LATEST NEWS

If You Have Not Yet Filed Your Corporate BOI Report, Press Pause

December 6, 2024

Earlier this week, a federal district court judge issued a nationwide injunction temporarily pausing enforcement of the Corporate Transparency Act (CTA) and the U.S. Department of the Treasury’s Financial Crimes Enforcement Network’s (FinCEN) regulations on Beneficial Ownership Information Reporting Requirements (BOI Reporting Requirements).

As we detailed in a legal alert earlier this year (see below), FinCEN’s BOI Reporting Requirements went into effect on January 1, 2024, and required businesses in existence before January 1, 2024 to file an initial BOI report by January 1, 2025.

While we anticipate that FinCEN will appeal the court’s decision, for now the BOI reporting requirement is suspended. With the injunction in place, no immediate action is required. However, companies subject to the reporting requirement should keep their ownership records organized and be ready to file their BOI Report by the stated deadlines in the event reporting requirements are reinstated.

We will continue to monitor these unfolding developments and provide updates.

Not So Fast…Federal Court Kills Salary Threshold Increases

November 18, 2024

Last Friday, a Texas federal district court set aside the Department of Labor’s (DOL’s) 2024 Final Rule increasing the salary threshold for executive, administrative, and professional overtime (EAP) exemptions under the Fair Labor Standards Act (FLSA). The court’s order vacates the 2024 Rule nationwide.

Therefore, the salary threshold in effect prior to July 1, 2024 for the EAP exemption ($35,568 per year, $684 per week) is restored, as is the salary threshold for the highly compensated employee exemption ($107,432 per year).

While the DOL may file an appeal prior to the change of administrations on January 20, 2025, that appeal would not likely be heard until after the Trump Administration is in place. The Trump Administration would then likely either withdraw the appeal or withdraw the 2024 Rule. Either way, the 2024 Rule is most certainly dead in the water.

Employers preparing to increase salary levels on January 1, 2025 to comply with the 2024 Rule may now reconsider those increases. Employers who put increases in place on July 1, 2024 could also withdraw such increases and reduce the affected employees’ salaries, but salary reductions are very difficult to impose without damaging morale and inhibiting retention. Employers may not recover any increases that were already paid.

Salary Threshold for Overtime Exemptions to Increase January 1, 2025

October 24, 2024

The current requirements: Under the Fair Labor Standards Act (FLSA), employees generally must be paid overtime at 1.5 times their regular rate of pay for all hours worked beyond 40 in a workweek, unless they fall under an exemption. The FLSA provides executive, administrative, and professional exemptions (the so-called “white-collar” exemptions), but to qualify for one of these exemptions an employee must meet the duties test AND earn a weekly salary above a set threshold. As of July 1, 2024, that threshold is $844/week ($43,888/year).

The January 1 changes: On January 1, 2025, the salary threshold for white-collar overtime exemptions will increase to $1,128/week ($58,656/year). The salary threshold will be automatically updated every three years beginning July 1, 2027. The threshold for the “highly compensated employee" (HCE) exemption, currently $132,964/year, will also increase on January 1 to $151,164/year. The HCE threshold will also be updated every three years.

What employers should do now: There are currently several pending legal challenges to the new overtime rule, but there is no guarantee a court will prevent the increase from taking effect on January 1st. Employers should:

determine if they have any white-collar exempt employees who earn less than $58,656 a year (or $132,964 for HCE); and
if so, consider whether to raise salaries to meet the new threshold or convert the employees to non-exempt (hourly) status, working with legal counsel as appropriate to decide on the best course of action. Employers should consider tracking the actual hours worked of those employees to determine the extent of potential overtime liability if such employees were converted to hourly status.

If reclassifying becomes necessary: Employers should be thoughtful about how and when such changes will be communicated to the affected employees. Exempt employees often believe that being salaried gives them greater clout and flexibility than hourly workers and may react negatively to the change. Make sure to let employees know about these changes before they take effect and that such changes are required by the federal government’s new wage and hour rules. Your written communication to each employee should detail the specific changes to their compensation and the accompanying new requirements, such as timekeeping, meal and rest breaks, etc.

Ensure ALL exempt employees meet the duties test for their exemption: Now is a good time to review your exempt positions, not only to determine if they meet the new salary threshold, but for compliance will all exemption criteria – especially the duties test. Keep in mind that neither their job title nor job description alone determines whether an employee qualifies for a white-collar (or any other) exemption. Our firm can assist you in an exemption analysis for any exempt positions about which you may be concerned.

Federal Court Strikes Down FTC Rule Barring Noncompetes

August 27, 2024

Last week, a Texas federal court struck down the Federal Trade Commission (FTC) rule barring worker noncompetes that was set to take effect September 4th (Rule). The Rule would have invalidated nearly all employee noncompete provisions and required employers to send notices informing current and former workers that their noncompetes are unenforceable. The court found that the FTC exceeded its statutory authority in promulgating the Rule and rejected the FTC’s argument that relief should be limited only to the named plaintiffs, so the ruling applies nationwide.

The FTC will likely appeal the ruling, but for now the Rule remains ineffective, meaning that employers may continue to enforce noncompete agreements that otherwise comport with state laws. The federal court ruling does not impact state laws restricting noncompete agreements and other restrictive covenants. For example, Virginia’s law prohibiting employers from entering or enforcing noncompetes against law wage earners (those making less than $73,320 per year, or $1,410 per week on average) remains in effect.

Legal Updates from Q2 2024

June 25, 2024

The summer solstice has passed, temperatures are rising, and this week closes out the second quarter of 2024. This quarter was a busy time for employment law developments! We have provided a few key updates below:

The U.S. Department of Labor (DOL) raises the overtime salary threshold on July 1st.

The Fair Labor Standards Act (FLSA) exempts from its overtime requirements workers employed as bona fide executive, administrative, professional and outside sales employees, as well as some computer employees, but only if those workers earn an annual salary above a certain amount.

In April, the DOL announced it would be raising the FLSA’s minimum annual salary threshold for overtime exemption in several stages. First, on July 1, 2024, the salary threshold will increase from $35,568 to $43,888 per year. On January 1, 2025, it will increase again to $58,656. Thereafter, the threshold will automatically increase every three years using current wage data, with the next increase occurring on July 1, 2027.

