A federal judge on Tuesday blocked the FTC’s controversial ban on noncompete agreements. The judge’s ruling ends months of speculation and prevents the FTC’s near-total ban on noncompete agreements from taking effect as planned on September 4.

Tuesday’s ruling came from US District Judge Ada Brown in connection with a case filed in Dallas by the US Chamber of Commerce. Judge Brown ruled that the FTC’s ban was “unreasonably overbroad” and that the FTC lacked the authority to enact it.

The FTC may appeal Tuesday’s ruling, but its noncompete ban will almost certainly remain blocked in the meantime.

The Labor and Employment Practice Group at Frantz Ward will continue to monitor this situation closely. If you have questions about this or other labor and employment law issues, contact Brian Kelly or another member of the group.

On April 29, 2024, in response to an Executive Order issued by President Biden last October, the Office of Federal Contract Compliance Programs (“OFCCP”) of the U.S. Department of Labor issued guidance to federal contractors on the use of artificial intelligence (“AI”) in order to address, “AI in the Equal Employment Opportunity (EEO) context.”. This Guidance follows previously reported guidance and actions issued and taken by the U.S. Equal Employment Opportunity Commission (“EEOC”) and the U.S. Department of Justice (“DOJ”) on which Frantz Ward has previously reported:

  • In May of 2022, we reported that the EEOC and DOJ issued guidance to employers, employees and applicants on the use of artificial intelligence tools.
  • In February 2023, we reported that the EEOC had held a public hearing in January 2023 to examine the use of automated systems, including artificial intelligence, in employment decisions.
  • In August 2023, we reported that as part of its aggressive stance against companies that utilize AI software,  the EEOC had reached a tentative settlement of its first discrimination suit based on the use of AI software. EEOC v. iTutorGroup, Inc., E.D.N.Y., No. 22-cv-02565 (2022).

This new OFCCP Guidance, “answers questions and shares promising practices … to clarify federal contractors’ legal obligations, promote EEO, and mitigate the potentially harmful impacts of AI in employment decisions.” While the OFCCP Guidance is directed at federal contractors, it also serves as a roadmap for how the OFCCP is going to address the use of AI in the private sector. For example, in discussing common questions about the use of AI in employment decisions, the Guidance makes it clear that employers need to adhere to OFCCP requirements with respect to maintaining records and confidentiality, as regardless of whether an employer develops its own AI system or uses that of a third-party, the employer is ultimately responsible for meeting their nondiscrimination and affirmative action obligations. The Guidance also emphasizes the need of employers to make reasonable accommodations of applicants and employees with known physical or mental disabilities.

The Guidance additionally discusses at length several “Promising Practices” for the development and use of AI in employment decisions. The OFCCP states that, “while not expressly required [these Promising Practices are] actions contractors may consider to help avoid potential harm to workers…” It further states that the Promising Practices are “not an exhaustive list, but rather an initial framework.” The Promising Practices include:

  • Providing advance notice and appropriate disclosure to applicants of the use of AI and the data to be captured and used, and informing applicants how to request and obtain reasonable accommodation in the hiring process.
  • Standardizing for all applicants any AI system that is used, routinely monitoring such system to ensure there is no disparate impact, and not relying solely on AI to make employment decisions.
  • Vetting and managing any AI vendors that an employer may use.

If you have questions about the OFCCP’s Guidance or the use of artificial intelligence, or a general labor or employment question, feel free to contact Joel Hlavaty or any member of Frantz Ward’s Labor & Employment Group.

Recent decisions and settlements from the National Labor Relations Board should serve as a not-so-friendly reminder to ensure that your severance agreements and employee handbooks do not run afoul of the National Labor Relations Act.

Severance Agreements
In June 2024, the Board held that a company violated the NLRA by including non-disparagement and confidentiality provisions in a severance agreement. Prime Communications LP entered into a severance agreement with former employee Spencer Smith (and entered into similar agreements with at least 3 other employees) that included the following terms:

  • Smith must “refrain from making disparaging, defamatory, negative or other similar remarks concerning Prime” except when required by law or in connection with a legal proceeding;
  • “This non-disparagement provision is intended to be as broad as possible and to include the written publication of any information related to Prime … whether true or untrue”;
  • Smith is “prohibited from calling, making personal contact with or, emailing any employee of Prime Communications at any location”;
  • Smith must “promise[] that he will maintain in confidence the terms and existence of this Agreement and will not disclose the existence of this Agreement or its terms to anyone else” except his spouse, tax advisor, or attorney; and
  • In the event of threatened or actual breach of the agreement, Prime is entitled to $5,000 for each breach, plus attorney fees and costs.

