Today, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction blocking the U.S. Department of Labor ("DOL") from implementing its latest revisions to the Fair Labor Standards Act ("FLSA").
In March 2014, President Obama issued a memorandum directing the Secretary of Labor to "modernize and streamline" the existing overtime regulations for executive, administrative, and professional employees. On May 23, 2016, the DOL published the Final Rule, increasing the salary level required to qualify for "white collar" overtime exemptions from $23,660 ($455 per week) to $47,476 ($913 per week). Additionally, the Final Rule increased the total annual compensation requirement for "highly compensated employees" from $100,000 to $134,000. The Final Rule was to take effect on December 1, 2016, with a mechanism for automatically updating the salary and compensation levels every three years.
A coalition of 21 states and more than 50 business organizations challenged the DOL's Final Rule in federal court, arguing that the Obama administration overstepped its authority. The court ultimately concluded that the states established a prima facie case that the DOL's salary level under the Final Rule and the automatic updating mechanism are without statutory authority and issued a nationwide preliminary injunction.
In June of this year, we reported that a judge in Texas issued a nationwide preliminary injunction blocking enforcement of the Department of Labor's controversial Persuader Rule, which would have required disclosures by any consultant -- including a company's attorney -- who engaged in activities for the purpose of directly or indirectly persuading employees in connection with their right to union representation. In a November 16 order, Judge Sam Cummings made the earlier injunction permanent, with nationwide effect. Judge Cummings' order notes that his preliminary injunction is currently on appeal to the U.S. Court of Appeals for the Fifth Circuit.
Given the upcoming change to a Republican administration, it seems unlikely that the Persuader Rule will be revived.
Our prior report on the Persuader Rule is available here.
The passage of Initiative Measure 1433 in Washington means that minimum wage workers who are at least 18 years old will see their wages increase from $9.43 to $11 per hour, effective January 1, 2017. Subsequent wage hikes each year will increase the minimum wage in Washington to $13.50 per hour by 2020, after which the minimum wage will be adjusted for inflation each year. Employers are precluded from counting any portion of tips or service charges toward the minimum wage.
In addition, beginning January 1, 2018, Washington employers will be required to provide paid sick leave to all employees. Sick leave will accrue at a rate of not less than one hour for each 40 hours worked by employees, who are entitled to carry over at least 40 hours of unused sick leave to the following year. Although employers are not required to pay out unused sick leave upon termination of employment, employees who terminate with sick leave on the books are entitled to have their unused balance restored if they return to work with the same employer within 12 months. Employers may permit the use of paid sick leave for other purposes. Consequently, an employer that provides more generous leave benefits may choose to modify its existing plan to cover paid sick leave obligations under the new law.
Competition is essential to a growing and healthy economy, which is widely said to benefit consumers. However, according to the White House, when companies compete, it also benefits workers.
Earlier this year, President Obama issued an executive order requiring executive departments and agencies to identify specific anti-competitive practices, such as blocking access to critical resources that may restrict meaningful consumer or worker choice or unduly stifle new businesses. Departments and agencies were also tasked with identifying potential actions to address those anti-competitive practices and promote more competitive markets.
In a separate statement, the White House cited research suggesting that low-wage workers without access to trade secrets are increasingly being required to sign non-competes, and that many workers are poorly informed about the existence and legal implications of their non-competes. The White House called for individual states to address the anti-competitive impacts of non-competes, noting that such agreements negatively affect worker mobility and bargaining power, constrict the labor pool, prevent workers from launching new companies, and may ultimately restrict consumer choice. The statement cited several examples of states, including Oregon, that have already taken steps to restrict the use and scope of non-compete agreements.
In furtherance of the President’s Executive Order, the FTC and the DOJ's Antitrust Division last week issued anti-trust guidance for human resource professionals and others who are involved in hiring and compensation decisions. The targeted conduct includes express or implicit agreements not to compete on terms of employment by agreeing on wages or other terms and conditions of employment, or entering into “no-poaching” agreements that would minimize competition between employers that would otherwise compete for workers. The guidance makes clear that “[a]ny company, acting on its own, may typically make decisions regarding hiring, soliciting, or recruiting employees. But the company and its employees should take care not to communicate the company’s policies to other companies competing to hire the same types of employees, nor ask another company to go along.”
Merely sharing information with competitors about terms and conditions of employment can run afoul of the anti-trust laws. Even if an individual does not agree explicitly to fix compensation or other terms of employment, the exchange of competitively sensitive information could serve as evidence of an implicit illegal agreement. The DOJ stated that it intends to criminally investigate and proceed against parties who enter into naked “no-poaching” and wage-fixing agreements, which are per se illegal under anti-trust laws. The DOJ is empowered to criminally prosecute individuals, the company, or both. Both the DOJ and the FTC may bring civil enforcement actions, and a private party injured by an agreement that violates anti-trust laws may bring a civil lawsuit for treble damages.
Not all information exchanges are illegal, however. Parties may lawfully exchange information for legitimate purposes through a third party aggregator (e.g., a compensation survey), or in the course of determining whether to pursue a merger or acquisition. Human resources professionals are often in the best position to identify and address practices that may cross the line.
Employers need to stay abreast of the rapidly changing legal landscape as it pertains to anti-competitive conduct and agreements, as mistakes in this area of the law can have unintended, and sometimes devastating consequences. To that end, employers should update their employee non-compete, non-solicitation, confidentiality, and assignment of rights agreements annually.
The employment lawyers at Ater Wynne LLP are available to answer questions and help you stay current.