For certain “highly compensated” employees, the minimum annual salary threshold will increase from $107,432 to $132,964 on July 1, 2024 and then to $151,164 on January 1, 2025.

Employers should determine if they have any currently exempt positions that will be impacted by the updated threshold. If so, employers will need to decide whether to convert such employees to hourly, nonexempt status and pay them overtime, or raise their pay to put them over the new salary threshold.

2. The Federal Trade Commission (FTC) final rule banning non-competes is set to take effect September 4, 2024.

Earlier this year, the FTC adopted a final rule prohibiting private, for-profit employers from entering new non-compete agreements but also requiring them to rescind existing non-compete clauses and advise their employees and former employees in writing that their non-competes are no longer enforceable.

The final rule was published in the Federal Register on May 7, 2024 and is scheduled to become effective on September 4, 2024, unless it is delayed or derailed by legal challenges. Several legal challenges are pending in federal courts, with the first decision on the rule’s enforceability expected next week. Stay tuned for updates.

3. The Equal Employment Opportunity Commission (EEOC) final regulations to the Pregnant Worker Fairness Act (PWFA) took effect this month.

The EEOC has issued final regulations regarding how it will administer and enforce the PWFA. The PWFA, enacted last year, requires employers with at least 15 employees to consider employee and applicant accommodation requests related to pregnancy, childbirth, or related medical conditions in the same way requests for accommodation related to disabilities are considered under the Americans with Disabilities Act (ADA).

A few important takeaways from the EEOC regulations include the following:

The regulations contain a very broad definition of “pregnancy, childbirth or related medical conditions.” Possible circumstances that fall within the definition include: current, past, and potential pregnancy; infertility and fertility treatment; the use of contraception; termination of pregnancy, including miscarriage, stillbirth, or abortion; pregnancy-related conditions; lactation issues; and menstruation.

Similar to the ADA, only “qualified” applicants and employees are covered under the PWFA, but the regulations state that an individual is qualified if their inability to perform the essential functions is just temporary and the essential functions can be performed “in the near future”, which generally – but not automatically – means about 40 weeks.

The PWFA covers “known limitations” related to pregnancy, childbirth, or related medical conditions, and the regulations define that term very broadly to include routine pregnancy care and problems that are minor or episodic. As such, workers with healthy or “normal” pregnancies could seek and receive accommodations under the PWFA. Unlike the ADA, there’s no threshold for the severity of the physical or mental conditions for accommodation requests.

Given the EEOC’s expansive interpretation of PWFA protections, we recommend you contact legal counsel before denying any pregnancy or childbirth-related accommodation request.

4. The EEOC issued its first updated enforcement guidance on workplace harassment in 25 years.

The EEOC issued updated enforcement guidance on workplace harassment on April 29, 2024. While the guidance is not legally binding, it provides the standards by which the EEOC evaluates claims of harassment.

Among the highlights in the new guidance:

Race and national origin harassment includes harassment based on traits or characteristics linked to a person’s race, ancestry, or ethnic/cultural characteristics, such as a person’s name, physical appearance, hair texture/style, cultural dress, and accent or speech pattern.

Religious harassment includes religious stereotypes and also includes explicit or implicit coercion by employees to have their coworkers engage in religious practices at work. Non-believers are also protected from religious harassment.

Sex-based harassment includes harassment based on pregnancy, childbirth, and related medical conditions such as lactation, morning sickness, use or non-use of contraception, and decisions related to abortions.

Sex-based harassment includes conduct based on an individual’s sexual orientation or gender identity. Prohibited activity includes “outing” a person’s sexual orientation or gender identity, repeated or intentional misgendering (using a pronoun inconsistent with a person’s gender identity), “dead naming” (using a name used by a person prior to their transition), and denying a person access to a bathroom or other sex-segregated facility consistent with the person’s gender identity.

Harassment can be based on more than one protected characteristic, which is known as “intersectional harassment”.

Stereotypes do not need to be motivated by hostility toward a particular group. Even well-intentioned use of stereotypes may constitute harassment.

FTC Adopts Final Rule Banning Non-Competes

April 24, 2024

Ban poised to take effect 120 days after Rule publication, unless courts intervene.

On April 23, 2024, the Federal Trade Commission (FTC) adopted a Final Rule that prohibits private, for-profit employers from entering or enforcing non-compete clauses in all but the following circumstances:

Non-compete agreements may still be entered into as part of the sale of a business; and
Existing non-compete agreements may remain in place for senior executives with annual compensation of over $151,164 (but new agreements may not be entered).

Under the Rule, employers will be prohibited from entering new non-compete agreements and will also be required to rescind existing non-compete clauses. Once the rule is effective, employers will be required to advise their employees and former employees in writing that their non-competes are no longer enforceable.

The FTC definition of “non-compete” is broad, encompassing any contract term that “has the effect of prohibiting the worker from seeking or accepting employment.” This may include:

nondisclosure provisions written so broadly that they effectively preclude the worker from working in the same position for a new employer; and
customer and employee non-solicits if those provisions are broad enough to be construed as preventing “a worker from seeking or accepting” employment.

Federal regulation of non-compete clauses is unprecedented, as this is an area of the law usually left to the states, where the legal landscape varies from prohibiting nearly all non-competes, to only restricting them for low-wage earners (as Virginia does), to very little restriction. As this Rule would constitute a significant expansion of the FTC’s power, legal challenges to it will certainly be filed in the coming weeks, but it will take time for this issue to be resolved in the courts.

In the meantime, private employers should continue to narrowly tailor non-compete, non-solicit, and nondisclosure agreements to their specific business needs, because even if the FTC Rule is ultimately struck down, many states (including Virginia) are still progressively limiting the enforceability of restrictive covenants.

Legal Updates from Q1 2024

March 21, 2024

Time flies, but even so…it seems impossible to believe next week closes out the first quarter of 2024! Here are a few notable updates from Q1:

1. Virginia raised the earning threshold for “low wage earners” who cannot be subject to non-compete agreements.

Under a law passed in 2020, Virginia employers may not enter into, enforce, or threaten to enforce a covenant not to compete with any "low-wage earner”, which is determined according to the Virginia Department of Labor & Industry (“DOLI”)’s annual computation of average weekly wages.