The Board, applying its 2023 McLaren Macomb decision, held that the provisions were potentially coercive and had a “chilling tendency” on Smith’s rights under the NLRA. (Click here for more on McLaren Macomb.) Specifically, the Board noted that the agreement: would preclude Smith from assisting former coworkers who may be interested in challenging similar agreements or involved in any other employment dispute; was not narrowly tailored because it was “intended to be broad as possible;” and could coerce Smith from filing an unfair labor practice charge or assisting with a Board investigation for fear of having to pay $5,000 for each covered disclosure.

As a reminder, the Board has suggested that their reasoning could also extend beyond severance agreements to similar provisions in non-compete agreements, employment agreements, offer letters, and more. This case is a “Prime” example of the Board’s application of McLaren Macomb to invalidate agreements with provisions routinely used by companies.

Handbook Provisions
In March 2024, the Board secured a $297,000 settlement against Hilst Enterprises, Inc. (dba La-Z-Boy Furniture Galleries) based on an unfair labor practice charge filed by a former employee who had been unlawfully laid off in retaliation for engaging in protected concerted activity. This settlement illustrates the Board’s 2023 decision in Stericycle Inc. in action, which prohibits work rules that chill employees’ exercise of their rights under the NLRA unless they are narrowly tailored to promote legitimate business interests. (Click here for more on Stericycle, Inc.)

Here, the Board held that Hilst maintained unlawful work rules prohibiting employees from discussing wages, hours, and working conditions. The employee handbook included “salary information” in its definition of “sensitive company information.” Additionally, an attachment to the employee handbook read: “Your salary is a confidential matter between us and you. Your continued employment is dependent upon that confidentiality; and any discussion of salaries between employees will be reason for dismissal.”

This settlement serves as a powerful reminder to not be a La-Z-Boy, and review employee handbooks and other work rules to ensure that they do not prohibit employees from discussing (with each other or others) their wages or working conditions – which they are entitled to do under the NLRA.

Employers – both union and non-union – are advised to heed the Board’s recent activity as a warning and review existing severance agreements, employee handbooks, and other agreements to ensure that they do not prohibit conduct protected by the NLRA. Please contact one of Frantz Ward’s labor & employment attorneys with any questions.

On Wednesday, July 3, 2024, a federal judge in Texas blocked the Federal Trade Commission’s rule that seeks an almost complete ban of non-compete agreements. In her ruling, Judge Ada Brown of the United States District Court for the Northern District of Texas granted the plaintiffs Motion for a Preliminary Injunction, delaying the effective date of the rule, but only as to the plaintiffs in the case before her. In doing so, Judge Brown noted that the FTC had exceeded its authority in issuing the Rule and that the lawsuit filed by the U.S. Chamber of Commerce and other business groups was “likely to succeed on the merits.”  Notably, the judge refrained from blocking the rule on a nationwide basis, at least for the time being.

The FTC’s rule, which would ban nearly all non-compete agreements and provisions, is currently set to take effect nationwide on September 4, 2024. While the Texas lawsuit will proceed and appeals are likely to follow, the judge’s order certainly calls into question the viability of the FTC’s rule. Judge Brown could still choose to issue a nationwide injunction as the case proceeds and another federal court in Pennsylvania is scheduled to rule on a similar request for an injunction by July 23, 2024. Uncertainty around the FTC’s rule is further underscored by the upcoming presidential election and the possibility of a new administration that may choose to scuttle the FTC’s efforts altogether.

For the time being, employers should continue to monitor developments but avoid taking any drastic actions in response to the FTC rule, as it now appears to be on precarious legal footing. Employers should continue to be mindful, however, of any state and local laws that may limit or prohibit an employer’s use or enforcement of restrictive covenants, including non-compete agreements. Please contact Mike Chesney or any other members of Frantz Ward’s Labor and Employment Practice Group with questions.

