On August 20, 2024, the U.S. District Court for the Northern District of Texas invalidated the Federal Trade Commission’s (FTC’s) final rule that effectively banned the use of noncompete agreements by U.S. employers.  The ruling comes just in time for employers facing the inability to enter into or enforce noncompete agreements when the rule was slated to go into effect on September 4, 2024.

The Texas court reasoned that the FTC exceeded its constitutional authority by proposing “arbitrary and capricious” sweeping prohibitions against noncompete agreements rather than a more targeted ban on specific noncompete provisions that are deemed unfair competitive practices.  In addition, the court noted that only Congress is authorized to issue substantive rules banning non-competes, whereas the FTC’s authority is limited to procedural rules aimed at implementing legislation passed by Congress, adding “[t]he role of an administrative agency is to do as told by Congress, not to do what the agency thinks it should do.”

Prior Judicial Proceedings: 

On April 24, 2024, the U.S. Department of Labor (DOL) announced a long anticipated final rule increasing the minimum salary requirements that “white collar” and highly compensated employees must meet to qualify for exemption from the overtime requirements of the Fair Labor Standards Act (FLSA).  It is estimated that the rule could impact up to 4 million employees who may now be eligible for overtime pay unless employers increase their salaries to meet the new requirements.

Two-Phased Increase for White Collar Exceptions

The DOL’s rule announced a phased-in increase in the salary basis test applicable to the white collar exemptions for executive, administrative and learned professional employees.

On April 23rd, 2024, the Federal Trade Commission (FTC) approved a final rule that effectively bans the use of non-compete agreements by U.S. based employers.  The final rule is substantially similar to the proposed rule announced in January 2023, and represents a sweeping change in the ability of employers to rely upon preexisting as well as future non-compete clauses to protect against unfair competitive practices.  The final rule will go into effect 120 days after its publication in the Federal Register, which is expected shortly.

The final rule defines a non-compete clause as any agreement that prohibits, penalizes or functions to prevent a worker from (1) seeking or accepting work in the U.S. with another employer or (2) operating a business in the U.S., after a separation of employment.

The Scope of the FTC Ban

In its April 17th, 2024, ruling in Muldrow v. City of St. Louis, the United States Supreme Court significantly eased the burden for employees challenging mandatory job transfers as a discriminatory action in violation of Title VII of the Civil Rights Act of 1964.  The Court’s ruling makes it clear that to advance such a claim, the employee need only show that the transfer resulted in “some harm” rather than “significant harm” to the terms and conditions of employment.  The Court’s groundbreaking decision resolves a split among the circuit courts, with numerous circuits applying a heightened standard that required proof of “substantial harm” to the employee.

The Challenged Transfer

Police Sergeant Jatonya Muldrow worked for nine years as a plainclothes officer in the St. Louis Police Department’s specialized Intelligence Division.  After a new Division Commander was hired, Muldrow was reassigned to a uniformed position in another district at the same rank and pay, against her wishes.  Muldrow claimed that because she was no longer in the Intelligence Division she lost her FBI status, department vehicle, and other perks.  In addition, the transfer to the “less prestigious” uniform patrol changed her regular schedule to a rotating schedule that included weekend shifts.  Muldrow claimed she was transferred because the new Commander wanted to replace her with a male officer, in violation of Title VII.

On April 15, 2024, the U.S. Equal Employment Opportunity Commission issued final regulations that clarify the obligation of employers to provide reasonable accommodation to pregnant workers under the Pregnant Workers’ Fairness Act (PWFA) that went into effect in June 2023.  While employers should review the final regulations linked here for further details, some highlights from new regulations are discussed below.

The Employer’s Obligations Under the PWFA:

The PWFA requires employers of 15 or more to provide reasonable accommodations “to the known limitations of a qualified employee related to pregnancy, childbirth, or related medical conditions, absent undue hardship.”  The regulations specify that employers are prohibited from:

In a ruling that could have far reaching implications in both unionized and non-union work environments, the National Labor Relations Board (“NLRB” or “Board”) ruled that Home Depot violated Section 7 of the National Labor Relations Act (NLRA) when it terminated an employee for refusing to remove a BLM logo from his company apron that violated Home Depot’s dress code prohibiting the display of causes or political messages unrelated to the workplace.

Although not the first time the Board has addressed the right of employees to don attire with BLM insignia, the ruling provides insight on the factors the Board will find sufficient to rule that employer dress codes must yield to employees’ expressions of support for social justice movements or other political causes.

The Prior Rulings

The duty to provide “reasonable accommodation” to an employee with a disability under the Americans with Disabilities Act (ADA) or the New Jersey Law Against Discrimination (LAD) poses significant challenges and legal risks to employers.  Determining when an employee’s request for a workplace accommodation is “reasonable” and thus must be accommodated, verses an “unreasonable” one that can be rejected by the employer, is often the subject of costly legal challenges.  A recent decision from the New Jersey Appellate Division shows how employers who implement an ongoing “interactive process” as well as offer reasonable accommodations along the way can successfully defend claims of disability discrimination.

The Facts: 

Plaintiff Robin Thomas was employed by the New Jersey Department of Corrections (DOC) as a secretarial assistant, a role requiring interaction with co-workers and access to her unit’s files.  In 2000, Thomas was diagnosed with an autoimmune disease that was adversely affected by cold and requested a work area without direct exposure to air conditioning.  The DOC accommodated that request.

Classifying workers as independent contractors can result in significant cost savings for employers, who are relieved of the obligation to offer company sponsored employee benefits (paid time off, health insurance contributions, etc.), to pay into state-sponsored employee benefit programs (e.g., paid sick leave, temporary disability, unemployment), and comply with other employment laws.  However, a recent decision from the New Jersey Superior Court, Appellate Division, illustrates that employers who misclassify workers as independent contractors rather than employees – thereby depriving them of the benefits of employee status – learn a tough lesson when workers challenge their employment status.

The Court Proceedings:

In Rodriguez v. De LaRosa (App. Div. 12/11/23), Barber shop owner Reynaldo De La Rosa hired Jonathan Rodriquez and other immigrants from the Dominican Republic to work six days a week as independent contractor barbers and to reside in housing he owned.  Rodriguez ultimately filed suit against De LaRosa in the Special Civil Part (a court with a jurisdictional cap on damages of $15,000) claiming he should have been classified as an employee and as required by New Jersey’s Wage and Hour Law, paid overtime for all hours in excess of 40 hours in the preceding two-year period.  After a four-day trial, the lower court agreed that Rodriguez did not meet the requirements for classification as an independent contractor under the “ABC test” used to determine independent contractor status and awarded him $15,000 in unpaid overtime wages.

Effective March 11, 2024, the U. S. Department of Labor (DOL) will implement its final rule, Employee or Independent Contractor Classification Under the Fair Labor Standards Act, rescinding the 2021 Trump era Independent Contractor Rule that made it easier for employers to establish independent contractor status.  The final rule substantially mirrors the Department’s proposed rule issued in October 2022.

Reaffirmation of the Economic Realities Test:

As noted in the DOL’s accompanying FAQ found here, the final rule “continues to affirm that a worker is not an independent contractor if they are, as matter of economic reality, economically dependent on an employer for work.”  The final rule reverts back to the narrower “totality of the circumstances” economic reality test in effect prior to 2021 that applied the following six non-exhaustive factors to analyze employee or independent contractor status: