The NLRB Takes Aim At Non-Compete Provisions

The NLRB has been flexing its muscle this year. First came the McLaren Macomb decision, where the Board found that confidentiality and nondisparagement provisions in severance agreements for non-supervisors violated the National Labor Relations Act. On May 30th the NLRB General Counsel issued a memorandum and took aim at noncompete agreements.

The General Counsel’s memo states that except in limited circumstances the “proffer, maintenance and enforcement ” of noncompete provisions violates the Act, because, in her opinion, noncompete provisions “reasonably tend to chill employees” in the exercise of their Section 7 rights under the Act to engage in concerted activity for mutual aid and protection in their employment. The General Counsel listed five specific types of protected activity under Section 7 that is chilled by noncompete provisions:

  1. Concertedly threatening to resign to demand better working conditions, because the threats would be futile due to the noncompete;
  2. Carrying out concerted threats to resign or concertedly resigning in an effort to secure better working conditions;
  3. Concertedly seeking or accepting employment with a local competitor to obtain better working conditions;
  4. Soliciting coworkers to go to work for a local competitor as part of a broader course of protected concerted activity; and
  5. Seeking employment, at least in part, to specifically engage in protected activity with other workers at an employer’s workplace.

The General Counsel opined that facts which are typically recognized by most courts as special circumstances which justify a noncompete, including specialized training and protecting trade secrets, are insufficient to overcome the chilling effect on Section 7 rights. Her rationale is that less restrictive means, such as a longevity bonus and a confidentiality agreement, protect those interests without the unreasonable chilling effect.

The General Counsel opined that noncompetes that only restrict managerial or ownership interests in a competing business and noncompetes with a true independent contractor do not violate the Act. She also stated that there may be other special circumstances to justify a narrowly tailored noncompete that would not violate the Act.

The General Counsel also encouraged the Board to award make whole relief, lost pay and benefits for example, if there is proof that an overbroad noncompete caused the employee to lose opportunities for other employment.

The memo is not law, but you can be certain that the Board with an existing or future case will try to make it the law in the near future.

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The 411 on the FTC’s Proposed Noncompete Ban

On January 5th the Federal Trade Commission (FTC) issued a proposed rule that would ban noncompete agreements between employers and their workers in most circumstances. While the proposed rule will almost certainly be met with legal challenges and ultimately get resolved in the courts, let’s take a look at what you need to know now.

The proposed rule would make it illegal for an employer to enter into or attempt to enter into a noncompete with a worker.

The proposed rule covers all employers.

“Worker” is broadly defined as a natural person who works, whether paid or unpaid, for an employer and specifically includes independent contractors.

Existing noncompete agreements are covered by the ban. Employers must rescind the noncompete by the “compliance date” and are required to notify the worker of the rescission. The compliance date is 180 days after publication of the final rule in the Federal Register, which has not yet occurred.

The FTC has published model language that can be used to communicate the rescission.

The proposed rule makes no mention of non-solicitation agreements. It does, however, specifically state that a non-disclosure agreement that is so broad that it effectively precludes the worker from working in the same field is prohibited, as is an agreement to repay training costs if the worker’s employment terminates within a specified period if the required repayment is not reasonably related to the costs incurred for training.

Presumably, a narrowly tailored agreement that prohibits the solicitation of customers, the solicitation/recruiting of employees and the disclosure of trade secrets and confidential information will still be valid.

A noncompete entered into as part of a sale of business (asset or stock/ownership interest sale) is allowed provided that the individual being asked to sign the noncompete owns at least 25% of the entity being sold.

Although the proposed rule is not yet in effect and will likely be resolved in the courts, there are certain steps employers should take now.

First, if you are asking lower wage or lower level workers to sign noncompete agreements, stop. Those are most likely not enforceable under the applicable state law now, and are even less likely to survive the final outcome of the FTC’s proposed rule.

Second, ask yourself if a non-solicitation and nondisclosure agreement will give you the protection you need. If so, use that instead of a noncompete, as that will likely be enforceable.

Finally, review your existing noncompete, nonsolicit and nondisclosure agreements to see if these comply with applicable state law and if there is adequate protection in the event the noncompete is banned. If not, or if you need assistance, please contact us or call your attorney.

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New Tennessee Law Requires Employers To Provide Veterans Day as Unpaid Holiday

Veterans Day is celebrated on November 11th. In April Tennessee passed a new law that requires employers to allow employees who are veterans to take Veterans Day off as an unpaid holiday if certain conditions are met.