On January 16, 2024, DOLI announced that the average weekly wage for the next 12 months had risen to $1,410 per week, or $73,320 annually, meaning any employee earning this amount or less may not be subject to a non-compete.

2. The Corporate Transparency Act was declared unconstitutional by a U.S. District Court.

The Corporate Transparency Act (CTA), which took effect on January 1, 2024, requires most small businesses registered in the U.S. to report certain information with the U.S. Department of Treasury’s Financial Crimes Enforcement Network for persons with “substantial control” over the business or 25 percent or more of the equity in the business.

Upon its enactment, the constitutionality of the CTA was immediately challenged in federal court. Earlier this month, the CTA was declared unconstitutional by a U.S. District Court in Alabama, which held that it was not a justified exercise of Congress’s enumerated powers. The ruling is subject to appeal, and we expect it will continue to work through the federal courts in the coming months.

Given that businesses in existence before January 1, 2024 have until January 1, 2025 to file an initial Beneficial Ownership Information Report, there is still time for these companies to wait and see if this ruling stands. (New business created on January 1, 2024 or after will need to file their initial reports within 90 days of creation.)

3. The Department of Labor issued its Final Rule regarding classification of workers as independent contractors.

On January 10, 2024, the U.S. Department of Labor published a Final Rule, effective March 11, 2024, revising its guidance on how to analyze who is an employee or independent contractor under the Fair Labor Standards Act. The misclassification of employees as independent contractors may deny workers minimum wage, overtime pay, and other protections. This Final Rule rescinds the prior rule published on January 7, 2021 and provides a new interpretation of the independent contractor analysis altogether.

The Final Rule does not concentrate on any particular factor(s) but instead focuses on an individual’s activity as a whole, applying the following 6 factors:

the worker’s opportunity for profit or loss;
investments by the parties;
the work relationship’s permanency;
the nature and degree of control over the work;
whether the work is an integral part of the employer’s business; and
the worker’s skill and initiative.

Ultimately, the outcome depends on the worker’s economic dependence on the employer. Independent contractors who perform substantially all of their work for one business are likely to be economically dependent on that business and thus likely to be misclassified employees.

Don’t Go Breaking Our Hearts:

5 Mistakes We Wish Our Clients Would Stop Making

February 14, 2024

1. Believing that if you place an employee on salary, they can’t earn overtime

To be free from the minimum wage and overtime requirements of federal and state law, an employee must qualify for one or more specific exemptions under the Fair Labor Standards Act. Those exemptions include executive, administrative, professional, computer and outside sales employees. An employee must meet each element of the test under the exemption to qualify for it.

To qualify for most exemptions, employees also generally must be paid at not less than $684 per week ($35,568 per year) on a salary basis. Employees who are paid $100,000 or more per year are considered “highly compensated employees” and are automatically exempt even if they do not meet any of the tests for exemption.

Employers who misclassify an employee as exempt may be liable for two or three times the amounts of unpaid wages going back two to three years.

2. Taking partial day deductions from exempt (salaried) employees’ pay

If an employee does qualify for one of the exemptions to the minimum wage and overtime regulations, they may be placed on salary and treated as exempt. This means they will not be owed any additional compensation for hours worked over 40 in a single workweek. However, to maintain the exemption (and keep them from qualifying for overtime), the employee’s pay cannot be reduced because of variations in the quality or quantity of their work.

Subject to exceptions listed below, an exempt employee must receive their full salary for any week in which they perform any work, regardless of the number of days or hours worked. Exempt employees do not need to be paid for any workweek in which they perform no work.

Deductions from pay for absences are only permissible when an exempt employee:

is absent from work for one or more full days for personal reasons other than sickness or disability;
for absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness;
to offset amounts employees receive as jury or witness fees, or for military pay;
for penalties imposed in good faith for infractions of safety rules of major significance;
for unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions;
for partial weeks worked in the initial or terminal week of employment; and
for weeks in which an exempt employee takes unpaid leave under the Family and Medical Leave Act.

Employers who offer paid leave usually may require exempt employees to use such paid leave to fill in for partial days of work missed for personal reasons or illness, as long as their pay is not reduced.

3. Making payroll deductions without the employee’s prior written consent

Under Virginia law, employers may not withhold any part of the wages or salaries of an employee (except for payroll, wage or withholding taxes or in accordance with law), without the advanced written and signed authorization of the employee. The written authorization must be specific to the type of deduction being made and may not be a blanket authorization for any type of deduction that could come up in the future. Employers also may not make signing the authorization a condition of employment.

An employer who has improperly withheld wages will be liable for double or triple the wages owed, plus interest, attorney fees and costs.

4. Assuming any worker can be an independent contractor if paid with a 1099

Under federal and state laws, workers are automatically considered to be employees. This means that they must be treated as employees for purposes of pay, payroll taxes, worker’s compensation, unemployment insurance, and other labor laws unless they qualify as independent contractors under specific classification tests, which differ from state to state.

In general, these tests look at the level of control and independence the worker has in performing the work. Generally speaking, an individual working full time for an employer, whose work relates to the primary purpose of the business, and who is subject to supervision, performance evaluation, and termination, will not qualify as an independent contractor.

Employers should perform a classification analysis under the state and federal tests that apply before designating any worker as an independent contractor. Penalties for misclassification may include payment to the worker of lost wages, salary, and employment benefits, civil fines, and even criminal liability in same states.

5. Thinking your out of state workers are only subject to Virginia employment laws

Generally, employees working in a different state than the employer’s main location - whether working remotely or in a satellite office - are subject to the laws of the state where they work. Virginia employers with out-of-state workers must comply with the employment laws of each state in which they have workers, not just Virginia’s laws.

In many cases, the protections of the other state’s laws apply immediately to a worker once they begin working there. In other cases, the worker may need to be working in that other state for a certain number of days and/or pass a certain amount of earnings before the other state’s laws apply.

Employing out-of-state workers may implicate the following employer responsibilities:

Withholding state income taxes;
Paying state corporate taxes;
Obtaining state and local business licenses and/or permits;
Complying with state wage and hour laws, leave and benefits laws, worker classification tests, and employee privacy and monitoring restrictions; and
Obtaining/contributing to workers’ compensation and unemployment insurance in that state.