The Equal Employment Opportunity Commission’s (“EEOC”) focus on harassment in the workplace – and construction employers specifically – is no secret. The EEOC’s Strategic Enforcement Plan (“SEP”) for 2024-2028 specifically mentions construction as an industry where barriers in recruitment and hiring are of specific concern and includes combatting systemic harassment as one of the EEOC’s enforcement priorities. Among other recent and significant activity on the issue of harassment, the EEOC updated its Enforcement Guidance on harassment in the workplace in April 2024. And just last week, the Commission published “promising practices” specifically directed to construction employers on preventing harassment in the workplace.

The guidance summarizes the EEOC’s rationale for generating this new guidance and highlights the number of charges filed with the EEOC that included allegations of harassment between fiscal years 2019 and 2023 (over one third of all Charges), the egregious incidents of harassment investigated by the EEOC in the construction industry, and the need to frame harassment as a workplace safety issue.  It also identifies a number of risk factors particular to the construction industry that may increase the likelihood of harassment, including “workforces that are primarily male, workplaces where there is pressure to conform to traditional stereotypes, and decentralized workplaces.”  It notes that these risk factors are often “exacerbated by the presence of multiple employers on a worksite and the cyclical, project-based nature of construction.”

The guidance also reiterates “five core principles” to prevent and address harassment that are found in the EEOC’s 2023 guidance directed to federal agencies and provides detailed explanations and recommendations for each: 1) committed and engaged leadership; 2) consistent and demonstrated accountability; 3) strong and comprehensive harassment policies; 4) trusted and accessible complaint procedures; and 5) regular interactive training tailored to the audience and the organization.

The EEOC’s overarching and repeated theme, however, is the “shared responsibility of fostering a harassment-free workplaces” and the need for general contractors to take on “coordination and leadership roles” on harassment issues at job sites. The document is replete with recommendations, including providing site-wide harassment training, monitoring subcontractor and staffing agency adherence to harassment policies, and “review[ing] each [subcontractor/entity’s] policy for content and overall alignment [and consistency]” across the job site.

This guidance has significant implications for construction employers, particularly in light of the National Labor Relation’s Board’s new Joint-Employer Rule under which two entities will be considered joint employers (and jointly liable) if they share or co-determine an employee’s “essential terms and conditions of employment” – defined by the Final Rule to include not only “working conditions related to the safety and health of employees,” but also “work rules and directions governing the manner, means and methods of the performance of duties and the grounds for discipline.”  Construction employers must, therefore, walk the fine line of taking steps to prevent workplace harassment while avoiding policies and practices that might lead to a joint employer finding.

In light of the flurry of recent activity at multiple federal administrative agencies under the Biden Administration, and the corresponding uptick in enforcement anticipated by these agencies, construction employers would be well-advised to review their contracts at multi-employer job sites, ensure comprehensive harassment training is completed, and ensure their harassment policies are reviewed for compliance with the EEOC’s “promising practices” guidance. Please contact Christina E. Niro and Frantz Ward’s Labor & Employment Practice Group with questions or for assistance.

On Tuesday, the Federal Trade Commission (“FTC”) issued its long-awaited final rule regarding non-compete agreements. The FTC determined that non-compete agreements are an unfair method of competition and, therefore, a violation of the FTC Act. Once the rule is effective, employers may not enter new non-compete agreements with employees or enforce existing non-compete agreements against former employees, other than senior executives. The rule only applies to businesses that are subject to the FTC Act, which generally does not include non-profit corporations.

The rule has a few exceptions to the non-compete ban, which are outlined below:

  1. Senior Executives: Existing non-compete agreements with senior executives remain enforceable. However, employers may not enter new non-compete agreements with senior executives. A senior executive is a worker earning more than $151,164 annually who is in a “policy-making position.” The FTC makes clear that this exception is very narrow. The definition is meant to include high-ranking positions such as the President or Chief Executive Officer of an organization, and the FTC estimates that less than 1% of workers in the country meet this definition.
  2. Sale of a Business: The ban on non-competes does not apply to non-compete clauses that are entered as part of a sale of a business entity, a person’s ownership in a business entity, or substantially all of a business entity’s operating assets.
  3. Current Cause of Action: If you have a cause of action currently pending regarding a former employee’s violation of a non-compete agreement, you may still pursue the cause of action.

