Author: Scott Horton

Scott has been practicing Labor & Employment law in New York for almost 20 years. He has represented over 400 employers and authored 100s of articles and presentations and wrote the book New York Management Law: The Practical Guide to Employment Law for Business Owners and Managers. Nothing on this blog can be considered legal advice. If you want legal advice, you need to retain an attorney.

Noncompete

FTC Attempts to End Noncompete Agreements

The Federal Trade Commission (FTC) has released its “final rule” banning noncompete agreements. This agency action marks a significant shift in the landscape of U.S. employment and competition law. This development, poised to reshape employer-employee dynamics and broader business practices, warrants close attention, especially given the potential legal battles and opposition it faces. If the rule takes effect in its current form, it will be a game-changer for numerous companies and will require immediate action by many.

The Rule and Its Rationale

For years, noncompete clauses have been standard in many industries, viewed as a means to protect businesses by restricting employees from joining competitors immediately after their tenure. However, under the new FTC rule, such agreements would be prohibited across all states, applying to employees, contractors, and some other workers. The FTC argues that noncompetes stifle wage growth, deter innovation, and limit job mobility, ultimately harming the economy. By eliminating these clauses, the FTC anticipates enhanced competition, increased entrepreneurship, and broader economic benefits, such as higher wages and lower healthcare costs.

Key Provisions of the Rule

  1. Effective Date: The rule is set to take effect on September 4, 2024, unless delayed by legal interventions.
  2. Exceptions: The rule permits some existing noncompetes for senior executives to remain in effect and allows them going forward in some scenarios involving the sale of a business.
  3. Scope of Restrictive Covenants: Other forms of restrictive covenants, like nonsolicitation and nondisclosure agreements, are not directly affected. The rule only restricts post-employment competition, meaning noncompetes that operate during employment are still permissible.

Employee Impact Notices

If the rule takes effect, all employers with existing noncompetes invalidated by the rule must notify affected workers that the noncompete will not be enforced. The FTC has even included a model notice for this purpose in the final rule.

Legal Landscape and Challenges

The FTC’s bold move has not gone unchallenged. Business entities, including prominent chambers of commerce and trade groups, argue that the FTC is overreaching its authority. Several lawsuits have already been filed, seeking to invalidate the rule on various grounds, which could delay or derail its implementation.

Compliance and Strategic Adjustments

Businesses need to proactively prepare for the potential enactment of this rule:

  • Tracking and Review: Employers should audit their current noncompete agreements and employment contracts to determine necessary revisions and notices.
  • Strategic Planning: Companies might need to recalibrate the terms of employment, particularly regarding compensation and other incentives, in response to the unenforceability of noncompetes.
  • Legal Consultation: Given the complexities and evolving nature of the rule, legal advice will be crucial in navigating compliance and leveraging permissible protective measures.

Enforcement and Penalties

The FTC will oversee the enforcement of this rule, treating violations as unfair competition practices subject to penalties. A good-faith defense is available for businesses that mistakenly, but reasonably, believe the rule does not apply to their actions. This defense may be limited to provisions that do not look like traditional noncompetes but are interpreted as having the same impermissible impact under the FTC rule.

Conclusion

As the legal battles unfold and the effective date approaches, businesses must stay informed and flexible, ready to adapt to a potentially transformed regulatory environment. The FTC’s noncompete ban could significantly alter how businesses operate and compete, making it essential for employers to rethink their strategies concerning workforce management and competitive practices.

 

A copy of the FTC noncompete rule, with accompanying information from the agency, is available here.

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Employee Pregnancy

New York Expands Employee Pregnancy-Related Rights

New York continues to set trends in expanding employee rights. The state’s 2024-25 budget legislation includes two amendments that grant paid time off for certain employee pregnancy-related conditions. Employees may now take paid breaks to express breastmilk and paid leave for prenatal care. The details of these new entitlements are described below.

Employer Coverage

These new requirements are not limited to employers with a minimum number of employees. The paid break time for nursing mothers applies to all New York employers. However, along with the rest of the New York Paid Sick Leave Law, the paid prenatal personal leave provisions only apply to private (i.e., non-governmental) employers.

Paid Break Time for Breast Milk Expression

Section 206-c of the New York Labor Law previously required employers to provide reasonable unpaid break time for employees to express breast milk at work. The new amendment mandates that employers must provide 30 minutes of paid break time “each time such employee has reasonable need to express breast milk.” Employees may use any existing paid break or meal time for expressing breast milk if they need more than 30 minutes.

This expansion of employee rights is highly unusual in requiring paid break time. Existing break time requirements for meal periods only require unpaid time.

How Much Time?

The law does not further address how often an eligible employee may take the 30-minute paid break. There is no elaboration on when an employee should be considered to have “reasonable need to express breast milk.” The U.S. Department of Health & Human Services Office on Women’s Health indicates that “Women typically pump every 2 to 3 hours or around two to three times per 8-hour work period. Women who work 12-hour shifts may need to pump three to four times to maintain their milk production.” Accordingly, New York law arguably could give some employees two hours (or more) of paid break time each shift.

It is plausible that the Legislature only intended to require 30 minutes of paid break time per day. But that is not clear from the statutory language.

The only additional clarification is that eligibility extends for up to 3 years following childbirth. Presumably, this period would start over whenever the employee gives birth to a new child.

No Discrimination

Another open question is whether an employer may require a nursing mother to extend her work day to account for the break time. There is a risk that such a requirement would be considered discriminatory under existing anti-discrimination laws. Indeed, Labor Law Section 206-c itself provides, “No employer shall discriminate in any way against an employee who chooses to express breast milk in the work place.”

