California Non-Compete/Non-Solicitation Amendments:
Deadline to Notify California Employees of Void Agreements February 14, 2024

By Samantha Halem, Tavish Brown   January 23, 2024

On January 1, 2024, amendments to Section 16600 of the California Business and Professions Code went into effect. This alert provides a brief overview and important information for employers with California-based employees subject to agreements that include restrictive covenant clauses, such as non-compete and non-solicit provisions. Employers are urged to review the information below and take steps to comply with the amendments. Please note that the changes to Section 16600 include a February 14, 2024 deadline for all businesses and organizations with employees working in California—regardless of where the business or organization is located—to provide written notice to certain California-based employees.

Changes to California’s Non-Compete Ban

With narrow exceptions, Section 16600 has long provided that, “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” California’s courts have interpreted this prohibition to apply to a variety of restrictive covenants, including non-compete and non-solicit provisions.

The changes to Section 16600 in effect as of January 1, 2024 include the following:

    • Employers are prohibited from attempting to enforce contracts that are void under Section 16600, “regardless of whether the contract was signed and the employment was made outside of California.”
    • Employers shall not attempt to enter a contract with an employee or prospective employee that is void under Section 16600.
    • The prohibitions under Section 16600 are not limited to agreements where the party being restrained are a party to the contract.
    • Employers who violate Section 16600 commit a civil violation, and current, former, or prospective employees can bring private rights of action in California seeking injunctive relief and/or damages.
    • Prevailing current, former, or prospective employees in an action brought under Section 16600 shall be entitled to recover reasonable attorney’s fees and costs, in addition to actual damages.

Obligation to Provide Notice by February 14, 2024

The amendments to Section 16600 also require that on or before February 14, 2024, employers must send a “written individualized communication” to (1) all current and former employees who were (a) employed after January 1, 2022, and (b) whose contracts include a prohibited provision, that (2) states that the applicable clause or agreement is void. The communication must be sent to the current or former employee’s last known address and email address. Failure to send the above notification is a violation of Section 16600 and, in addition to creating the risk of award of attorney’s fees and costs, constitutes unfair competition under California law.

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Key Takeaways

Employers with California-based employees should take immediate steps to comply with the February 14, 2024 deadline to provide written notice that the prohibited provisions are void. We note that Section 16600, and the written notice requirement, apply to most non-solicitation agreements, as well as non-compete agreements.

Employers with California employees or who do business in California should therefore work with counsel to do the following:

    • Review employee agreements and policies on a case-by-case basis to determine if any agreements or policies are de facto  prohibited non-compete agreements under California law, including customer and employee non-solicits, and overly restrictive confidential information clauses;
    • Review their policies and procedures to protect trade secrets and confidential information; and
    • Assess or consider adopting policies regarding employee notice of residency changes or remote work to ensure employers have notice of any employee’s plans to relocate to California.

For Questions / Compliance Assistance

If you have any questions about the changes to Section 16600 of the California Business and Professions Code and its potential impact on your business, please contact:

DOWNLOAD THE FULL PDF HERE.

PFML News: New Rates for 2024 / Top-Off Now Permitted

By Catherine Reuben, Ari Kristan, David Wilson, Kathleen Berney, Alicia Ward, Julia Russo   October 23, 2023

We have important news to share regarding the Massachusetts Paid Family and Medical Leave (PFML):

1.  Beginning in January 2024, the maximum weekly benefit that employees are eligible to receive will increase to $1,149. In addition, effective January 1, 2024, the total contribution rate for employers with 25 or more covered individuals will increase from 0.63% to 0.88% of eligible wages. For employers with fewer than 25 covered individuals, the total contribution rate will increase from 0.318% to 0.46% of eligible wages.

2. Effective November 1, 2023, employees receiving PFML benefits may supplement (or “top off” those benefits with employer-provided sick time, vacation time, PTO or other accrued paid leave.


Topping Off Now Permitted

Effective November 1, 2023, employees receiving benefits from the Massachusetts Department of Family and Medical Leave (DFML) may supplement (or “top off”) those benefits with any available accrued paid leave benefits (e.g., sick time, vacation, PTO, personal time, etc.) or other paid leave available under employer policies, including under collective bargaining agreements.

