Perspectives

Jean-Paul Sartre put it best: “Nothing has changed, and yet everything is different.”

As you may know, the FTC proposed a nationwide ban on non-compete agreements which was set to go into effect on September 4, 2024. Now, the Northern District of Texas has struck down the rule nationally. This decision is a major blow to the FTC’s rule, but not its end.

What happened?

In July of 2024, the Texas court issued a preliminary injunction that only extended to the parties of the present lawsuit and chose not to address whether a national injunction was necessary. On August 20, 2024, the Texas court held that the FTC did not have the statutory authority to issue such a rule and that doing so was arbitrary and capricious. The court further explained that the rule needed to be set aside at the national level because of the Administrative Procedures Act (APA). We anticipate that the FTC will file an appeal to the 5^th Circuit in short order.

What’s changed?

As Mr. Sartre put it, nothing. However, this does not mean that non-compete agreements are back on the menu for everyone. Many states have banned non-competes, and this ruling does not affect those state laws. It is up to you as an employer to make sure that you are still complying with your state’s laws while the FTC rule is in limbo. You should reach out to employment counsel if you have concerns or questions about whether you are properly complying with your state’s applicable laws.

What’s different?

With the Supreme Court of the United States’ recent decision regarding “Chevron deference” and the FTC’s likely appeal of this ruling down in Texas, there is a good chance that this case could be headed to the Supreme Court. As a result, we may see further changes to the agency state and executive powers in the near future. The legal landscape is different.

What now?

If you have not taken any steps to come into compliance with the FTC’s rule, you’re in luck! You can keep doing what you’ve been doing for a little while longer as the FTC pursues its appeal.

If you decided to take early action and issue FTC compliant notices to your employees and former employees, you should consult your employment counsel to determine how best to resolve the situation. Unwinding the clock may be impossible, but there are other ameliorative steps that you can take depending on the specific circumstances.

Regardless of how you have prepared for the FTC rule, this is a great time to review your restrictive covenants and focus your attention on the things you aim to protect: business information and relationships.

Estate planning might seem like a task best suited for later in life, but it’s actually a critical step for anyone who wants to ensure that their affairs are managed according to their wishes, both during their lifetime and after their death. This planning involves more than just deciding who will inherit your assets; it’s about making comprehensive decisions that will minimize stress and confusion for your loved ones, protect your legacy, and give you peace of mind.

Managing Your Affairs During Your Lifetime

One of the primary aspects of estate planning is managing your affairs while you’re still alive. This includes setting up directives that allow trusted individuals to make financial and healthcare decisions on your behalf if you become unable to do so. These arrangements can prevent a great deal of uncertainty and ensure that your wishes are followed.

For instance, durable power of attorney allows someone to handle your financial matters if you’re incapacitated, while a healthcare directive (or living will) lets you specify your preferences for medical treatment in situations where you cannot communicate them yourself. These tools not only protect your interests but also relieve your loved ones from the burden of making difficult decisions during emotional times.

Distributing Your Estate After Your Death

Another critical element of estate planning is determining how your assets will be distributed after your death. Without a will or a comprehensive estate plan, state laws will dictate the distribution of your estate, which might not align with your wishes. By creating a will or a trust, you can specify exactly how and to whom your assets will be distributed, whether it’s to family members, friends, or charitable organizations.

Additionally, proper estate planning can help minimize taxes and other expenses, ensuring that your beneficiaries receive as much of your estate as possible. This process can include setting up trusts, designating beneficiaries, and even making gifts during your lifetime to reduce the taxable value of your estate.

Minimizing Problems for Your Loved Ones

One of the greatest gifts you can give your loved ones is the gift of clarity. Estate planning allows you to clearly communicate your wishes, which can prevent disputes and legal battles among family members after your death. By taking the time to outline your desires in detail, you reduce the risk of misunderstandings and the potential for costly and time-consuming probate proceedings.

Key Decisions in Estate Planning

When engaging in estate planning, there are several key decisions everyone should make:

• Who Will Administer Your Estate?
  • You need to choose a trustworthy executor or personal representative to administer your estate. This person will be responsible for settling your debts, distributing your assets, and ensuring that your wishes are carried out.