Virginia employers with employees in other states should ensure their employee policies, pay practices and benefits align with the laws of such states, and should consult their tax advisor regarding the potential tax implications.

Changes to I-9 Employment Verification Process: What Employers Need to Know

August 1, 2023

Major changes to the I-9 employment verification process will take effect today, August 1st:

The U.S. Department of Homeland Security (DHS) has issued a new, streamlined I-9 Form. Use of this form is mandatory beginning November 1st and optional beginning today. The revised form allows employers to indicate if the alternative (remote) document inspection procedure was used.
U.S. Immigration and Customs Enforcement (ICE) announced that COVID-19 related Form I-9 physical document inspection flexibilities will end today. This means that only Qualified E-Verify Employers can continue to remotely inspect documents when completing I-9 forms.
By August 30, 2023, employers are required to complete a re-verification of all employees that were virtually verified under the flexibility policy rolled out in March 2020. Whether this re-verification must be conducted in person or by the alternative procedure depends on the employer’s qualification to use E-Verify and the method by which they completed the initial verification during the flexibility period.

What is the alternative document inspection procedure?

Under the alternative document inspection procedure, the employee must first transmit a copy of the document(s) to the employer and then present the same document(s) during a live video interaction. Employers must allow employees who are unable or unwilling to submit documentation using this alternative procedure to submit documentation for physical examination.

Who can use the alternative document inspection procedure to comply with the re-verification requirement outlined in #3 above?

Currently Qualified E-Verify Employers can use the alternative procedure to re-verify if they:

Were enrolled in E-Verify at the time they performed a remote examination of an employee’s Form I-9 documentation or reverification while using the COVID-19 flexibilities;
Created an E-Verify case for that employee (except for re-verification); and
Performed the remote inspection between March 20, 2020 and July 31, 2023.

“Qualified E-Verify Employers” are those employers who: (i) are in good standing with E-Verify, (ii) have enrolled in E-Verify with respect to all hiring sites that use the alternative procedure, and (iii) comply with all E-Verify requirements.

Who must complete an in-person physical re-verification?

All other employers must complete an in-person physical re-verification of all employees that were virtually verified since the flexibility policy rolled out in March 2020.

Yeng Collins Law will continue to monitor these developments and will provide additional guidance as available.

Virginia Employment Laws Taking Effect July 1, 2023

June 28, 2023

Non-Disclosure Act (NDA) Law Expanded:

Virginia’s current NDA Law prohibits employers from requiring actual or prospective employees “to execute or renew any provision in a non-disclosure or confidentiality agreement that has the purpose or effect of concealing the details relating to a claim of sexual assault.”

The amendments to the NDA Law effective July 1st will result in the expanded prohibition against requiring actual or prospective employees to execute or renew any non-disclosure, confidentiality, or non-disparagement provisions that have the purpose or effect of concealing details relating to a claim of sexual assault or sexual harassment. The amendment states that such provisions are now “void and unenforceable.”

While the Virginia Supreme Court has not yet interpreted it, the amended NDA Law appears by its plain language to be limited to agreements entered into “as a condition of employment.” In other words, it does not apply to separation or severance agreements entered into upon termination of employment and/or to settle an existing claim.

Subminimum Wage Eliminated by 2030:

The Virginia Minimum Wage Act has been amended to limit use of the subminimum wage, eventually eliminating the subminimum wage by 2030. This will end the practice in Virginia of paying subminimum wage (on average, $3.34/hour) to certain workers with disabilities. Virginia is one of only a handful of states that still permits employers to pay subminimum wage. After July 1st, no employers not previously certified to pay the subminimum wage will be eligible for such certification, although any currently certified employer will be grandfathered in until 2030. The wages of all affected employees will be raised to Virginia’s minimum wage in 2030.

Employee Social Security Now Numbers Off Limits:

Senate Bill 1040 prohibits employers from using an employee’s Social Security number “or any derivative thereof” – which includes the last four digits – as the employee’s work identification number or on an access card or badge.

Leave for Living Organ Donors:

Senate Bill 1086 requires employers with 50 or more employees to provide eligible employees with up to 60 business days of unpaid organ donation leave and up to 30 business days of unpaid organ donation leave in any 12-month period. The bill requires employers to restore the employee's position following the leave, to continue to provide coverage for the employee under any health benefit plan during the leave, and to pay the employee any commission earned prior to the leave. The bill also prohibits employers from taking retaliatory action against employees for taking organ donation leave.

The Pregnant Workers Fairness Act Expands Protections for Pregnant Workers

June 20, 2023

The Pregnant Workers Fairness Act (PWFA), set to go into effect on June 27th, requires employers to provide reasonable accommodations to workers for known limitations related to pregnancy, childbirth, or related medical conditions. The requirement will apply to employers with 15 or more employees.

While the Americans with Disabilities Act (ADA) already mandates that covered employers provide reasonable accommodations to employees with pregnancy-related conditions when such conditions qualify as a disability, many common pregnancy-related conditions are not covered by the ADA. The PWFA will extend ADA-like protections for those conditions that would not otherwise be covered by the ADA if they qualify as a “known limitation” – defined as a “physical or mental condition” related to “pregnancy, childbirth, or related conditions” that the employee “has communicated to the employer.” Neither the PWFA nor the ADA, however, applies to pregnancy itself.

The PWFA requires covered employers to:

engage in the interactive process to determine whether reasonable accommodation may be made (i.e., whether the job or work environment can be adjusted to allow the employee an equal opportunity to successfully perform the job despite their known limitation); and
provide a “reasonable accommodation” unless the employer can demonstrate that the accommodation would impose an undue hardship (a significant difficulty or expense) on the operation of the business.

The PWFA prohibits covered employers from:

denying a job or other employment opportunities to a qualified employee or applicant based on the person’s need for a reasonable accommodation;
requiring an employee to take leave (paid or unpaid) if another reasonable accommodation can be provided;
taking adverse action against an employee for requesting accommodation; or
retaliating against an employee for reporting or opposing unlawful discrimination under the law or participating in an investigation related to a PWFA complaint.