The law applies to all persons or entities with one or more employees. Under the law an employee is a veteran if he or she is: 1. a former member of the armed forces or; 2. a former or current member of a Reserve or a Tennessee National Guard unit that was called into active military service of the United States.

In order to qualify to take Veterans Day off as an unpaid holiday the employee must provide: 1. at least one month’s written notice of the intent to take the day off; 2. provide proof of veteran status.

If the employee meets the above requirements the employer must grant the leave unless the veteran employee’s absence, either alone or in combination with the absence of other veteran employees on that day, will impact public health or safety, or cause the employer significant economic or operational disruption, as determined by the employer in the employer’s sole discretion.

Employers can waive the notice and proof of veteran status requirements and/or treat Veterans Day as a paid holiday for qualifying employees if they choose to do so.

Veterans, enjoy the day off and thank you for your service!

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Tennessee Bans Hair Discrimination

As of July 1st Tennessee joined the states that prohibit discrimination based on an employee’s natural hairstyle. The General Assembly passed the CROWN Act- Create a Respectful and Open Workplace for Natural Hair.

The CROWN Act prohibits private employers from adopting policies or practices that restrict or ban employees from wearing ethnic hairstyles within the workplace, including braids, locs, twists, bantu knots, or other hairstyles that are part of the cultural identification of or physical characteristic of the employee’s ethnic group. Tennessee is the first state in the South to make the CROWN Act law.

Employers should review their Equal Employment Opportunity, Grooming, Dress Code and Uniform Policies and revise them as needed to ensure compliance with this new law.

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Mandatory Arbitration of Sexual Harassment Claims Will Soon Be Forbidden

On February 10th the U.S. Senate unanimously passed the so called #MeToo bill, H.R. 4445. The bill prohibits mandatory arbitration of workplace sexual harassment and sexual assault claims. The bill will become law after it is signed by President Biden. After it is signed it will take effect immediately.

Under this (soon to be) law employers can no longer require employees to arbitrate sexual harassment or sexual assault claims. Mandatory arbitration of other claims will, however, still be allowed so long as your arbitration agreement/provision complies with all state law requirements for enforceability.

Employers that utilize mandatory arbitration should take this opportunity to review those contracts and revise them accordingly.

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OSHA Vaccine Rule Is Blocked; CMS Vaccine Rule Is Not

This afternoon the Supreme Court issued two opinions pertaining to “mandatory vaccination rules” .

The Court blocked the OSHA vaccine or test mandate, which was applicable to employers with 100 or more employees. The Court voted 6-3 to stay or block the OSHA Rule.

In a 5-4 decision the Court allowed the CMS Mandatory Vaccination Rule to proceed, as it stayed two District Court decisions which had enjoined the Rule. The CMS Rule applies to facilities that receive Medicare and Medicaid Funding , their employees, and contractors who provide services to those facilities.

In Tennessee this means the Tennessee COVID Law will remain in effect, but businesses governed by the CMS Rule can apply with the Comptroller for an exemption from the Tennessee law.

Stay tuned for further developments.

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OSHA’s Mandatory Vaccination Rule Gets New Life

On Friday evening (December 17th) the Sixth Circuit Court of Appeals dissolved the stay of OSHA’s Emergency Temporary Standard (ETS) which requires employers with 100 or more employees to mandate that employees get vaccinated against Covid-19 or be subject to mandatory weekly testing. You can read my blogpost summarizing the ETS requirements here.

Later Friday night numerous states and interest groups filed emergency applications with the U.S. Supreme Court seeking a stay of the ETS, as well as petitions for certiorari, which are requests that the Supreme Court take the case for review. We do not yet know whether the Supreme Court will take the case (here is one bet that it will). Hopefully, we will know the answer to that soon. In the meantime, what should employers do?

Employers should prepare to comply with the ETS, though they now have more time to do so. In light of the Sixth Circuit ruling, and the likelihood of further court review, OSHA issued the following statement over the weekend:

To provide employers with sufficient time to come into compliance, OSHA will not issue any citations for noncompliance with any of the ETS before January 10 and will not issue citations for noncompliance with the standard’s testing requirements before February 9th, so long as an employer is exercising reasonable, good faith efforts to come into compliance with the standard. OSHA will work closely with the regulated community to provide compliance assistance.

Reasonable, good faith efforts to comply are key pending final resolution of the issue. This situation will continue to evolve. As always, check here for updates!

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Judge Blocks Vaccine Mandate For Federal Contractors in Tennessee, Kentucky and Ohio

A federal judge on Tuesday blocked the COVID-19 vaccine mandate for federal contractors from going into effect in Tennessee, Kentucky and Ohio.