• Who Will Serve as Guardian of Your Children?
  • If you have minor children, it’s crucial to designate a guardian who will care for them if something happens to you. This decision should be made carefully, considering both the potential guardian’s ability to provide for your children and their willingness to take on this responsibility.

• Making Your Healthcare Wishes Known
  • Your healthcare directive should clearly state your preferences for medical treatment, such as whether you want life-sustaining measures if you’re terminally ill or permanently unconscious. You should also design a healthcare proxy-someone you trust to make medical decisions on your behalf.

• Addressing Financial and Healthcare Matters While You’re Living
  • Beyond healthcare directives, you should also have a durable power of attorney to manage your finances if you become incapacitated. This ensures that your bills are paid, your investments are managed, and your financial interests are protected, even if you’re unable to oversee them yourself.

Estate Planning is about more than just passing on your wealth; it’s about ensuring that your legacy is preserved, your wishes are honored, and your loved ones are protected. By taking the time to plan your estate, you’re not only securing your own peace of mind but also providing a clear and thoughtful guide for your family during difficult times. No matter your age or the size of your estate, now is the time to start planning for the future.

Minnesota has experienced unprecedented levels of flooding this summer. Some businesses have shut down or limited operations because of the historic flooding. Businesses impacted by natural disasters may need to make temporary or permanent changes to their workforce due to the financial stress or lack of work caused by a national disaster. There are a few cost-saving measures that businesses can implement to blunt the effect of a natural disaster and start the path to financial recovery. Furloughs, layoffs, and reductions in force provide businesses with a possible solution. It is important, however, that businesses understand the differences between these three cost-saving measures and their legal implications.

What is a Furlough?

A furlough is when an employer requires employees to work fewer hours or take unpaid time off for a certain period of time. For example, an employer can reduce full-time employees’ hours to 30 hours a week or require employees take multiple weeks off of unpaid leave. Employers commonly use furloughs when they have financial issues or lack of work for employees. An employer should use a furlough when the employer wants to avoid terminating employees and intends to bring back employees to their regular work schedules. Furloughs, however, may turn into a layoff if an employer later decides not to recall employees and instead end the employees’ employment.

Employers must be aware of whether furloughed employees are non-exempt or exempt employees. Exempt employees must receive their full predetermined salary for any week where the exempt employee performs any work without regard to the number of days or hours worked. This is important because an employer deducting from an exempt employee’s pay, or reducing the exempt employee’s pay, based on the number of hours worked during a furlough will cause an employee to lose their exempt status. Employers can avoid this issue by requiring exempt employees to take at least one week of leave, or take other weekly increments of leave, because employers are not required to pay exempt employees for any workweek that an exempt employee did not perform any work. However, employers need to ensure exempt employees are still paid at least minimum wage to avoid employees losing their exempt status.

Furloughed employees normally stay on the employer’s payroll but still may be able to collect unemployment benefits. Furloughed employees may lose employer-provided benefits. Employers should therefore review their benefit plans and be aware of whether reducing employees’ hours or requiring periods of unpaid time off will cause employees to lose their benefits, which may require employers to send COBRA notices to the furloughed employees.

What is a Layoff?

A layoff is a temporary separation of employment due to lack of work or financial issues. The term “layoff” is used when employees’ temporarily end due to no fault of the employees, and the employer hopes or plans to recall employees back to work. Lad off employees do not stay on payroll and often lose employer-provided benefits but normally receive unemployment benefits. Employers should familiarize themselves with their benefit plans before laying off employees to see if a layoff will trigger any requirements by the employer, such as sending COBRA notices to the laid off employees.

Reduction in Force

A reduction in force (RIF) is when an employer permanently eliminates a job position within the company with no intention of filing the position with new hires. A layoff can turn into or be similar to a RIF if the employer permanently decides not to recall the laid off employees. A RIF causes employees to go off payroll and lose employer-provided benefits, but they can normally receive unemployment benefits.

Legal Obligations & Consideration

Volunteers

Deciding which employees to lay off or to include a RIF often involves tough choices for employers. To ease an employer’s burden, an employer can ask for employees to voluntarily be laid off or included in a RIF. One way to incentivize volunteers is for the employer to offer a severance package. Employers can also ask employees to voluntarily take early retirement.