Examples of potential reasonable accommodations contemplated by the PWFA (as detailed in FAQs issued by the EEOC) include:

the provision of the ability to sit or to drink water;
access to closer parking;
flexibility in work hours;
the provision of appropriately sized uniforms and safety apparel;
additional break time allowances for bathroom use, eating, or resting; and
excusal from strenuous activities and/or activities that involve exposure to unsafe compounds.

Employers with 15 or more employees should consider training supervisors and human resources personnel to understand the requirements of the PWFA and to recognize potential requests for accommodation under this new law.

As always, the attorneys at Yeng Collins Law are available to assist you with efforts to come into compliance and to help you analyze and appropriately respond to requests for accommodation.

NLRB General Counsel Argues Unenforceability of Non-Competes

June 8, 2023

We previously notified you in early January that the Federal Trade Commission (FTC) proposed a sweeping rule to ban nearly all non-compete agreements between employers and workers as “an unfair method of competition” prohibited by Section 5 of the FTC Act. Late last week, the General Counsel for the National Labor Relations Board (NLRB) chimed in, issuing a memo asserting broad non-compete agreements also violate Section 7 rights under the National Labor Relations Act (NLRA), with few exceptions.

The NLRB General Counsel’s memo states an employer’s offer, maintenance, and enforcement of non-compete agreements violates the NLRA by inhibiting employees from engaging in five specific types of activity protected under Section 7:

threatening to resign to secure better working conditions;
carrying out threats to resign or otherwise resigning to secure improved working conditions;
seeking or accepting employment with a local competitor to obtain better working conditions;
soliciting co-workers to go to work for a local competitor as a broader course of protected concerted activity; and
working at another company to organize from within to promote unionization there.

The memo instead encourages employers to protect their proprietary or trade secret information with customized confidentiality agreements, rather than sweeping non-compete provisions.

Exceptions

This update applies only to private employees who are not supervisors or managers. It does not apply to public sector employees, independent contractors, or private employees that are supervisors or managerial, as they do not have Section 7 rights.

The memo acknowledges that noncompete agreements could be lawful if:

they clearly restrict only employees’ managerial or ownership interests in a competing business; or
they are “narrowly tailored to special circumstances justifying the infringement on employee rights." The memo, however, rejects the commonly asserted business interests of “retaining employees or protecting special investments in training employees” as “unlikely to ever justify an overbroad non-compete provision."

Why Is This Memo Significant?

The General Counsel’s memo signals that her office is seeking to prosecute cases involving potentially unlawful non-competes before the NLRB, with the goal of obtaining a decision from the Board reinforcing her view on non-compete agreements. Even if the Board were to adopt the General Counsel’s position, such decision would most certainly be appealed to the appropriate U.S. Court of Appeals, and ultimately to the U.S. Supreme Court, and could be overturned at any point in that process. For a review of the current landscape for enforceability of non-competes, see our January 10, 2023 blog “Proposed FTC Rule Would Make Non-Competes a No-Go.”

What Should Employers Do Now?

Employers should be aware that non-compete agreements will now be subject to scrutiny by the NLRB. As such, employers should carefully examine their current reliance on non-compete agreements and consider a tentative plan for implementing less sweeping covenants, such as non-disclosure agreements, non-solicitation agreements, and more stringent confidentiality agreements for those employees possessing highly sensitive trade secret information. In many cases, these narrower restrictions can achieve many of the same objectives as a non-compete while remaining enforceable in the event the General Counsel’s view, or that of the FTC, are confirmed by the Board or the courts.

What Should Employees Do Now?

Any private sector employee who is currently subject to, or may be asked to enter, a broad non-compete agreement, whether stand-alone or as part of an employment or severance agreement, should be aware that such non-compete agreements are now subject to scrutiny by the NLRB. Under Va. Code § 40.1-28.7:8, Virginia employers are already prohibited from entering into, enforcing, or threatening to enforce a covenant not to compete with any “low-wage employee” (one making less than $1,343 per week, or $69,836 annually). As the legal environment becomes less friendly towards broad non-competes, employers may replace their current non-compete agreements with less sweeping covenants, such as non-disclosure agreements, non-solicitation agreements, and more stringent confidentiality agreements for those employees possessing highly sensitive trade secret information. Such narrower restrictions would benefit employees by allowing more freedom of movement between jobs and more opportunity for launching competitive businesses.

At Yeng Collins, we remain available to provide guidance regarding this ever-changing area of law.

PUMP Act Increases Employers’ Obligations to Nursing Employees

April 27, 2023

Beginning April 28, 2023, the Providing Urgent Maternal Protections (PUMP) for Nursing Mothers Act provides nursing mothers with a new private right of action.

Q: Which employers are subject to the PUMP Act?

A: Employers of any size have obligations under the PUMP Act, importantly, including employers with less than five employees. Employers with five or more employees are already subject to the Virginia Human Rights Act (VHRA) requiring employers to provide reasonable accommodations for pregnancy, childbirth or related medical conditions, including lactation, unless the accommodation would impose an undue hardship. Examples of reasonable accommodations include breaks to express breast milk and access to a private location other than a bathroom for the expression of breast milk.

Employers with less than 50 employees are not subject to the Act if providing such accommodation would cause undue hardship, which is analyzed on a case-by-case basis as the need for accommodation arises.

Q: What obligations does an employer have, and what rights does an employee have, under the PUMP Act?

A: The PUMP Act requires employers to provide a reasonable break for an employee to express breast milk each time the employee has a need to do so for up to one year after a child's birth. Employers must provide the employee with a private location to express, other than a bathroom, that is shielded from view and free from intrusion. Employees must notify their employer if they have failed to provide adequate space to pump, and the employer then has 10 days to comply. Employers are also prohibited from firing an employee for requesting break time or space to pump.

The PUMP Act also amends the Fair Labor Standards Act (FLSA) to require employers to pay employees for lactation breaks if the employer provides paid breaks to other employees. Under the PUMP Act, even where employers do not provide paid breaks, time spent expressing must be considered hours worked unless the employee is completely relieved of duties during the entire break. If the employee is interrupted during the break, they must be paid for the entire break. Although these protections were already in place for nonexempt (hourly) employees under the Break Time for Nursing Mothers Act, passed in 2010 as part of the Affordable Care Act (ACA), the PUMP Act amends and expands that legislation to provide such protections to overtime-exempt (salaried) employees and adds additional enforcement mechanisms.

