Policy Matters Newsletter - April 10, 2023

More Fallout From The FTC Proposed Noncompete Rule. As Seyfarth summarized here, and we podcasted and summarized here, the FTC has published a proposed rule which would ban all non-compete agreements between employers and “workers” (broadly defined to include employees, independent contractors, interns, and others). Since the release of the proposal, the business community has noted the numerous legal and practical objections to the proposal, including lack of constitutional and congressional authority, contravention of Supreme Court precedent, preemption of state law, undue disruption of the principles of federalism, impediment to business investment in innovation, stifling employee training, interference with existing legally bargained-for contracts, and deals already consummated. In other words, the proposed rule is highly problematic.

Highlighting the business community’s serious interest in this proposal, our own Michael Wexler recently hosted a webinar for the Society of Human Resource Management that attracted more than 3,500 viewers. The comment period for the proposed rule is open until April 19, 2023, and has already received more than 11,000 comments. 

As noted previously, the FTC is not alone in promulgating rules related to noncompete provisions. First, on the federal side, Senators Christopher Murphy (D-Conn.) and Todd Young (R-Ind.) introduced the Workforce Mobility Act of 2023, which provides that use of employment non-competes is an unfair trade practice under federal law. While the Act’s ban on non-competes is narrower than the FTC’s proposal, it is still quite broad. On the state side, there are now 65 non-compete bills percolating in the state houses of 24 states. 2023 appears to be the year for regulating non-competes—stay tuned.  

All Things NLRB. Now in the third year of the Biden administration, which is, as they promised to be, the most union-friendly administration in history, the NLRB — and the NLRB’s general counsel, Jennifer Abruzzo specifically — has recently splashed across headlines for a variety of reasons, none of which are great for employers. First, GC Abruzzo has released a memo identifying 15 different precedents that she believes need to be revisited by the NLRB’s board, as Seyfarth summarized here. The list includes, by way of example, cases involving the definition of an intermittent strike and cases involving the applicability of make-whole compensatory remedies for failures to bargain. The list is long and daunting. Stay tuned.

Second, as we noted here and Seyfarth summarized here, the NLRB recently ruled that that it is an unlawful employment practice to condition severance agreements on workers agreeing not to disparage the employer or speak to the contents of the agreement. In light of the general confusion in the wake of the decision, GC Abruzzo issued GC Memo 23-05 (which is not legally binding) purporting to instruct regions on responding to inquiries “about implications stemming from” the decision. Seyfarth immediately issued a legal alert, reminding employers that the decision is not an outright ban on severance agreements; rather, employers may continue to proffer and enter into severance agreements so long as they “do not have overly broad provisions that affect the rights of employees to engage with one another to improve their lot as employees,” as was the non-disparagement / confidentiality clause construed in that decision.

The NLRB and its general counsel are also wrapped up in a lawsuit alleging that GC Memo 22-04, describing the general counsel’s position that captive audience meetings are unlawful and improperly discourage employers from exercising their free speech rights in violation of the Constitution.  

Proposed Rule for CHIPS Act Funding.  As we noted here, the CHIPS And Science Act appropriates billions in subsidies for semiconductor manufacturing, but access to that money comes with some strings. Specifically, the Democratic caucus desires to condition obtaining CHIPS Act tax credits / subsidies on complicated compliance requirements, as evidenced by 180 members signing onto a letter urging the Secretary of Commerce to require “binding and enforceable agreements based on high road labor practices and establish worker protection benchmarks to ensure the creation of good jobs,” in line with the President’s EO issued concurrently with the Act.

In addition to potential labor requirements, late last month, the Commerce and Treasury departments released notices of proposed rulemaking that would set new national security and tax rules for qualifying for microchip subsidies. The Commerce Department’s proposal details the agency’s interpretation of the “national security guardrails” Congress built into the Act, including new details on the restrictions Commerce will impose on companies that maintain chip facilities in China or other “countries of concern.” The Treasury Department and Internal Revenue Service’s proposal gives more details on the strings attached to receipt of the CHIPS and Science Act’s 25 percent tax credit for investments in new, U.S.-based chipmaking facilities.