Effective Date

This amendment will take effect on June 19, 2024.

Paid Prenatal Personal Leave

The second major update comes to the New York Paid Sick Leave Law. In addition to existing sick leave obligations, the amendment introduces a separate requirement for “paid prenatal personal leave.” With this amendment, every non-governmental employer in New York will be required to provide an eligible employee with 20 hours of paid prenatal personal leave in any 52-week period.

Covered Leave

This leave is specifically designed for “health care services received by an employee during their pregnancy or related to their pregnancy, including physical examinations, medical procedures, monitoring, testing, and consultations with health care providers concerning the pregnancy.”

Based on the above-quoted language, it appears that only the pregnant employee is entitled to this form of leave. Non-pregnant parents-to-be are not covered.

Administrative Parameters

Employers must allow employees to take paid prenatal personal leave in hourly increments.

The law does not indicate that unused paid prenatal personal leave must carry over from year to year. It does clarify that employers are not obligated to pay out unused paid prenatal personal leave upon separation from employment.

Unlike traditional sick leave, which accrues based on hours worked by default, paid prenatal personal leave is available in full (up to 20 hours) when first needed.

Effective Date

This amendment will take effect on January 1, 2025.

Implications and Benefits for Employee Pregnancy

There are undoubtedly positive motivations behind these new laws designed to help accommodate work-related challenges pregnant employees and new mothers face. However, additional obligations to pay employees for time spent not working create new burdens for employers:

  • An employee using prenatal personal leave in hourly increments could take time off on up to 20 different days leading up to their pregnancy.
  • Nursing mothers may be entitled to 1-2 hours (and possibly more) of paid break time every day for up to three years following each birth.

It’s crucial to understand these changes thoroughly and prepare for their implementation. Employers will need to update policies, train human resources teams and supervisors, and take additional measures to ensure compliance.

 

Make sure you’re using NYS Department of Labor updated nursing mothers policy.

 

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Last Chance Agreements for Workplace Drug and Alcohol Violations

Addressing employee issues related to drug and alcohol misuse poses significant challenges for employers, particularly when balancing disciplinary actions with the opportunity for rehabilitation. Last chance agreements (LCAs) are a nuanced tool that employers can use in such scenarios. They offer a structured yet compassionate approach to handling these sensitive issues.

What Are Last Chance Agreements?

Last chance agreements are written contracts between an employer and an employee who has violated company policies regarding drug or alcohol use. (Sometimes unions are also party to the agreement.) These agreements are not exclusively used for substance-related issues, but are common in these contexts due to the complex nature of addiction and its impact on employment.

The essence of an LCA is to provide the employee with an opportunity to rectify their misconduct through acknowledgment and compliance with specific conditions set forth by the employer. Typically, the agreement comes into play after an incident that could otherwise lead to immediate termination. The LCA offers an alternative path toward the goals of rehabilitation and retention.

Key Elements of Last Chance Agreements for Drug and Alcohol Issues

  1. Acknowledgment of Misconduct: The employee must acknowledge their wrongdoing, specifically regarding the misuse of drugs or alcohol, and recognize the potential consequences of their actions on their employment status.
  2. Agreement to Conditions: LCAs usually stipulate that the employee agrees to meet certain conditions to remain employed. These conditions often include undergoing treatment, abstaining from further use of prohibited substances, and subjecting themselves to random drug testing.
  3. Referral to Support Services: Many LCAs include a referral to an Employee Assistance Program (EAP) or other professional treatment services. This aspect underscores the employer’s role in supporting employee health and recovery rather than merely punishing wrongdoing.
  4. Disclosure Agreements: In some cases, LCAs may require the employee to authorize the disclosure of treatment-related information to the employer. This allows employers to monitor compliance with the agreement’s terms without violating privacy regulations such as HIPAA.
  5. Final Opportunity: The agreement is typically framed as a final opportunity to remain employed. Failure to comply with the terms usually results in termination, as understood and agreed upon in advance by all parties involved.

Benefits of Using Last Chance Agreements for Drug and Alcohol Issues

  • Rehabilitation Over Punishment: LCAs focus on rehabilitation, offering employees a chance to overcome their struggles with substance abuse and recover their professional standing.
  • Legal Safeguards: They provide a clear, legally sound framework that protects both the employer and the employee. Employers can enforce the terms of the agreement, knowing they have offered a fair chance to the employee, thus mitigating potential legal challenges. For more on potential employee protections related to drug and alcohol use, read Employee Drug Addiction and Alcoholism in New York.
  • Workplace Safety and Integrity: By addressing drug and alcohol misuse constructively, employers can maintain safety and integrity within the workplace, ensuring that all employees operate in a safe and supportive environment.
  • Promoting Recovery: Encouraging treatment and recovery reflects positively on the employer’s commitment to their workforce’s well-being, fostering a supportive and understanding company culture.

Considerations for Employers

Last chance agreements represent a potential win-win solution in the delicate balance of employment law and employee welfare. They provide a structured yet empathetic approach to serious workplace issues, facilitating recovery and retention where possible, and upholding the employer’s commitment to a safe and productive work environment.

While last chance agreements offer a valuable option for managing complex employee issues, they require careful drafting to ensure they are legally compliant and effective. Employers should consult with employment attorneys to tailor these agreements to their specific workplace policies and the legal requirements of their jurisdiction.

 

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