In the past, except for the first week of leave (which is unpaid), employees were not permitted to use their accrued paid leave benefits while simultaneously receiving benefits from the DFML. Only employers with private plans could permit such “topping off”. Due to a recent legislative change, employees can now use accrued paid time to supplement PFML benefits, provided that the total amount they receive each week does not exceed the employee’s average weekly wage. This change will apply to applications filed with the DFML on or after November 1, 2023, including applications filed retroactively for a leave that began before that date.

The DFML is clear that employers will be responsible for monitoring and ensuring that the combined weekly sum of employer-provided paid leave benefits and PFML benefits does not exceed the employee’s individual average weekly wage. For example, if an employee continues to use full days of accrued paid leave benefits after the first week of the leave of absence, and the employee later receives payments from the DFML for those same days, the employee will receive more paid benefits than their average weekly wage. If that happens, the employer, rather than the DFML, will be responsible for recouping the excess amount paid to the employee.

For additional information, see the FAQ published by the DFML for employers.

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HRW will be discussing this development in more detail during our Roundtable on November 14, 2023. Click here to register. In the meantime, employers should review their policies and procedures and provide their workforce with information about this new “top off” option in addition to the new contribution rates. As a reminder, employers must provide current employees with information on the new contribution rate 30 days in advance (i.e., December 2, 2023) of the rate change.

For Questions / More Information

Please contact:

 

DOWNLOAD THE FULL PDF HERE.

DOL Proposes Increasing Salary Threshold Needed to Qualify for White Collar FLSA Exemptions

By John Arnold, Peter Moser, Catherine Reuben   September 8, 2023

On August 30, 2023, the United States Department of Labor (DOL) proposed a new rule that would increase to $1,059 the minimum weekly salary level needed for an employee to qualify as an Administrative, Professional or Executive employee, exempt from the minimum wage and overtime requirements of the Fair Labor Standards Act (FLSA). The current minimum salary level is $684 per week ($35,568 annually). For so-called “highly compensated employees”, i.e., those employees for whom the FLSA duties test is easier to meet given the employees’ relatively high compensation, the requisite annual salary would be increased from the current level of $107,432 to 85 percent of the earnings for full-time salaried workers nationwide, which, based on current data, would be $143,988 per year, of which at least $1,059 per week would have to be paid on a salary or fee basis.

The final salary numbers will be based on governmental earnings data applicable as of the date the new rule goes into effect, so the above numbers may increase. In addition, the DOL’s proposed rule would impose automatic increases every three years based on updated governmental earnings data.
The new salary levels would apply not just to the 50 states but also to most U.S. territories including Guam, Puerto Rico, and the U.S. Virgin Islands (the salary level required in U.S. territories has not been increased for almost 20 years).

Readers will recall that the DOL made a similar effort under the Obama Administration to raise the annual FLSA salary level to $47,476. That effort was eventually blocked by the courts shortly before the rule’s implementation date. No doubt the DOL’s new proposed rule will face similar legal challenges. Once the DOL formally publishes the proposed rule in the Federal Register in the coming days, a 60-day comment period will follow during which any interested parties may submit written comments addressing it.

Although the future of the DOL’s new proposed rule is unclear, employers are well advised to nevertheless review the salary levels of their exempt positions. In many areas of the country, even under current law, if an employee earns a salary lower than $55,000 per year it could
be a commonsense indicator that the employee’s duties may be subject to challenge as
lacking the requisite high level of judgment and authority needed to satisfy the duties test for
an FLSA exemption.

For Questions / More Information
To discuss how the proposed rule could affect your organization, please contact your HRW
attorney:

DOWNLOAD THE FULL ALERT HERE

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NLRB Delivers One-Two Punch: New Election Rules and Groundbreaking New Decision Change the Law to Help Unions Organize

By Jeffrey Hirsch, Peter Moser   September 1, 2023

Last week, the National Labor Relations Board (NLRB) took two major steps to change the legal landscape and help unions organize workers more easily.

