How Recent Changes to Federal Employment Law Could Impact Utah Employers

Law firm Ogletree Deakins – an EDCUtah Builder’s Circle investor – recently held an employment law briefing and invited EDCUtah to attend. We sat down with Kathleen Weron , who has an extensive employment law practice with a focus on occupational safety and health, labor law and litigation, to get the latest updates. ?

An important note: Ms. Weron stresses that the conversation that follows is not confidential legal advice and that you should seek guidance from your own counsel.

What’s top of mind for you when advising clients on the latest changes?

We covered a broad range of Federal and State laws and regulations in the seminar, which I can cover briefly. For me, topics that stand out are the Federal Trade Commission’s (FTC) ban on Non-Compete Agreements, the Equal Employment Opportunity Commission’s (EEOC) guidance on sexual harassment, and changes to the National Labor Relations Board’s (NLRB) approach to “concerted activities” as defined in the Unfair Labor Practice Act.?

Non-compete agreements made the news when the FTC published its final rule in May 2024. Is this a done deal?

Not yet. The first thing I’ll tell you is that there’s a lot of misinformation out there. I caution companies not to get their legal advice from headlines. ?

For one thing, the rule doesn’t take effect until September 4, and it’s the target of two lawsuits, so in all likelihood it’ll be subject to a stay in the federal courts and may eventually get overturned. ?

But for prudence’s sake, companies should evaluate at their non-compete agreements, their non-solicitation agreements, and their confidentiality agreements, because this is an opportunity to narrow and tighten the language to better withstand challenges in the future. One takeaway here is to separate these agreements into different documents and narrowly tailor them to protect legitimate business interests. ?

The FTC’s rule effectively bans all non-competes, retroactively and going forward. The rule’s language requires employers to refrain from enforcing most existing non-compete agreements. It also states an employer cannot prohibit, penalize, or prevent a worker from seeking or accepting work in the U.S. or from operating a business. A “worker” is defined as anyone from an executive to frontline employees to independent contractors.

If it goes into effect, employers will be required to send notices to employees who have non-competes, advising the employees that the non-competes are no longer enforceable. Should the rule navigate past the lawsuits, this notice would need to be sent in September 2024.

Are there any exceptions under the new language?

Yes, there are three. One involves existing agreements with senior executives entered into before the effective date of the rule. A second involves sale-of-business non-competes, and the third involves any causes of action that accrue before the September 4th effective date.

Senior executives are defined as employees in policymaking positions who have annualized compensation over $151,164. Remember to factor in those last $64 dollars—I love how the Feds come up with these very specific dollar criteria! ?

“Policymaking” is narrowly defined, requiring “final” policymaking authority over more than just a segment of a business. So, it’s only going to cover pre-existing agreements with your most senior leaders.

You mention non-solicitation and trade secret provisions. What’s changing here?

The FTC’s expanded definition of non-competes may extend to clauses that restrain the solicitation of customers, if those provisions are broad enough to be seen as functionally preventing a worker from seeking or accepting employment. Specifically, a well-drafted customer non-solicitation provision could “prohibit” an employee to reject competitive employment. This is going to be a focus of intense litigation in the near term.

As for trade secret agreements, state and federal trade secret laws remain in place and employers will retain the same rights to protect trade secrets under those laws. If the rule goes into effect, you’ll want to make sure your confidential information and trade secrets are protected outside the context of a non-compete or non-solicitation agreement. In other words, split these things up into separate documents.

What courses of action are in front of companies in light of this rule?

Well, there’s something to be said for doing nothing, given the likelihood of a judicial stay.

You can also embrace the future and rewrite your template contracts to remove non-competes.

Lastly, there’s a middle ground, where you retain non-competes for senior leadership and other highly compensated employees. A lot of states are moving in this direction, and I expect Utah will eventually as well. ?

How does this effect Utah’s rule on non-competes?

Currently Utah allows non-competes to have an effective duration of 12 months from the date an employee leaves the company’s employ. If the FTC rule comes into effect, it would supersede the state’s provisions.

The other thing to bear in mind – and a good reason to revisit your template agreements – is that most other states are moving in the direction of limiting use of non-competes. If your business has operations in multiple jurisdictions, keep an eye on each state’s actions in this arena.

You mentioned the EEOC’s 2024 guidance on sexual harassment. What’s the update here?

First of all, this is the EEOC’s first update to workplace harassment guidelines since 1999, and the language took effect at the end of April. I can give a couple of high points, but I would encourage your human resource experts to dive into the details if they haven’t already done so.

For one thing, the guidance recognizes unlawful harassment against LGBTQ+ individuals, including sexual orientation and gender identification. Second, it addresses working protections for pregnancy, childbirth, or related medical conditions, including lactation. And third, it provides more than 70 hypothetical examples of potential unlawful harassment. ?

There’s language focused on color—that is, skin tone—versus race or national origin that bears consideration, as well as discussion of “repeated and intentional” misgendering. There’s also language on intraclass and intersectional harassment. For example, a 56-year-old harassing a 65 year old is still harassment, even though the individuals are in the same protected class.

The new guidance also discusses pregnancy-related harassment, which is relevant as the Pregnant Workers Fairness Act became effective in June 2023.

What’s the overview on the NLRB’s Unfair Labor Practice update?

You need to know what’s going on here, even if you don’t have union employees. Section 7 of the National Labor Relations Act (NLRA) grants employees the right to form or join unions; engage in protected, concerted activities to address or improve working conditions; or refrain from engaging in these activities, if they so choose.

Section 8 makes its an unfair labor practice for an employer “to interfere with, restrain, or coerce employees in the exercise of their rights guaranteed in Section 7.”

Any other “icebergs” floating out there for companies to watch?

Two things come to mind. First, the Department of Labor (DOL) has increased the salary threshold for white collar exemptions. It is happening in two stages. In July, the threshold reaches $43,888 per year, and in January 2025, it rises to $58,656 per year. This may significantly increase the number of employees entitled to overtime compensation in Utah and other states you operate in. It calls for auditing your current payroll and has implications for timekeeping and recordkeeping.

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