Prior to the rule’s effective date, employers must provide notice to employees (other than senior executives) who are currently bound by a non-compete provision that the employer will not be enforcing the non-compete provision. The FTC has provided a model notice available here.

The rule is set to go into effect 120 days from its publication in the Federal Register. However, it is expected that various business groups will quickly file suit to challenge the rule, which will delay the effective date.

While non-compete agreements may be in limbo, employers can still use confidentiality agreements, non-solicitation agreements, and federal and state trade secret laws to protect their interests. But do not forget to check for any state-specific restrictions regarding confidentiality and non-solicitation agreements.

The Equal Employment Opportunity Commission (“EEOC”) has finalized its regulations for the Pregnant Workers Fairness Act (“PWFA”), which went into effect last summer. After issuing a Notice of Proposed Rulemaking in August 2023, summarized here, and a notice and comment period, the EEOC published the Final Rule in the Federal Register on April 19, 2024.

As previously reported, the PWFA is modeled after the Americans with Disabilities Act (“ADA”) and requires employers to make reasonable accommodations based on known limitations related to pregnancy, childbirth, or related medical conditions. Employers are not required to grant an accommodation request if it imposes an undue hardship. The terms “reasonable accommodation” and “undue hardship” have the same meaning as under the ADA and employers should follow the same interactive process after receiving a request for an accommodation.

Below are significant points from the final regulations:

  • Lactation, miscarriage, stillbirth, episodic pregnancy-related conditions (such as morning sickness) and “having or choosing not to have an abortion” are readily apparent medical conditions related to pregnancy or childbirth for which employees can seek reasonable accommodations.
  • Reasonable accommodations can include: additional breaks to drink water, eat, or use the restroom; a stool to sit on while working; reserved parking; modification of equipment or uniforms; time off for health care appointments; temporary reassignment; temporary suspension of certain job duties; telework; or time off to recover from childbirth or a miscarriage, among others.
  • Time off is unpaid, unless employers’ policies indicate otherwise.
  • Early and frequent communication between employers and employees is encouraged in order to raise and resolve requests for reasonable accommodation in a timely manner.
  • Employers are not required to seek supporting documentation when an employee asks for a reasonable accommodation under the PWFA and should only do so when it is reasonable under the circumstances.

The regulations also provided further explanation on key issues for employers, including:

  • When an accommodation would impose an undue hardship on an employer and its business; and
  • How employers may assert defenses or exemptions (including those based on religion) to accommodation requirements if an employee files a discrimination charge.

The regulations go into effect on June 18, 2024. If you have any questions about the PWFA, please contact Katie McLaughlin or any member of Frantz Ward’s Labor & Employment Group.

Recently, the National Labor Relations Board (“NLRB”) announced a settlement it “secured” which required a company to rescind certain work rules and pay two discharged employees $297,000. Of note, the workers were not discharged for violating the alleged unlawful work rules. In addition, the workplace was not unionized and no union organizing activity had occurred.

A review of the underlying facts suggests nothing more than a typical employment dispute. A furniture seller acquired a new facility and implemented its own policies and practices. Two employees (including a Shift Manager) took issue with those policies and practices and repeatedly violated company policy through insubordinate and other behavior (e.g., using offensive and inappropriate language in customers’ presence). The company-employee friction culminated when one of the employees said the owner was “high” for implementing the new policies. As a result, the company discharged the employees.

The discharged employees subsequently filed an unfair labor practice charge. Among other things, the employees alleged they had expressed safety concerns by claiming the owner was “high.” As part of its investigation, the NLRB obtained the company’s employment policies. The Board then concluded that certain policies unlawfully prohibited employees from discussing their working conditions. Those policies included: a previously rescinded wage disclosure policy (which inadvertently had been left in the new hire packet); an IT policy regarding use of email systems and company equipment; and policy language regarding use of the company’s confidential information and intellectual property. Notably, the company did not claim the employees violated the policies nor did any discussion of the policies occur in connection with the employees’ discharge. In fact, the company had not recently disciplined or discharged any employees for violating these policies. Nonetheless, the Board pursued the perceived National Labor Relations Act violations against the company, ultimately filing a complaint and seeing the matter proceed to a hearing before the parties settled.