Implementing Objective Criteria to Enforce a Layoff or RIF

However, an employer looking to perform a layoff or RIF will likely have to make its own decision on which employees to layoff or include in a RIF. It’s imperative that employers develop objective criteria to determine how to select employees for a layoff or RIF to avoid or prevail against discrimination claims and retaliation claims. Common selection criteria include seniority, employment status (full-time and part-time or exempt and non-exempt), skill-based, merit based, and job position. Employees may try to argue the layoff or RIF was discriminatory because it had a disparate impact on a protected class-such as race, ethnicity, sex, gender, age, etc.-or argue they were retaliated against for engaging in protected activity, such as making a whistleblower claim, taking Family and Medical Act Leave, or taking Minnesota Earned Sick and Safe Time Leave. Employers implementing objective criteria to select employees for a lay off or a RIF will greatly minimize the employer’s liability risk in a discrimination claim or retaliation claim. Employers must simply be able to show that the employees selected for a layoff or RIF would have been chosen regardless of their protected class status or recent engagement in protected activity.

Severance Agreements and the Older Worker Benefit Protection Act

Additionally, employers can protect themselves by asking employees to sign a severance agreement before being laid off or subject to a RIF. A severance agreement is a contract where an employee agrees to waive and forego many potential legal claims they may have against the employer usually in exchange for a sum of money that the employees is not otherwise entitled to receive. In other words, an employee agrees not to sue the company in exchange for receiving payment and such payment is in addition to any earned wages or earned commissions the employer is already owed. Both Minnesota and federal law require that a severance agreement to be enforceable but there are some noteworthy requirements to be aware of. A Minnesota employee, regardless of age, always has 15 days to rescind a severance agreement after signing it. If a Minnesota employee is at least 40 years old, then the federal Older Worker Benefit Protection Act (“OWBPA”) requires that an employee must also have at least 21 days to consider signing the severance agreement; the 15-day rescission period remains the same. furthermore, the OWBPA requires the consideration period be extended from 21 days to 45 days if there are at least two employees subject to a layoff or RIF; again, the 15-day rescission period remains the same. When two or more employees are subject to a layoff or RIF, the employer must give written notice of the following information to each adversely affected employee:

• the class, unit, or group of all individuals selected for the layoff or RIF
• the eligibility factors used to select employees for the layoff or RIF
• time limits of the layoff (if applicable)
• the job titles of all employees selected for the layoff or RIF
• and the ages of all employees selected for the layoff or RIF

Worker Adjustment and Retraining Notification Act

Finally, large employers may also be subject to the Worker Adjustment and Retraining Notification (“WARN”) Act. If an employer has at least 100 full-time employees or at least 100 employees who, in the aggregate, work at least 4,000 hour per week (not including overtime), then the employer must comply with the WARN Act when:

• the employer permanently or temporarily (at least 30 days) closes a plant that causes at least 50 full-time employees to permanently or temporarily lose their jobs
• the employer conducts a mass layoff that causes at least 33 percent of full-time employees, or at least 50 full-time employees, to lose their jobs, be laid off for more than six months, or have their work schedule reduced by more than 50 percent during each month of a six-month period.

Employers subject to WARN generally must give a 60-day advance notice to the following parties; all the affected employees or their collective bargaining representative; the Minnesota Department of Employment and Economic Development; and to the chief elected official of the unit of local government within which such closing or layoff is to occur. The 60-day notice requirement, however, can be shortened if a plant closing or mass layoff is caused by “business circumstances that were not reasonably foreseeable.” A natural disaster would likely qualify as an unforeseeable event that allows employers to substantially shorten the 60-day notice period.

The flooding in Minnesota and the surrounding areas this summer has inflicted significant hardships on employers but there are options available that employers can implement to ease the burden. WFJ is here to help. Please contact us if you have any questions about furloughs, layoffs, or RIFs. 

An employer in the state of Washington recently agreed to pay monetary damages to a former supervisor after managers and other employees intentionally misgendered the supervisor. The supervisor filed an employment discrimination charge with the U.S. Equal Employment Opportunity Commission (“EEOC”) and alleged that after the supervisor disclosed their gender identity and pronouns to the employer, fellow co-workers repeatedly and intentionally referred to the supervisor with pronouns inconsistent with the supervisor’s gender identity. The EEOC’s investigation found that the supervisor’s co-workers intentionally misgendered the supervisor for over six months, and the employer failed to intervene to stop the sex-based harassment despite receiving complaints about the misgendering.