A U.S. District Judge in Kentucky granted a preliminary injunction preventing the mandate, enforced against federal contractors and subcontractors through Executive Order, from taking effect In Tennessee, Kentucky and Ohio, which had collectively challenged the rule. The mandate in the Executive Order requires effectively all employees of federal contractors and subcontractors to be fully vaccinated by Jan. 4. The court reasoned that the Executive Order likely exceeded President Biden’s authority over federal procurement, and that the states had shown enough proof to meet the standard for a preliminary injunction.

Stay tuned for further updates.

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What Employers Need To Know About Tennessee’s COVID-19 Law

This month Tennessee passed sweeping legislation that restricts employers and others on the requirements they can impose and actions they can take pertaining to COVID-19. The highlights from an employment law standpoint are as follows:

1) Prohibits employers from requiring vaccination or proof of vaccination by prohibiting employers from taking adverse action against employees who refuse to disclose their vaccination status –  “a private business, government entity, school, or local education agency shall not compel or otherwise take an adverse action against a person to compel the person to provide proof of vaccination if the person objects to receiving a COVID-19 vaccine for any reason.” 

The definition of “adverse action” means to deny a person employment privileges or to “discharge, threaten or otherwise discriminate against an employee in any manner that affects the employee’s employment, including compensation, terms, conditions, locations, rights, immunities, promotions, or privileges.”

2) Prohibits governmental employers from requiring an employee to wear a face covering, “unless severe conditions exist and the requirement is in effect for no more than 14 days. ” This provision does not apply to private employers or businesses.

3) Provides that individuals who left their employment because of an employer’s vaccine requirement or who were terminated for refusing to be vaccinated are eligible for unemployment benefits.  This section entitles an otherwise qualified claimant to receive retroactive benefits if they were separated for refusing to be vaccinated.

4) Provides that the commissioner of health has the sole authority to determine quarantine guidelines for a person if the person tests positive for COVID-19.     The definition of “quarantine” includes “the limitation or restriction of a person’s freedom of movement or isolation of a person, or preventing or restricting access to the premises upon which the person or the cause or source of COVID-19 may be found, . . ..”  

This language effectively precludes employers from implementing their own guidelines to deal with individuals who test positive or are in close contact with someone who tests positive since requiring employees to stay away from work would restrict their freedom of movement and/or restrict their access to the employer’s premises. 

The Department of Health has issued a revised document titled “Releasing Cases and Contacts from Isolation and Quarantine” that can be found here –  Unless or until the Commissioner says otherwise, this Guidance will likely constitute the applicable “quarantine guidelines” for purposes of the bill.  It is important to note the difference in the sections of the Guidance as it relates to actions which “must” be done if a person tests positive and those which “should” be done when a person is a close contact but has not tested positive.

5) Limits potential causes of action for loss, damage, injury, or death arising from COVID-19 to situations when the claimant proves by clear and convincing evidence that the defendant proximately caused the loss, damage, injury or death by an act or omission constituting gross negligence or willful misconduct.  It also contains certain pleading requirements that must be met.

6) Creates a private cause of action for injunctive relief and to recover compensatory damages and reasonable attorneys’ fees against an alleged violator.

7)  The act takes effect immediately and, except for the section regarding liability, terminates on July 1, 2023.

The law does not apply to certain businesses, including healthcare providers who are certified by or subject to fines from the Centers for Medicare & Medicaid Services (“CMS”). So, if you are covered by the CMS Mandatory Vaccination Rule you can (and must) comply with it without violating this Tennessee law.

Additionally, federal contractors and subcontractors who have to comply with the Executive Order which requires mandatory vaccination may seek an exemption from the law by applying in writing to the Tennessee Comptroller of the Treasury. To obtain the exemption you must show that complying with the Tennessee law would result in a loss of federal funding and an exemption is necessary to conform to a federally awarded contract or subcontract.  If granted the exemption is good for one year and may be renewed for no more that one calendar year.

The legal landscape on COVID-19 is changing rapidly. As always, stay focused, plan ahead and check here for updates.

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OSHA Suspends Mandatory Vaccination Rule After 5th Circuit Issues Stay

Late Friday the 5th Circuit Court of Appeals issued a stay of the OSHA ETS, a/k/a/ the Mandatory Vaccination Rule. After that ruling OSHA announced yesterday that it would suspend “activities related to the implementation and enforcement of the ETS pending future developments in the litigation”.

Please remember that this action by OSHA does not apply to employers governed by the Executive Order for federal contractors and subcontractors, or employers governed by the CMS Rule (hospitals, ambulatory surgery centers and other CMS certified facilities).

Stay tuned for further developments.

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