The Board’s aggressive approach in this matter highlights the importance of ensuring all employers maintain properly updated employee handbooks and policies. This holds true regardless of whether a workplace is unionized or whether organizing activity is underway. 

If you have questions about this matter, your employee handbook/policies, or other Labor and Employment issues, please do not hesitate to contact Andrew Cleves or another member of the Frantz Ward Data Labor and Employment Practice Group.

On April 1, 2024, a new final rule was published which significantly revises OSHA’s longstanding regulations regarding an employee’s right to choose a representative to accompany parties during an OSHA’s onsite inspection and increases the likelihood of union access to non-union workplaces.

As outlined in Section 8 of the Occupational Safety and Health Act, employees and employers have the right to choose a representative to participate during OSHA’s physical inspection of the workplace, which may result from employee complaints, emphasis programs, and situations (like serious workplace injuries) that rank high on OSHA’s list of inspection priorities. This physical inspection process, which follows the opening conference, is commonly referred to as the “walkaround.” After judicial challenge to an earlier attempt made by the Obama Administration to affect this change informally through a guidance letter, the Biden Administration recently completed OSHA’s formal rulemaking process.

Under the new final rule, employees are now permitted to bring non-employee third parties on OSHA walkarounds if these individuals are “reasonably necessary to the conduct of an effective and through physical inspection of the workplace by virtue of their knowledge, skills, or experience.”  OSHA guidance indicates that reasons for a non-employee third party representative may include language barriers or technical or practical knowledge or experience about the processes and hazards present in the workplace that the OSHA compliance officer may not have. Not surprisingly, the final rule gives the OSHA compliance officer discretion to determine whether an employee’s choice of a non-employee third party is necessary.

In addition to expecting OSHA compliance officers to be extremely deferential to employee’s choice of representative, employers should also anticipate confidentiality and trade secret disagreements, as well as attempts by community and union organizers to gain access to non-union workplaces and (vice versa) attempts by employees to introduce a union presence in their non-unionized workplaces.

Employers should contact experienced OSHA defense counsel to immediately discuss the implications of OSHA’s new rule and strategies regarding when and how to dispute qualifications of a proposed third-party employee representative and to deny access to their workplace.

Ohio employers with plans to enforce non-compete agreements may have to think again in light of a recent Ohio Appellate Court decision. In Kross Acquisition Co. v. Groundworks Ohio, 2024-Ohio-592, the Court of Appeals upheld a lower court’s refusal to enforce an agreement barring a former Kross employee from competing against Kross and soliciting its customers. The lower court reached this decision even though the employee admittedly went to work for a competitor and took on job duties and a sales territory that directly overlapped with those he had at Kross. The basis for the court’s refusal to enforce the agreement was that the agreement was overly broad because it barred the employee from working anywhere in Ohio and Kentucky, though his sales territory at Kross only covered portions of those states.

The Kross case is particularly notable because the lower court could have modified the agreement and enforced a narrower scope of restrictions. For example, the court could have enforced the agreement to the extent it barred the employee from competing against Kross in his former Kross sales territory. Though this type of rewriting agreements – or “blue penciling” – is something that Ohio courts customarily do, the lower court refused to so and simply found the agreement unenforceable as a whole. On review, the Court of Appeals agreed, finding that the bedrock case in Ohio for evaluating non-compete agreements, Raimonde v. Van Blerah, did not require blue penciling.  Rather, a court can simply void the restrictions if there are too many factors and considerations necessary to easily rewrite the agreement.

The decision is significant because it gives trial courts the leeway to simply refuse to enforce agreements they consider unreasonable, rather than rewriting them.  The case serves as a stark reminder that it is paramount, when preparing non-compete and non-solicitation restrictions, to carefully consider the legitimate business interests a company is trying to protect, and to closely marry the restrictions to those interests.   

For more information on these best practices on restrictive covenants, contact Chris Koehler or any other member of the Frantz Ward Labor & Employment Law Practice Group.