Q: What remedies does an employee have for a violation of the PUMP Act?

A: As of April 28, 2023, employees who are denied breaks, not provided a suitable space for expressing, not paid for the break as required by the Act, or fired for requesting break time or space to pump may bring a private right of action in federal court against their employers for back pay, front pay, liquidated damages, attorneys' fees and costs. Virginia law also provides employees who believe their pregnancy accommodation rights have been violated with a private right of action in state court.

In light of these developments, now is a good time to revisit your employee policies with respect to pregnancy and lactation breaks. If you find you need guidance regarding your workplace policies or other employment law matters, Yeng Collins Law is here to assist.

NLRB General Counsel Issues Guidance on

Non-disparagement and Confidentiality Provisions

March 30, 2023

We previously alerted you to the National Labor Relations Board (NLRB)’s recent decision in McLaren Macomb, holding that severance agreements containing overly broad non-disclosure or non-disparagement clauses are unlawful because they restrict workers’ rights under the National Labor Relations Act (NLRA). The McLaren decision raised more questions than answers, however, and employers (and the attorneys who advise them) have been awaiting further guidance from the NLRB. NLRB General Counsel recently released a memo providing additional clarification on the scope and impact of the February 21 McLaren decision.

Here are the main takeaways:

Severance agreements may still be lawful. Carefully crafted severance agreements may continue to be “proffered, maintained, and enforced” as long as they do not contain “overly broad provisions that affect the rights of employees to engage with one another to improve their lot as employees.” Notably, the Board held that employers have “no legitimate interest” in maintaining unlawful provisions in severance agreements and that in finding whether there has been an NLRA violation, whether or not an employee actually signed a severance agreement is “irrelevant” as “the proffer itself inherently coerces employees by conditioning severance benefits on the waiver of statutory rights.”

Limited non-disclosure clauses may still be lawful. Confidentiality (non-disclosure) clauses that are “narrowly tailored to restrict the dissemination of proprietary or trade secret information for a period of time based on legitimate business justifications” are lawful. Additionally, clauses that prohibit disclosure of the financial terms of a severance agreement are still lawful. However, a clause that has “a chilling effect that precludes employees from assisting others” or communicating with the media, a union, or other third parties would be unlawful.

Limited non-disparagement clauses may still be lawful. Non-disparagement provisions are still allowed provided they are “limited to employee statements about the employer that meet the definition of defamation as being maliciously untrue, such that they are made with knowledge of their falsity or with reckless disregard for their truth or falsity.”

The McLaren decision applies retroactively. McLaren applies to agreements signed before the February 21 decision, meaning that claims regarding overly broad non-disclosure or non-disparagement clauses in existing severance agreements would not be time-barred as long as an employer maintains or enforces such terms. Employers who attempt to continue to enforce such unlawful severance clauses would be committing a contemporary violation.

Agreements will not be voided in their entirety because they include unlawful provisions. The Board will generally seek to void only those provisions determined to be unlawful, rather than voiding the entire agreement, even in situations where the agreement does not include a severability clause.

Overly broad non-disclosure and non-disparagement provisions are unlawful even if requested by the employee.

Disclaimer language is not necessarily a cure-all.

Still unresolved is the question whether McLaren applies to other types of agreements, such as settlement agreements (though many legal experts believe it likely does apply to such agreements).

Finally, while this guidance memo is helpful in understanding the NLRB’s enforcement intentions, it is important to keep in mind that McLaren is subject to appeal, thus there is likely to be further direction from the courts on these issues that may conflict with the General Counsel’s guidance. In the meantime, employers should review the terms of their severance agreements in light of this new guidance.

Yeng Collins Law will continue to monitor these developments and will provide updates as additional information becomes available. We remain available to assist you in navigating this uncertain legal terrain.

NLRB Decision Upends the Legality of Severance Agreements Containing Confidentiality and Non-disparagement Provisions

February 26, 2023

Last week, the National Labor Relations Board (NLRB) issued a tide-turning decision in McClaren Macomb finding that severance agreements are unlawful if they broadly restrict an employee’s right to discuss the agreement (confidentiality) or speak negatively about their former employer (non-disparagement). Specifically, the NLRB held that a severance agreement containing broadly-drafted confidentiality and/or non-disparagement provisions is unlawful because such terms tend to interfere with workers’ organizing rights under Section 7 of the National Labor Relations Act (NLRA). The McClaren decision applies to both unionized and non-union private workplaces.

It is important to note that this decision does not affect workers who do not have Section 7 rights, including independent contractors, managers, most supervisors, and public sector employees, among others.

In light of this sweeping decision, private employers who utilize standard severance agreements containing confidentiality and/or non-disparagement provisions need to closely examine the language of those provisions. Here are a few things for employers to keep in mind:

Even if you haven’t sought to enforce a confidentiality or non-disparagement provision in a severance agreement, the agreement may still violate Section 7. McClaren held that merely “proffering” a severance agreement containing such overly-restrictive provisions constitutes an unlawful labor practice, because the act of conditioning receipt of benefits on the acceptance of what it considered to be unlawful terms waiving organizing rights was deemed coercive in and of itself.

It is possible, but not definite, that a severance agreement containing confidentiality and non-disparagement provisions could still be legal if those provisions are sufficiently narrowed and/or contain a disclaimer preserving the employee’s Section 7 rights. The confidentiality and non-disparagement provisions in the McClaren case were drafted broadly, and neither were accompanied by a disclaimer stating these provisions do not prevent the employee from enforcing their Section 7 rights. While the decision did not directly state that such a disclaimer could have saved these provisions, it does leave the door cracked to the possibility that such a disclaimer, if carefully drafted, might allow the inclusion of non-disparagement and confidentiality provisions. The question is, would such disclaimers need to be so broad that they would essentially render the confidentiality and non-disparagement provisions practically unenforceable. Similarly, any narrowing of such provisions would likely need to be so limiting as to obviate the employer’s purpose for including them – for instance, the McClaren decision found that a confidentiality clause prohibiting disclosure to any third party, which would include the employee’s labor union and former co-workers was unlawfully restrictive.

