Perspectives

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. 

That’s right. You heard us. The National Labor Relations Board (NLRB) is not the toothless, independent federal agency some would have you believe.

In March of this year, Region 25 of the NLRB secured an agreement settling a case against a Midwest employer, Hilst Enterprises, Inc. d/b/a La-Z-Boy Furniture Galleries (Hilst), for $297,000 in backpay, front, pay, interest, excess tax, mileage, and medical expenses for the two discharged employees; removal of the unlawful discharges from the employee’s files; and a letter of apology to the discharged employees with mail and email notices to its current employees.

So, what exactly happened with Hilst? Essentially, it boils down to two key issues.

First, Hilst maintained three unlawful work rules:

• Forbidding employees from discussing wages
• Imposing restrictions on employees’ use of its name and logo without explicit permission.
• Prohibiting employees’ personal use of the company email system and equipment

Additionally, two employees were fired the day after they engaged in protected concerted activity by expressing concerns about the behavior of Hilst’s President and its potential effect on Hilst’s employees and business.

As you probably know, Section 7 of the NLRA guarantees certain rights for workers. These include “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representative of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection,” as well as the right to “refrain from any or all such activities.” Section 8(a)(1) of the NLRA makes it an unfair labor practice for an employer to “interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7.”

In the present case, the Court concluded that “it is axiomatic that employees have a Section 7 right to discuss their wages” and observed that the three rules stated above could reasonably be construed by an employee to restrict or prohibit Section 7 activities. The Court also found “that the employee complaints about changes made by management to their working conditions constituted protected concerted activity” and that Hilst’s discharge of the two employees was intended to punish their protected conduct.

The crucial insights from this case abound. Employers need to regularly reassess their policies to ensure they are not chilling the rights of their workers under the NLRA. Employers must be aware that, in the words of NLRB Regional Director Patricia K. Nachand, “Workers have a right to take collective action free from retaliation.”

The NLRB laws serve as a crucial safeguard for employee’s rights to organize and collectively bargain. Employers who fail to uphold these rights not only risk legal penalties, but also undermine trust , morale, and productivity within their organizations. It’s essential for employers to prioritize compliance with these laws, not only to avoid financial and legal repercussions but also foster a fair and respectful workplace environment where both employees and employers can thrive together. Upholding these rights is not just a legal obligation but a cornerstone of an equitable workplace.

Being mindful of the language in your employee handbooks, contracts and agreements is solid first step in proactively protecting your business from legal risk. Consulting with an Employment Law Attorney while creating and updating your documents 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. 

In the construction industry, where flexibility and specialized skills are heavily sought after, the classification of workers as independent contractors has long been a common practice. Independent contractors bring a range of talents and expertise to construction projects, offering unique advantages for both employers and workers.

However, recent developments in labor regulations have brought about significant changes in how independent contractors are classified, particularly in the construction sector. It is crucial for all stakeholders involved to stay informed and adapt to these new requirements to ensure compliance with the law.

The reclassification of independent contractors have significant implications for construction projects. From compliance with wage and hour laws to eligibility for certain benefits, the changes affect how construction businesses operate and engage with their workforce.

The New (Old) Regulations

Beginning March 11, a new Department of Labor rule will change how employers determine if a worker is an independent contractor of employee. The federal rule, first proposed in October 2022 and published in the Federal Register January 10, will reverse a rule made late in former President, Donald Trump’s term.

The 2021 shift by the former President’s administration altered worker classifications to focus on two factors: the nature and degree of control over work, and opportunity for profits or loss. Under the new framework-a return to the standard before the 2021 alteration-six nonexhaustive factors will determine a worker’s employment status.

The Six Major Factors When Determining Employment Status:

• Worker’s opportunity for profit or loss
• Investments made by the worker and the employer
• Degree of permanence of the work relationship
• Nature and degree of control over performance of the work
• Extent to which the work performed is an integral part of the employer’s business
• Use of the worker’s skill and initiative

There are Mixed Reviews

Construction employer groups balked at the change-calling the final rule’s standard “ambiguous and difficult to interpret”. (Associated Builders and Contractors).

Labor groups, on the other hand, applauded the update.

“Simply put, this rule will ensure the basic rights of all workers, consistent with the Fair Labor Standards Act.” (United Association of Union Plumbers and Pipefitters.)

Acting Secretary of Labor Julie Su said the final rule would ensure a level playing field for workers, particularly vulnerable workers who are misclassified and lose out on minimum wage, overtime pay, and other protections under the FLSA. Worker misclassification is prevalent in the construction industry: an estimated 1.1 million to 2.1 million workers are misclassified or paid off the books. (Century Foundation)

Final Thoughts

Employers, and especially employers who utilize the work of specialty and independent contractors, should conduct thorough audits of the employees and their current classification. Failing to comply with federal and state labor laws often leads to costly consequences such as legal penalties, back pay claims, and damages. Additionally, proper employee classification contributes to a fair and equitable workplace, building trust between employers and their workforce.

Employers would benefit from consulting with a lawyer will versed in employment law to assist in their audit of worker classifications. The attorneys at Wagner, Falconer & Judd stay up-to-date on the various laws that impact the classification of employees by state. Learn more about our services and get started today-that way you’ll be ready for the next employment law updates!

The onslaught of new employment related laws in Minnesota has kept our phone lines pretty busy! Many of the new laws took effect January 1-but employers are still scrambling to determine how the law applies to them. So let’s address some of the common questions we’re getting:

What exactly IS earned sick and safe time?

ESST (Earned Sick and Safe Time) is paid leave employers must provide to employees in Minnesota that can be used for certain reasons, including when an employee is sick, to care for a sick family member or to seek assistance if an employee or their family member has experienced domestic abuse, sexual assault, or stalking. ESST must be paid at the same hourly rate an employee earns when they are working.

Who is eligible?

An employee is eligible for ESST if they:

• work at least 80 hours in a year for an employer in MN
• are not an independent contractor

Temporary and part-time employees are eligible for ESST.

How do you accrue and use ESST?

• Employees can accrue at least one hour of ESST for every 30 hours worked, unless an employer front loads ESST hours as allowed by law.
• ESST begins accruing on the first day of work and employees are allowed to use ESST as it accrues.
• Employers must allow an employee to accrue at least 48 hours of ESST to the net year up to a maximum accrual of at least 80 ESST hours.
• Employers can require documentation from employees with ESST used for more than three consecutive days.

What can you use ESST for?

ESST can be used for reasons that include:

• The mental or physical illness, treatment or preventative care of an employee or their family member;
• Absence due to domestic abuse, sexual assault or stalking of an employee or their family member;
• Closure of an employee’s workplace due to weather or public emergency or closure of their family member’s school or care facility due to weather or public emergency.

In 2024 consulting with an employment law attorney is not just a precautionary measure, it’s a strategic business decision to safeguard the interests of both employers and employees. As you navigate the complex and ever-changing laws, a proactive approach to legal compliance becomes paramount in fostering a workplace that values the well-being of its workforce.

Wagner, Falconer & Judd offers a number of ways to partner with us for all your business needs. Reach out to us today for a consultation, or visit our Support Services page to learn more about our offerings.