On September 9, 2024, the SEC announced settled enforcement actions against seven companies for violating the SEC’s whistleblower rules.[1] Specifically, the SEC alleged that the companies had provisions in various kinds of agreements with employees, including employment, separation, and settlement agreements, that purport to restrict, and thereby could potentially discourage, employees and other signatories from reporting information to government investigators or participating in a whistleblower award.Continue Reading SEC Enforcement Sweep Reaffirms Focus on Anti-Whistleblower Provisions in Employee Agreements
Texas District Court Prohibits the FTC from Enforcing Its Non-Compete Ban Nationwide
Nationwide Injunction
On August 20, 2024, Judge Ada Brown of the United States District Court for the Northern District of Texas granted summary judgment for the plaintiffs in Ryan LLC v. FTC, preventing the FTC from enforcing its proposed rule banning almost all non-compete clauses in employer agreements. (Click here for the opinion.) The rationale for Judge Brown’s decision was consistent with her prior ruling on plaintiffs’ motion for a preliminary injunction (described here): the FTC does not have substantive competition-related rulemaking authority and the proposed non-compete rule was arbitrary and capricious. However, unlike Judge Brown’s preliminary injunction order, which was limited to the named plaintiffs, her summary judgment order states that the proposed rule “shall not be enforced or otherwise take effect on September 4, 2024, or thereafter.” Applying the plain text of § 706(2) of the APA, Judge Brown held that the proper remedy after concluding that the non-compete rule was in excess of the FTC’s statutory authority and arbitrary and capricious was to “set aside” the rule. According to the opinion, “setting aside agency action under § 706 has ‘nationwide effect,’ is ‘not party-restricted,’ and ‘affects persons in all judicial districts equally.” As a result, the order prohibits the FTC from enforcing the proposed non-compete rule on a nationwide basis.Continue Reading Texas District Court Prohibits the FTC from Enforcing Its Non-Compete Ban Nationwide
EEOC Issues New Guidance on Workplace Harassment
The U.S. Equal Employment Opportunity Commission (EEOC) in April 2024 issued new enforcement guidance on harassment in the workplace, its first guidance on this subject in 25 years, superseding five earlier documents from the 1980s and 1990s. The new guidance accounts for the changing times, including the #MeToo and Black Lives Matter movements, the Supreme Court’s decision in Bostock v. Clayton County, and the COVID-19 pandemic, and presents a comprehensive summary of the legal standards for harassment claims. The guidance, which is effective immediately and will be referenced by EEOC staff in determining whether to investigate and ultimately litigate allegations of discrimination, provides a helpful roadmap for employers’ efforts to prevent and correct workplace harassment. As further explained below, however, it is already being challenged.Continue Reading EEOC Issues New Guidance on Workplace Harassment
DOL Issues Final Rule Expanding Overtime Eligibility
On April 23, 2024, the U.S. Department of Labor (DOL) announced a final rule that increases the salary thresholds required to classify certain employees as exempt from overtime pay requirements under the Fair Labor Standards Act (FLSA). The final rule, applicable to employees who otherwise satisfy the “white-collar” (bona fide executive, administrative, and professional) and “highly compensated” exemptions, is similar to the proposed rule DOL issued last August, although the salary thresholds in the final rule have been increased to align with the latest Census salary data.
The final rule represents a sharp increase—approximately 65%—from the current salary thresholds implemented in 2019 under the Trump Administration. The rule is scheduled to take effect in two phases, with the first phase effective July 1, 2024 and the second on January 1, 2025. Thus, employers have only a small window to determine how the rule will impact their operations and make any necessary adjustments.Continue Reading DOL Issues Final Rule Expanding Overtime Eligibility
Changes to WA’s Non-Compete Law Require Employers to Take Action
Since 2020, with the adoption of Washington state’s non-compete statute (Chapter 49.62 of the Revised Code of Washington (“RCW 49.62”)), Washington has imposed significant restrictions on employer use of non-compete agreements with employees and independent contractors, permitting such agreements only subject to certain statutory and common-law requirements, including without limitation, a minimum annual earnings threshold (the 2024 limits are $120,559.99 for employees and $301,399.98 for independent contractors), and a Washington forum for any disputes.