The EEOC concluded the intentional misgendering violated Title VII of the Civil Rights Act of 1964. Title VII prohibits the discrimination and harassment based on sex, which includes gender identity, and gender identity encompasses transgender, non-binary, and other gender non-conforming individuals. After the EEOC’s investigation, the employer agreed to pay the supervisor monetary damages, revise its non-discrimination policies, conduct employee training, and provide additional training to managerial-level- employees and other employees involved in investigating complaints of discrimination and harassment. The EEOC emphasized that employers have a duty to intervene when an employee is harassed or discriminated against because of the employee’s gender identity.

The outcome in Washington is an important reminder to employers to be aware that it is illegal for an employee to be discriminated against or harassed based on the employee’s gender identity. This means an employee cannot be fired, demoted, or have any other aspect of employment negatively affected because of the employee’s gender identity. Furthermore, harassing an employee based on gender identity becomes illegal harassment when the harassment is either so pervasive or severe that it creates a hostile work environment.

The recent ruling in Washington is an example of pervasive harassment that created a hostile work environment because the supervisor endured intentional misgendering abuse for over six months. It is important to note that the EEOC’s finding of gender identity harassment was based on intentional misgendering over an extended period of time. Accidentally misgendering an employee, minor teasing, or offhand comments made about an employee’s gender identity, or isolated incidents of intentional misgendering generally do not rise to the level of illegal harassment unless they are so severe that they create a hostile work environment.

Moving forward, employers should review their non-discrimination policies to ensure they clearly inform employees that discrimination and harassment based on gender identity are prohibited. Employers should also consider providing their employees, especially managerial-level employees, with discrimination and harassment prevention training to create a healthy work culture and to equip employees with the tools to prevent and eliminate any discrimination or harassment in the workplace.

The recent case in Washington serves as a crucial reminder for employers to maintain a work environment free from discrimination and harassment based on gender identity. Ensuring compliance with Title VII of the Civil Rights Act of 1964 is not only a legal requirement but also a fundamental step toward fostering an inclusive and respectful workplace. Employers must proactively revise their non-discrimination policies and provide comprehensive training to all employees, particularly managers, to prevent and address any incidents of harassment or discrimination.

WFJ is here to support you in creating a healthy and legally compliant work environment. We offer expert training, advice, and consultation services to help your organization avoid the costly legal consequences of non-compliance with the Title VII. Let us assist you in building a workplace where all employees feel respected and valued. 

As a homeowner, understanding your rights and legal obligations is essential for protecting your investment and ensuring a smooth living experience. From property rights to navigating homeowner association (HOA) disputes and landlord-tenant laws, here’s a brief overview of key topics every homeowner should be aware of:

Property Rights

Your property rights encompass various legal protections that safeguard your ownership and use of your home. These rights include the right to exclusive possession, the right to see or transfer the property, and the right to use the property in a manner consistent with local zoning laws. It’s crucial to familiarize yourself with local ordinances and regulations governing property use to avoid potential conflicts with neighbors or local authorities.

HOA Disputes

Many homeowners reside in communities governed by an HOA, which establishes rules and regulations aimed at maintaining property values  and community standards. While HOAs can provide benefits such as community amenities and maintenance services, disputes between homeowners and HOAs can arise over issues such as property maintenance, architectural guidelines, or assessment fees. Understanding your rights within the framework of the HOA’s governing documents and state laws can help you navigate these disputes effectively.

Landlord-Tenant Laws

If you rent out a property you own or are a tenant yourself, it’s essential to understand the legal rights and responsibilities outlined in landlord-tenant laws. These laws govern various aspects of the landlord-tenant relationship, including lease agreements, rent payments, eviction procedures, and maintenance responsibilities. Familiarizing yourself with your state’s specific landlord-tenant laws can help protect you from potential disputes and ensure a fair and lawful renting experience.

