Updated Information on the FTC Non-Compete Ban

A federal court has issued a final order declaring the FTC’s ban of non-compete agreements invalid.  The federal district court in Texas held in its final order that the rule was “arbitrary and capricious” and exceeded the FTC’s statutory authority. As a result, the FTC cannot enforce the rule against any employer, anywhere in the country, and there is no longer a nationwide ban of non-compete agreements.  While there is no nationwide ban of non-compete agreements, it is important to keep in mind that several states have fully banned non-compete provisions (California, Colorado, Oklahoma, North Dakota, and Minnesota), and many other states have banned non-compete provisions in certain circumstances.  Just as one example, in Illinois, non-compete agreements cannot be enforced against employees unless they earn at least $75,000, and there are specific statutes restricting enforcement in certain industries, such as construction, healthcare, and broadcasting.

The FTC may appeal this judge’s decision and it is always possible that there will be future attempts to ban non-compete agreements by rule or law. Therefore, we highly recommend considering other strategies for protecting your company’s proprietary information, such as non-solicitation agreements, confidentiality agreements, and trade secret enforcement. Feel free to contact us if you have any questions or would like to discuss more.

Learn more about this update by viewing the video FTC Ban on Non-Competes Blocked by Federal Court in Texas.

For details on the FTC ban on non-competes, go to Navigating the FTC’s Non-Compete Ban: Strategies for Protecting Proprietary Information. You may also view the video here: FTC’s Ban of Non-Compete Agreements. Continue reading »

Understanding the FLSA’s New Salary Test

The Fair Labor Standards Act (FLSA) sets minimum wage and overtime requirements for employees. The overtime requirement requires employers to pay at least one-and-one-half times the hourly rate of the employee for each hour the employee works over 40 hours in a regular work week.

However, certain employees may be exempt from the overtime requirements if they qualify as meeting three tests:

1. Job Duties Test;
2. Salary Level Threshold Test, and
3. Salary Basis Test.

The FLSA does not define those tests. Instead, the U.S. Department of Labor (DOL) is directed to define the exemptions and modify criteria from time to time with regulations.

The Job Duties Test specifies certain duties that the employee must perform if the employee is to be classified as an executive, administrative, professional, outside salesperson, or a computer-related occupation. Additionally, highly compensated employees are also eligible if they fit within a specific job duty test. These employees must all meet the Salary Level Threshold Test and be paid a predetermined and fixed salary that is not subject to reduction (Salary Basis Test). Continue reading »

It’s Now Easier to Prove Discrimination With Job Transfer or Other Change in Terms or Conditions of Employment

Jaytona Muldrow was a plainclothes sergeant in the St. Louis City Police Department’s specialized Intelligence Division. In connection with her duties in the Intelligence Division, Muldrow was deputized as a Task Force Officer with the FBI and was granted FBI credentials and an unmarked take home car. When a new captain was assigned to supervise the Intelligence Division, the Police Department transferred Muldrow from the Intelligence Division (at the new captain’s suggestion) to a uniformed position in the City’s 5^th District, supervising the day-to-day activities of neighborhood patrol officers. While Muldrow’s rank and pay remained the same, her responsibilities, perks and schedule did not. She no longer worked with high-ranking officials in the police department, lost her FBI credentials and the take-home car, and had to work weekends (while in the Intelligence Division she worked Monday through Friday).

Muldrow filed suit against the City of St. Louis under Title VII of the federal Civil Rights Act in the federal District Court for the Eastern District of Missouri, claiming she was transferred because she was a woman. The District Court granted summary judgment in favor of the City, holding that Muldrow’s transfer did not cause her a materially significant disadvantage, as it did not result in a diminution of her title, salary or benefits and had caused only a minor change in her working conditions. The Eighth Circuit Court of Appeals affirmed the decision of the District Court.

In Muldrow v. City of St. Louis, issued April 16, 2024, the U.S. Supreme Court reversed the decision, holding that it was not necessary to show that an injury resulting from an action taken by an employer because of an employee’s protected status (e.g., sex, race, religion, or national origin) resulted in significant injury. Instead, Justice Kagan, writing for a six-member majority of the Court, stated that “an employee must (only) show some harm from a forced transfer to prevail in a Title VII suit…” (emphasis added). This same standard of “some harm” will also apply to any other change in the terms and conditions of employment made as a result of the employee’s protected status. The other three justices each wrote opinions concurring in the result. Continue reading »

Changes in Missouri Law Regarding Restrictive Covenants in Business Sales

Authored by Ruth Binger with assistance from Kristina M. Stevenson, contributor

Recent changes in Missouri law have impacted the enforceability of restrictive covenants in the sale of businesses, particularly those involving business entities and owners. These modifications, detailed in Revised Statutes of Missouri (RSMo) 431.204, arguably reduce protections extended to business purchasers.