What’s On The Legislative Agenda In The Empire State (And Big Apple)? As Seyfarth recently reported, legislators in New York (State and City) are considering several bills that could impact employers’ daily operations in the Empire State. The queued bills would broaden discrimination protections to include a person’s height, weight, financial status, and tattoos; would require mandatory onboarding meetings for employees returning from parental leave and trainings on employee rights; would ban “no re-hire” agreements; and impose new requirements related to the use of automated employment decision tools, including artificial intelligence.

Speaking of the Empire State, Seyfarth recently blogged about the sharp uptick in plaintiff-friendly ADA Title III decisions in New York in 2022. New York has now surpassed California as the nation’s leader in ADA Title III and website accessibility litigation, with courts eager to side with plaintiffs on a mix of recent cases brought against companies for website accessibility access.

HELP clears DOL, EEOC nominees. Last week, the U.S. Senate Committee on Health, Education Labor & Pensions (“HELP”), voted to advance six nominees, including Kalpana Kotagal at the EEOC, Jessica Looman at the DOL Wage and Hour Division, and Jose Javier Rodriguez to be Assistant Secretary for the DOL Employment and Training Administration. These nominations now move to the Senate floor where voting is set to continue throughout the next few months. Seyfarth recently discussed this process, and in particular nominee Jessica Looman, on its Policy Matters Podcast.

CA’s AB 5…Still Being Litigated. On March 17, 2023, the Ninth Circuit issued an opinion affirming in part an appeal brought by companies in the so-called gig economy in connection with California’s 2019 enactment of Assembly Bill No 5. As reviewed previously, AB 5 implemented the mandatory “ABC” test for determining whether a person is an independent contractor or employee under California law. The holding from the Ninth Circuit recognized the plausible “animus” of some lawmakers in refusing to exclude certain gig-worker companies from AB 5’s lengthy reach. The opinion remands the matter back to the lower court to address the parties’ Equal Protection claims, keeping the parties’ claims alive and reviving the potential for a enjoining enforcement of AB 5 against them.

Yes: It Is 2023; Yes: We Are Still Discussing Child Labor. Many states have recently introduced or passed measures to weaken child labor protections, as Seyfarth’s own Ed Bergmann recently discussed in International Employment Lawyer. At the same time, the Departments of Labor and Health and Human Services recently announced new efforts to combat exploitative child labor, noting that “[s]ince 2018, the Department of Labor has seen a 69 percent increase in children being employed illegally by companies [and] [i]n the last fiscal year, the department found 835 companies it investigated had employed more than 3,800 children in violation of labor laws.” The DOL announcement also foretells significant increases in funding for enforcement agencies, monetary penalties for violators, and strategic, data-driven efforts to initiate investigations and hold employers accountable for any archaic child labor practices.

EEOC Self-Grading Reveals Some Strategic Insight. On March 13, 2023, the EEOC released its “internal report card” – its own performance report for fiscal year 2022. As Seyfarth reported, the “internal report card” analyzes the EEOC’s performance results based on its Strategic Plan for FYs 2018-2022. A close read reveals valuable insight into the EEOC’s strategic priorities and offers a unique lens into what employers can expect from the EEOC moving forward, such as a particular emphasis on the use of automated technologies in the workplace for hiring purposes. Addressing race discrimination and acts of retaliation continue to be top litigation priorities for the EEOC. Employers should ensure employees are receiving adequate training on both.

OSHA Requests Significant Budget Bump. The Department of Labor recently requested over $100 million more for their FY 2024 OSHA budget, attempting to curb the flat budgets and hiring lulls prevalent during the Trump Administration. As Seyfarth recently reported, Congress will of course have the final say, but if the budget request is approved, the Department of Labor will seek to add 432 full-time equivalent employees (“FTEs”), including 250 additional enforcement staff “to rebuild and strengthen OSHA’s enforcement program.” The 250 new enforcement FTEs would also include 142 OSHA compliance safety and health officers.