Now, Senate Bill 5935 (“SB 5935”) – which takes effect on June 6, 2024 – amends the non-compete statute to further restrict the use of non-compete provisions and expand the types of agreements that may be considered non-competes. As a result, employers will need to take quick action to review their employment agreements and hiring processes to ensure compliance with the new law.
However, as discussed in our Covington Alert, on April 23, 2024 the Federal Trade Commission issued a final rule purporting to ban the use of non-competes with most U.S. workers. The FTC Rule – should it become effective – would supersede inconsistent state laws. The earliest the FTC Rule would take effect is late August 2024, and pending legal challenges may result in court orders that could delay or stay enforcement of the FTC Rule. Accordingly, employers with workers in Washington State should take steps to comply with SB 5935 before it takes effect on June 6, 2024. Employers should also consider consulting with employment and executive compensation counsel for assistance with navigating the evolving non-compete landscape.
Here is an overview of the key changes under SB 5935:Continue Reading Changes to WA’s Non-Compete Law Require Employers to Take Action
California’s New Workplace Violence Prevention Plan and Training Requirements Take Effect on July 1, 2024; How to Get Ready
As previewed in our prior post regarding new California employment laws from the 2023 legislative session, employers must implement a comprehensive workplace violence prevention plan (WVPP) and provide employee training on the WVPP by this coming July 1, 2024. The WVPP requirement (under new California Labor Code Section 6401.9), augments the existing obligation for California employers to create and maintain an injury and illness prevention plan and is intended to combat incidents of workplace violence, which is the second leading cause of fatal occupational injuries in the United States according to OSHA. The new compliance requirements are described below, along with steps employers can take to get ready.Continue Reading California’s New Workplace Violence Prevention Plan and Training Requirements Take Effect on July 1, 2024; How to Get Ready
The Supreme Court Keeps Status Quo for SOX Whistleblower Retaliation Claims
In a unanimous decision, the U.S. Supreme Court rejected an argument that would have made it harder for whistleblowers to prevail on retaliation claims under the Sarbanes-Oxley Act (“SOX”). The decision, Murray v. UBS Securities, LLC, No. 22-660, may be welcome news to whistleblowers, but as a practical matter, employers will likely not see a significant change in SOX whistleblower retaliation claims or awards.Continue Reading The Supreme Court Keeps Status Quo for SOX Whistleblower Retaliation Claims
2023 Legislative Session Wrap-Up: New California Workplace Laws for 2024 and Beyond
As we enter the final months of 2023, California employers should turn their attention to the employment-related bills that Governor Newsom recently signed into law, many of which take effect on January 1, 2024. Summaries of key developments are below.Continue Reading 2023 Legislative Session Wrap-Up: New California Workplace Laws for 2024 and Beyond
New York Employers Beware: New Employment Laws Are In Effect And On The Horizon
New York lawmakers have been busy enacting a number of laws and regulations in 2023 that impose new requirements on employers, several of which have recently taken effect. New York employers may need to update their policies, agreements, and practices to comply with the new laws, as summarized below.Continue Reading New York Employers Beware: New Employment Laws Are In Effect And On The Horizon
California Doubles Down with Yet Another Law on Employee Non-Competes
On the heels of approving SB 699, which heightened the protections and reach of California’s prohibition of employee non-competes under California Bus. & Prof. Code Section 16600 (“Section 16600”) (see our blog post here), Governor Gavin Newsom has now signed AB 1076. AB 1076 further increases the litigation risk for employers that use employee non-competes and, most notably, requires employers to provide notice of any non-competes to current and former employees by early next year. Together, these two new laws, which take effect on January 1, 2024, reinforce California’s strong public policy against employee non-competes and specify new consequences for employers who seek to enforce or enter into such agreements.
As a reminder, SB 699 adds new Bus. & Prof. Code Section 16600.5 to: (1) prohibit an employer or former employer from attempting to enforce a contract (e.g., a non-compete) that is void under Section 16600; (2) grant current, former, and even prospective employees a private right of action for damages and injunctive relief, and to recover attorney’s fees and costs; and (3) expand the territorial reach of California’s prohibition of employee non-competes to apply “regardless of where and when the contract was signed.”Continue Reading California Doubles Down with Yet Another Law on Employee Non-Competes