Effective August 28, 2023, a covenant prohibiting solicitation of employees between a business entity and an owner cannot extend beyond a two-year period following the termination of the owner’s affiliation with the entity. Essentially, this means that after two years from the sale of their business, an owner is permitted to solicit employees previously associated with the entity.

Moreover, the revisions have introduced more stringent conditions for covenants prohibiting the solicitation of customers. These non-solicitation covenants must now be limited to customers with whom the owner had prior dealings and cannot extend beyond five years after the owner’s termination of business ties with the entity. This adjustment opens the door for sellers to solicit customers they had not previously interacted with. Continue reading »

Employee or Independent Contractor Classification under the Fair Labor Standards Act Effective March 11, 2024

The U.S. Department of Labor (DOL) has modified the Wage and Hour Division Regulations to replace its 2021 analysis for determining whether a worker is an employee or independent contractor (Final Rule). The previous test gave greater weight to control and opportunities for profit and loss.

Effective March 11, 2024, under the Final Rule the employee or independent contractor classification determination will focus on the economic realities of the worker’s relationship and whether the worker is either economically dependent on the potential employer for work or is in business for himself. In short, is the worker dependent upon the business to which it renders services for work?

Economic dependence does not focus on the amount of income the worker earns, but rather whether the worker has other sources of income from other customers. To determine economic dependence, the DOL assesses seven factors and conducts a totality-of-the-circumstances analysis. No one factor carries more weight. The DOL looks at the working relationship, the workplace, and the particular industry.

Under the Final Rule, Section 795.105, DOL, uses the following tools and/or factors in its determination: Continue reading »

What to Do If You Might Have Been Ineligible for the Employee Retention Tax Credit Claim

The COVID-19 Pandemic was cause for many new programs to be created by the U.S. government to keep businesses afloat and employees retained in unprecedented times. One of these programs was the Employee Retention Tax Credit (“ERC”) which incentivized employers to retain employees while business was down. The program was available regardless of the size of the employer and included tax-exempt organizations.

To be eligible for the ERC, employers had to (1) be either fully or partially suspended by government order due to COVID during the calendar quarter or (2) have gross receipts below 50% of the comparable quarter in 2019.

The IRS began sending out letters in December 2023 to more than 20,000 taxpayers who received disallowed ERC claims. Letter 105 C, Claim Disallowed is being sent to a first group of taxpayers because the entities either (1) did not exist during the eligibility period (March 13, 2020, through December 31, 2021), or (2) did not have paid employees during the ERC’s applicable time period (ERC is a credit against qualified wages).

Letter 105 is being sent out to taxpayers prior to payment in an effort by the IRS to help ineligible taxpayers avoid audits, repayments, and penalties. Many employers were encouraged to file ERC claims by “promoters” who received monetary commissions based on approval. Issuance of a disallowance letter prevents promoters from receiving funds to which they are not entitled. Continue reading »

Non-Compete and Non-Solicitation Agreements Under Attack!

Soon companies may be prohibited or severely limited from using employee non-compete and non-solicitation agreements. The Federal Trade Commission’s (FTC) January 2023 proposed Non-Compete Clause Rule would prohibit employers from using non-compete agreements with any employee or independent contractor, paid or not, with very limited exceptions. The proposed rule is retroactive requiring employers to rescind all existing non-compete agreements and notify workers that these agreements are no longer in effect.

The FTC’s proposed rule does not prohibit customer or employee non-solicitation agreements unless they are overly broad. The proposal indicates that eradicating non-compete agreements is a priority for the FTC. The vote is scheduled for April 2024 and will likely be subject to extensive litigation if passed.