Knowing your rights as a homeowner (and renter) empowers you to navigate legal challenges confidently and protect your interests. However, legal matters can be complex, and seeking guidance from a qualified real estate attorney can provide invaluable assistance in understanding and asserting your rights effectively. Stay informed and proactive, you can enjoy the benefits of homeownership while minimizing potential legal risks and disputes. The attorneys at Wagner, Falconer & Judd are here to help! Reach out today for a consultation.

On April 23, 2024, the U.S Department of Labor (DOL) issued a Final Rule raising the minimum salary thresholds for exempt employees under the Fair Labor Standards Act (FLSA). Exempt employees are (quite literally) exempt from the minimum wage, overtime, and time reporting provisions of the FLSA, allowing employers to pay these employees a weekly salary regardless of actual hours worked. The DOL sets the minimum threshold for compensation, and the positions must meet certain duties tests to be considered exempt. The Final Rule affects employees under the White Collar Exemption (executive, administrative, or professional) and Highly Compensated Employees’ Exemption.

Now and until July 1, 2024, employees occupying white collar exempt positions must be compensated at a rate of at least $684 per week ( about $35,568 per year). Similarly, employees in highly compensated positions must be compensated at a rate of at least $107,432 to qualify for the exemption.

The DOL, in its Final Rule, drastically raised these thresholds. But, potentially to soften the blow on the employers, the DOL is implementing the salary threshold increase in a two-part approach:

• First, effective on July 1, 2024, the salary level threshold for exempt employees will increase to a minimum of $844 per week (about $43,888 per year), and to $132, 964 per year for highly compensated employees.
• Then, starting on January 1, 2025, the threshold is set to increase to at least $1,128 per week (about $58,656 per year) for exempt employees and $151, 164 per year for highly compensated employees.

The Department of Labor plans on updating salary thresholds every three years beginning July, 1, 2027.

What Should Employers Do Now?

The Final Rule has already not been well received by some, and is expected to be challenged-which could delay implementation. Nevertheless, employers should proceed with caution and, despite the potential delay in the implementation, start preparing and budgeting for the changes.

• Employers could either prepare to increase employees’ salaries in a two-part approach, as the DOL suggests, first on July 1, 2024, and then again on January 1, 2025.
• Employers could also increase the salary threshold to January 1, 2025 levels on July 1, 2024.
• Employers can always convert the employees to the nonexempt status should the new thresholds be too burdensome.

As always, when it comes to exempt employees’ classification and compensation, employers should always seek experienced legal counsel. Our attorneys at Wagner, Falconer & Judd are always available to answer any of your questions.

On April 23, 2024, the Federal Trade Commission (FTC) convened an open commission meeting. Following deliberation, the five commissioners cast their votes, resulting in a decisive 3-2 outcome in favor of approving the proposed final rule-banning non-compete agreements. This pivotal decision marks a significant shift in regulatory action.

This new rule could impact an estimated 30 million workers (or 1 in 5 Americans) who are subject to a non-compete through their current or former employers. Barring a successful legal challenge, this new rule will go into effect in 120 days (August 2024).

In January 2023, the FTC warned of this eventuality when it issued its proposed rule adopting the stance that non-compete clauses were an unfair method of competition due to a multitude of factors:

• preventing workers from leaving jobs
• decreasing competition for workers
• lowering wages for both workers who are subject to the agreements and who are not

This rule paints with broad strokes, applying the ban not only to workers, but also independent contractors, externs, interns, volunteers, apprentices, or any sole proprietor who provides a service to a client or customer.

This new rule not only prevents employers from entering into new non-compete agreements with workers, but it also requires employees to rescind existing non-compete clauses. The rule also requires that employers notify parties that are currently subject to a non-compete, that the agreement is now void and unenforceable. While it may be of cold comfort to employers who traditionally utilize non-compete agreements, the FTC has not banned non-solicitation or nondisclosure agreements. Existing non-competes with senior level executives remain in effect, but new agreements, even with executives, are banned.

We expect pushack from employers and business groups who will likely challenge this rule in court. Wagner, Falconer & Judd will be watching these developments closely and will share as we know more.

Staying on top of legislative updates is time consuming. Consulting with an Employment Law Attorney to proactively monitor and update company policies is a simple way to ensure compliance with your local and federal laws. Learn more about the Business Support Services provided by Wagner, Falconer & Judd here.