Biden’s DOL Issues New Rule Making It More Difficult for Businesses to Classify Individuals as Independent Contractors for Wage and Hour Law Purposes

As most know, in August a Texas federal court struck down the FTC’s proposed regulation banning employment non-competition agreements. However, on October 7, the NLRB’s General Counsel published a Memorandum reiterating, and further explaining, her position that most non-competition agreements violate the National Labor Relations Act, “NLRA.” This is a position that she originally announced in a May 23 Memorandum. She appears to have double-downed on this, possibly because of the FTC ruling. At any rate, employers should be aware that the NLRA applies to most private employers, whether they have a union-organized workplace or not. Additionally, the General Counsel’s Memo states that “stay-or-pay” agreements are generally also illegal under the NLRA. These are any contracts under which an employee must pay their employer if they separate from employment, whether voluntarily or involuntarily, within a certain timeframe. Some examples are: training repayment agreement provisions or educational repayment contracts. If an employer maintains unlawful stay-or-pay provisions or non-compete provisions, the NLRB is going to seek financial “make whole” remedies. In the case of a no-compete, this could include the difference between what the employee makes and what they could have made in another job. The Memo states “an employee must demonstrate that: (1) there was a vacancy available for a job with a better compensation package; (2) they were qualified for the job; and (3) they were discouraged from applying for or accepting the job because of the non-compete provision.” If these criteria are satisfied, the employer must compensate the employee for the difference (in terms of pay or benefits) between what they would have received and what they did receive during the same period. This could also be a remedy for a stay-or-pay agreement. It must be noted that this General Counsel Memo does not have the force of law. However, it does set forth the enforcement position of the NLRA, meaning that NLRB Charges and investigations will likely follow. A court may eventually find that the General Counsel’s position is not in accord with the law, but it would be very expensive for an individual employer to litigate to that point. Employers have 60 days to “cure” existing stay-or-pay provisions by unilaterally altering contract terms to conform to the General Counsel’s demands. Otherwise, they will be subject to prosecution. It appears to us that so altering the agreements would render them pretty much useless. Employers should review any no-competes, or stay-or-pay agreements that they utilize, and determine if such agreements might violate the conditions set forth in the General Counsel’s Memo. If so, a decision will have to be made as to whether to continue to use the agreements. Employers should consult with labor counsel in making the decision whether to continue to use these agreements.

Employers should take note that the EEOC has filed at least 3 lawsuits in the past month related to the Pregnant Workers Fairness Act, PWFA, which took effect in June of last year. We believe these are the initial lawsuits filed by the EEOC, and most likely indicates that this is a new strategic point of emphasis for the EEOC. What are the cases about? In one case, a pregnant employee who worked on an assembly line requested an accommodation that would not require excessive bending or lying on her stomach. The employer placed her on leave without engaging in the interactive discussion process with her, which constituted a forced accommodation according to the lawsuit. In another case, the employer refused to excuse an employee’s absences for pregnancy-related conditions and medical appointments and required her to work mandatory overtime despite knowing that her physician had restricted her from working over forty hours per week during her pregnancy. Because of her pregnancy-related absences, the company assessed attendance points against her and warned that she would be terminated if she acquired another point. As a result, the employee resigned to avoid termination and protect her pregnancy. In the third case, a specialty medical practice did not allow a medical assistant to sit, take breaks, or work part-time as her physician had advised to protect her health and safety during the final trimester of her high-risk pregnancy. Instead, the practice forced her to take unpaid leave and refused to guarantee she would have breaks to express breastmilk. When she would not return to work without those guaranteed breaks, her employment was terminated. What should employers do? They should review their accommodations policies to ensure that that they include requests related to pregnancy, childbirth, and related medical conditions. This may also include creating or revising interactive process paperwork that should be used to review requests for accommodations, and engage in the required interactive process. By doing so, the risk of failing to engage in the interactive process with pregnant employees who are in need of an accommodation can be reduced, and there will be documentation of the process itself. The EEOC has provided examples of possible reasonable accommodations: Frequent breaks; Sitting or standing; Schedule changes, part-time work, and paid and unpaid leave; Telework; Parking; Light duty; Making existing facilities accessible or modifying the work environment; Job restructuring; Temporarily suspending one or more essential function; Acquiring or modifying equipment, uniforms, or devices; and Adjusting or modifying examinations or policies. The analysis to consider whether an accommodation request is an undue hardship is whether it causes significant difficulty or expense for the employer’s operations. Under the PWFA, employers must conduct an individualized assessment when determining whether an accommodation will impose an undue burden. If you believe a request constitutes an undue hardship, you should review the matter thoroughly with your HR advisor.

Yesterday, a Texas federal court struck down the FTC’s proposed ban on non-competition agreements on a nationwide basis , meaning employers will not have to comply with the proposed Rule, and can continue to maintain non-competes as their state laws allow. While there is a slim chance the Rule could be resurrected by a federal appeals court in the future, that is doubtful at best. In case you missed it, here is information regarding the now invalid Rule from our April 24 Newsletter on this topic: The Fair Trade Commission, FTC, issued a final Rule that would have prohibited employers from utilizing non-compete agreements with almost all employees. Specifically, under the Rule, employers would have no longer been able to: Enter into non-compete agreements with employees; or Enforce existing non-compete agreements, unless they are with “Senior Executives,” defined as those earning more than $151,164 annually, with policy making responsibilities.  Additionally, before the effective date of the Rule, employers would have been required to provide an explicit Notice to employees and former employees that their non-compete agreements were no longer enforceable.

The Department of Labor, DOL, issued a final rule raising the salary that an employee must be paid to be Exempt from overtime pay, “OT” under the so-called white-collar Exemptions: Executive; Professional; Administrative; and Computer Employees. On July 1, 2024, the minimum salary to qualify for these Exemptions will jump from $684 per week