Existing severance agreements containing confidentiality and non-disparagement provisions, while not specifically excluded from the McClaren decision’s coverage, are unlikely to be invalidated by it. Mainly, this is because the NLRB’s procedural rules effectively bar workers from bringing charges unless they relate back to a violation occurring within the past six months. Additionally, it is reasonable to assume that if a severance agreement took effect at a time when confidentiality and non-disparagement provisions were allowed, the employer would have a valid defense to any complaint seeking retroactive application of the new restriction on such provisions.

Given all of the above, and in the absence of further guidance from the NLRB’s General Counsel (which we expect to follow in the coming months), there is no definite answer to the dilemma the McClaren decision raises for employers. As to a severance agreement presented to any employees who have Section 7 rights, employers may take a number of approaches:

Risk-averse employers who do not want to take any chances with a possible NLRA violation may decide to immediately stop including confidentiality and non-disparagement provisions in their severance agreements.
Others may decide to keep such provisions in but narrow them as much as possible and add strong disclaimer language.
Still others may decide to keep their broad confidentiality and non-disparagement provisions as-is, at least until further guidance is issued, given the deterrent value of such provisions and the unlikelihood of the employee to bring a complaint that could disgorge their severance benefits.

Yeng Collins Law will continue to monitor the impact of the McLaren decision as it unfolds and as further guidance is issued and will provide updates as needed. In the meantime, if you have questions, we are available to provide advice that will best position you on this still-uneven ground.

Untold Tales: Q4 2022 Legal Developments We Did NOT Blog About

January 24, 2023

As we wade into 2023 (hard to believe January is almost over!), we’d like to take note of a few legal developments that occurred in the fourth quarter of last year that we haven’t yet shared with you:

The Fourth Circuit Held that Gender Dysphoria Is Covered by the ADA

Employers in Virginia should know that they will not only be navigating Title VII when dealing with transgender employees, but also potentially requests for accommodation under the Americans with Disabilities Act (ADA), based on the Fourth Circuit’s decision in Williams v. Kincaid. Although the case was decided in August 2022, it was cemented as Fourth Circuit law when a full panel rehearing was denied in October.

The Williams case holds that transgender people who experience gender dysphoria that results in physical distress or requires the use of a physical treatment are protected under the ADA.

New Proposed DOL Independent Contractor Test

On October 13, 2022, the Department of Labor issued a proposed new rule establishing the test for when employers may properly classify workers as independent contractors rather than employees. The proposed rule, which is very similar to the Obama-era test, focuses on the “economic realities of the workers’ relationship with the employer,” and frames a worker’s economic dependence on their employer as the “ultimate inquiry” for the test. If it takes effect, the new rule would entirely replace the current rule, which was issued in the last days of the Trump administration.

Independent contractors are paid on an hourly or per-project basis and are not entitled to healthcare benefits, retirement benefits or most labor protections. However, the rise of the gig economy has created a class of worker that effectively works full time for a company but is still considered an independent contractor. The proposed rule would likely change that, providing these workers with benefits and labor protections under federal law.

Speak Out Act

The Speak Out Act, signed into law by President Biden on Dec. 7, 2022, makes pre-dispute nondisclosure and non-disparagement clauses in employment contracts or severance agreements unenforceable with respect to claims or allegations of sexual assault and sexual harassment.

In practical terms, this means that prospective non-disclose agreements between employees and employers that include restrictions on disclosing sexual misconduct are no longer enforceable. Similarly, prospective non-disparagement clauses prohibiting employees from speaking negatively about the employer or other employees are unenforceable. Such clauses would also be unenforceable in severance agreements, provided the separation was not prompted by allegations of sexual assault or harassment.

Employers wishing to include non-disclosure and non-disparagement clauses in their employment agreements may still do so with respect to other topics, provided they carve out sexual assault and sexual misconduct.

Because it only applies to pre-dispute clauses, the Speak Out Act does not prohibit employers who are settling claims alleging sexual assault or sexual harassment from negotiating for and enforcing non-disclosure and non-disparagement clauses in the applicable settlement agreements. Indeed, these clauses are often critical in getting such disputes resolved.

Proposed FTC Rule

Proposed FTC Rule Would Make Non-Competes a No-Go

January 10, 2023

On January 5, 2023, the Federal Trade Commission (FTC) proposed a sweeping rule that would:

ban employers and workers from entering future non-compete agreements (except in limited circumstances in connection with the sale of business); and
invalidate existing non-compete agreements between employers and their current and former workers.

If the rule takes effect, it would deem non-competes between employers and workers “an unfair method of competition” prohibited by Section 5 of the FTC Act.

In support of the proposed rule, the FTC argues that noncompete clauses “hinder innovation and business dynamism in multiple ways – from preventing would-be entrepreneurs from forming competing businesses, to inhibiting workers from bringing innovative ideas to new companies.” But the U.S. Chamber of Commerce calls the proposed rule a “blatantly unlawful” restriction on the right of employers and employees to contract freely.

As of July 1, 2020, Virginia law bars employers from entering and enforcing non-competes with “low-wage employees” (currently, those making less than $67, 080 annually). However, the use of non-compete agreements by Virginia employers continues to be commonplace for higher-paid workers, including independent contractors. The FTC proposed rule would upend this status quo, preventing employers from entering into non-compete clauses with workers at all pay levels. Additionally, unlike the Virginia prohibition on non-competes for low wage earners, which grandfathers all agreements made before July 1, 2020, the FTC rule would require employers to rescind all existing non-compete agreements with workers. Furthermore, because the rule applies to “workers” and not just “employees,” it is written to include independent contractors.

Once the FTC publishes the proposed rule in the Federal Register, it will allow a 60-day public comment period. It can then finalize the rule based on input received. As currently drafted, once finalized and published, the rule would require employers to comply within 180 days. However, enforcement of any final rule could be delayed or prevented entirely by legal challenges.

For now, employers should carefully examine their current reliance on non-compete agreements and consider a tentative plan for implementing less restrictive covenants, such as non-disclosure agreements and non-solicitation agreements, that would achieve many of the same objectives as a non-compete while remaining enforceable in the event the rule, or a modified but similar version thereof, takes effect. On the other hand, employees whose ability to move jobs within their industry in the next few years is curtailed by a non-compete agreement should monitor the progress of this proposed rule closely and may wish to seek legal counsel now regarding the current limits and enforceability of their agreement.