In May 2023, Jennifer Abruzzo, the National Labor Relations Board (NLRB) General Counsel, issued a memorandum stating that offering, upholding, and enforcing non-compete agreements may interfere with Section 7 of the National Labor Relations Act (NLRA). Employees could interpret the agreements as creating a lack of employment mobility by denying them the ability to quit or change jobs or by blocking access to other employment opportunities. Non-compete agreements could be lawful if they are narrowly tailored and only restrict individuals’ managerial or ownership interests in competing businesses or true independent contractor relationships. According to the memorandum, the NLRB will focus on pursuing enforcement actions against employers utilizing non-compete agreements. Continue reading »

Illinois Passes Freelance Workers Protection Laws: Understanding the Freelance Worker Protection Act

Authored by Katherine M. Flett with assistance from Kristina M. Stevenson, contributor

In a pioneering move, Illinois has become the first state to enact comprehensive protection laws for freelance workers. The Freelance Worker Protection Act (FWPA), set to take effect on July 1, 2024, introduces stringent regulations governing the engagement, treatment, and compensation of freelance workers within the state. This legislation, which is gaining steam nationwide with other states, aims to safeguard the rights and interests of freelance workers, who play an increasingly vital role in today’s dynamic economy.

Defining Freelance Workers

The FWPA defines a freelance worker as an independent contractor who offers products or services within Illinois or for Illinois-based entities, in exchange for compensation exceeding $500. This compensation can stem from a single contract or multiple contracts over a 120-day period. However, certain exceptions apply. Construction service providers, employees of construction contractors, and those already subject to traditional employer-employee relationships under the Illinois Wage Payment and Collections Act are excluded from the definition.

Key Protections Offered by FWPA

The FWPA outlines three requirements regarding hiring freelance workers: Continue reading »

Your Business and the ADA: Ensuring Accessibility and Inclusion

Part 2 of 2-Part Series on Accessibility and Accommodation

It is important for small businesses to be aware of and comply with the requirements of the Americans with Disabilities Act (ADA). The ADA has two sections that can potentially impact small businesses: Title I and Title III.

Title I of the ADA applies to businesses with 15 or more employees (or 6 or more employees under the Missouri Human Rights Act) and requires employers to provide reasonable accommodations for employees with disabilities. This means making modifications or adjustments to the work environment that enable employees to perform their job duties which could include providing assistive devices, modifying work schedules, or allowing telecommuting.

Title III applies to all businesses, regardless of their size, and requires them to make their physical premises accessible to individuals with disabilities. A key aspect is the removal of architectural barriers that may hinder accessibility and ensuring that physical structures are designed and constructed in a way that accommodates individuals with disabilities. Elements such as entrances, parking spaces, ramps, doorways, hallways, and restrooms must be accessible to people with mobility impairments.

When constructing a new building or making alterations or renovations to an existing building, businesses are generally required to comply with the ADA Standards for Accessible Design adopted by the Department of Justice in 2010. However, even if a business is not engaged in construction or renovation, they still have an obligation to make alterations to their premises to provide access if it is “reasonably achievable.” The term “reasonably achievable” has not been precisely defined, but courts consider factors such as the nature and cost of barrier removal, the business’ financial resources, technical difficulties, the number of employees and visitors, safety requirements, and the impact on business operations. Continue reading »

Clicking Towards Disaster: The Cost of ADA Non-Compliant Websites

Authored by David R. Bohm with assistance from Sarah L. Ayers, contributor

Part 1 of 2-Part Series on Accessibility and Accommodation (Updated July 2023)

Business websites are an invaluable tool for businesses to reach and grow their customer base. Entire businesses now operate completely online. Interactive websites that conduct transactions with consumers must be accessible by anyone, including those with hearing or vision disabilities. Non-compliant websites violate Title III of the Americans with Disabilities Act (ADA), which prohibits discrimination in public accommodations. A business could be found liable if its website is not accessible.

To be ADA compliant, the website should comply with the Web Content Accessibility Guidelines (WCAG). WCAG addresses accessibility issues such as contrasts, subtitles, and compatibility with screen reader equipment. This area of law is still developing. Federal courts are split as to whether Title III applies to businesses with no physical location. The Justice Department has not developed exact criteria for accessibility but has released various settlement agreements giving business owners some insights into ADA requirements.

When Rite Aid’s vaccine appointment portal was found to be inaccessible to individuals with disabilities, the company settled with the Justice Department. The issues were: (1) images, buttons, links, headings, and form fields that were either unlabeled or inaccurate, (2) pop-up windows and error messages that were not reported to screen readers, (3) tables that were missing information and proper mark-ups, (4) screen contrasts, and (5) navigation of the screen without a mouse. According to the settlement agreement, compliance is determined by “…whether individuals with disabilities have full and equal enjoyment of the goods, services, facilities, privileges, advantages, and accommodations offered.” Rite Aid agreed to continuously use an accessibility testing tool, address any barriers found within 15 days, provide annual training to employees on how to make its website accessible, and retain an outside website accessibility consultant. Continue reading »