlash to news events.
Employers should ensure that managers and supervisors are trained on the requirements of the PWFA in addition to ensuring compliance with all other anti-discrimination laws. Employers who utilize AI should also use this as a reminder to ensure that the AI does not unintentionally (or intentionally) disproportionately impact protected groups of individuals.
It appears that 2023 has already created new challenges for employers in connection with employment law compliance issues. As always, we are here to be your compass as you navigate these sea changes.
Joan M. Vecchioli is a partner in the Clearwater office and is Board Certified in Labor and Employment Law by the Florida Bar.
Colleen M. Flynn is a partner in the Clearwater office whose practice focuses on Labor and Employment Law.
Rachael L. Wood is an associate in the Clearwater office whose practice focuses on Labor and Employment Law.
THIS ARTICLE IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL ADVICE. LEGAL ADVICE CANNOT BE GIVEN WITHOUT INFORMATION ABOUT YOUR SPECIFIC SITUATION.