  1. “Quickie Elections” Are Back. On August 24, the NLRB announced changes to its election procedures, most notably to shorten the timeframe for holding a union election after a representation petition is filed. The new changes mark a return to Obama-era procedures, and are intended to limit the amount of time an employer is able to communicate with its employees about the pros and cons of unionization. The NLRB framed its changes as procedural rather than substantive, allowing the agency to avoid the need to provide advance public notice or comment. The Final Rule will take effect on December 26, 2023, absent federal court intervention.
  2. Card Check Recognition?  The NLRB didn’t go quite so far as to completely supplant union elections with card check recognition, but the agency took a dramatic step in that direction on August 25 when it issued its decision in Cemex Construction Materials Pacific, LLC. In Cemex, the NLRB established a new framework for unions to obtain recognition. Now, as soon as a union requests recognition from the employer by claiming that the union enjoys the support of a majority of employees, the employer must promptly choose one of two paths: (a) recognize and bargain with the union, or (b) file a petition with the NLRB seeking an election. The second option must be exercised within two weeks of the union’s request, or else the employer becomes obligated to recognize and bargain with the union. Compounding the risks, the Cemex decision also establishes that if an employer seeks an election but commits an unfair labor practice (ULP), the NLRB may dismiss the election petition altogether and simply order the employer to recognize and bargain with the union without employees ever having the chance to vote. This type of “bargaining order” had historically been a rare and extreme remedy, as it deprives employees of the ability to express their choice in a secret ballot election; however, the NLRB now appears poised to use the remedy as a routine means of ensuring successful union organizing. To understand just how easy it is for almost any employer to be accused of a ULP (potentially triggering a “bargaining order”), one need look no further than the NLRB’s recent decision in Stericycle which we discussed here; under Stericycle, even commonplace handbook policies that are facially neutral—such as social media and cellphone policies—could be found presumptively unlawful if an employee could reasonably interpret them to have a chilling effect on labor law rights.

Conclusion

The Cemex decision makes it far more likely that a union organizing drive will result in an election, because a request for recognition by the union now puts the burden on the employer to either request an election or recognize the union; on top of this, the NLRB’s new procedural rules will ensure that elections happen very quickly.

The Cemex decision became effective immediately and may be applied retroactively to all pending cases. The new Final Rule, however, will not take effect until December 26, 2023.

Time will tell whether these pro-union new NLRB decisions and procedural changes survive judicial scrutiny (they surely would not survive a transition to a Republican presidential administration). For now, however, the changes are a stark reminder and strong motivation for employers to carefully review existing policies, procedures, and benefits. In light of Stericycle, employers should also review their handbook policies.

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For Question / More Information

To discuss how these recent NLRB changes affect your organization, and for assistance in reviewing and revising your workplace policies or handling a recognition request, please contact your HRW attorney:

 

DOWNLOAD THE FULL ALERT HERE

NLRB Adopts Strict New Standard for Assessing Lawfulness of Workplace Rules

By Alicia Ward, Peter Moser, Jeffrey Hirsch   August 11, 2023

Last week, the National Labor Relations Board (NLRB) issued its long-anticipated decision in Stericycle, Inc., heralding a return to more intense scrutiny of employer handbook policies. Stericycle is the latest in a string of pro-employee NLRB decisions, reflective of the NLRB’s current political make-up. The Stericycle decision overturned prior case law issued during the Trump administration.

In its August 2, 2023 decision, the NLRB announced a new legal standard to determine whether work rules (such as those in Stericycle, which addressed personal conduct, conflicts of interest, and confidentiality of harassment complaints) violate the National Labor Relations Act (NLRA). Under the new standard, if an employee could reasonably interpret a work rule to have a coercive meaning that would limit the right to engage in protected concerted activity under the NLRA, then the work rule is presumptively unlawful. It does not matter whether any employee actually did interpret the policy as being coercive, or whether there was actually any protected activity being engaged in or contemplated, or even whether there exist other more reasonable non-coercive interpretations of the work rule.

When this presumption of unlawfulness is met, the employer then has an opportunity to rebut the presumption by establishing that the workplace rule advances a legitimate and substantial business interest and that the employer is unable to advance that interest with a more narrowly tailored rule. If the employer proves its defense, then the workplace rule will be found lawful.

Unfortunately, under this new standard even commonplace handbook policies having no intended connection to labor law could be found unlawful. It remains to be seen whether the Stericycle decision and its reasoning will withstand Supreme Court scrutiny on appeal, and how quickly and extensively the NLRB’s position will change in the event of a political change in administration. HRW will continue to monitor new developments regarding Stericycle.

In the meantime, there is no time like the present for employers to review their policies, and to make necessary changes to maximize the chance of surviving NLRB scrutiny. Generally, employers will want to avoid policy language that unintentionally suggests even a hypothetical or attenuated infringement on NLRA rights, and use policy language that confirms the legitimate and substantial business interests the policies are seeking to protect.

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For Questions / More Information

To discuss how the Stericycle decision affects your organization, and for assistance in reviewing and revising your workplace policies, please contact your HRW attorney or:

DOWNLOAD THE FULL ALERT HERE.

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