Virginia Overtime Wage Act Creates Substantial Exposure for Employers and Greater Availability of Damages for Employees

June 21, 2021

The new Virginia Overtime Wage Act (VOWA) will go into effect July 1, 2021, and similar to the federal Fair Labor Standards Act (FLSA), the VOWA requires employers to pay nonexempt workers overtime at a rate of one-and-a-half times their regular rate of pay for any hours worked over 40 hours in a single workweek.

The VOWA is more favorable to employees than the FLSA in three notable respects:

(1) The VOWA has a 3 year statute of limitations, whereas the FLSA has a 2 year statute of limitations, with a 3 year statute of limitations only available if the employee can prove the violation was willful.

(2) The VOWA provides for greater remedies than the FLSA. The VOWA makes liquidated damages automatic, whereas the FLSA provides employers with a good faith defense against liquidated damages. Additionally, the VOWA allows for treble damages for "knowingly" failing to comply, however, those damages are not available under the FLSA.

(3) As to nonexempt salaried workers, the VOWA calculates the worker's regular rate of pay as one-fortieth of all wages paid for a particular week (regardless of the number of hours worked) and requires time-and-a-half overtime pay, whereas the FLSA calculates the worker's regular rate of pay by dividing the salary by the total number of hours worked and allows overtime pay as half-time only.

Fluctuating workweeks likely do not comply with the VOWA, and any piece rate and day rate arrangements should be reevaluated to ensure compliance with the VOWA. There are exemption defenses available to employers for employees that are executive, administrative, professional or outside sales, among others. The VOWA also expressly authorizes collective actions.

CDC Updates Recommended Isolation and Quarantine Guidance

January 5, 2022

On January 4, 2022, the CDC updated it's recommended isolation and quarantine guidance.

If your employee has been in close contact with someone who has tested positive for COVID-19:

OPTION 1: If the employee is fully vaccinated, he/she does not need to quarantine. The employee should still:
- (1) wear a mask around others for 10 days from the date of his/her last close contact, and
- (2) get tested at least 5 days after the last close contact. If the test is positive, or if he/she develops COVID-19 symptoms, the employee should isolate for 5 days, then wear a mask around others for an additional 5 days. If the test is negative, the employee can return to work but should wear a mask around others until 10 days from the date of the last close contact.
OPTION 2: If the employee (a) had confirmed COVID-19 within the last 90 days, (b) has recovered, and (c) is not experiencing any COVID-19 symptoms, the employee does not need to quarantine or get tested after the close contact. The employee should wear a mask around others for 10 days from the date of the last close contact.
OPTION 3: If the employee is not vaccinated or is not fully vaccinated, he/she should:
- (1) quarantine for at least 5 days from the last close contact, and
- (2) get tested:
  - (i) at least 5 days after the last contact, if there are no symptoms. If the employee tests negative, he/she can return to work but should wear a mask around others until 10 days after the last close contact. If the employee tests positive, he/she should isolate for 5 days from the positive test result, then wear a mask around others for an additional 5 days; or
  - (ii) immediately if symptoms develop. The employee should isolate for at least 5 days from the date the symptoms began, then wear a mask around others for an additional 5 days.
- If the employee does not want to be tested or cannot locate a test, he/she should quarantine for 5 days from the last close contact and, if no symptoms develop, can return to work but should wear a mask for 10 days after the last close contact.

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Paycheck Protection Program Extension Act of 2021 Extends the Program until May 31, 2021

April 6, 2021

Businesses can now apply for a PPP loan until May 31, 2021, with an additional thirty (30) days provided for the Small Business Administration to process applications that are still pending.

Extended COVID-19 Related Leave Provisions Provided For Under the American Rescue Plan Act of 2021

March 16, 2021

On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (the Plan), which expanded the availability of paid leave previously provided through the Families First Coronavirus Relief Act (FFCRA). The Plan allows an employer to voluntarily provide Emergency Sick Leave (ESL) and Emergency Family and Medical Leave Act Leave (EFMLA), and to claim the related tax credit for the wages associated with the use of that leave, between April 1, 2021 through September 30, 2021.

The FFCRA provided for paid leave for these qualifying reasons:

to comply with a federal, state, or local quarantine or isolation order related to COVID-19;
to self-quarantine if advised to do so by a healthcare provider;
to obtain a medical diagnosis if experiencing COVID-19 symptoms;
to care for an individual required to be quarantined if that individual is subject to a quarantine or isolation order or has been advised by a medical provider to self-quarantine; or
to care for your child if the child's school or child care center is closed due to COVID-19.

The Plan now allows the 10 days of paid leave under the ESL and the 12 weeks of paid leave under the EFMLA to also be used for these additional qualifying reasons:

obtaining a COVID-19 vaccine;
recovering from an injury, disability, illness or condition related to a COVID-19 vaccination; or
seeking or awaiting results of a COVID-19 test or diagnosis either because the employee has been exposed or the employer requested the test or diagnosis.

Beginning April 1, 2021, employees have access to a new bank of 10 days of ESL and are therefore eligible for this leave even if they have previously taken 10 days of paid leave under the ESL.

The first two weeks of the EFMLA no longer need to be unpaid.

U.S. Department of Labor Delays Effective Date of New Tip Pool and Tip Credit Regulations

March 1, 2021

On February 24, 2021, the U.S. DOL announced it would delay until April 30th the implementation of the tip pool and tip credit regulations that were set to go into effect on March 1st. The new regulations would allow non-tipped employees to be paid as little as $2.13/hr and be included in a tip pool to receive tips that would compensate them up to the higher minimum wage. These regulations would also remove limits on how many hours of non-tipped work a tipped employee can perform while being paid at a rate of $2.13/hr. Finally, the regulations include new recordkeeping and notice requirements for employers. It is anticipated that these regulations will assist employers in the service industry struggling during the COVID-19 pandemic.

Robust Avenue to Recover Unpaid Wages Under the Virginia Wage Payment Act

March 1, 2021

Employees in Virginia can now file suit in state court to recover unpaid wages, bonuses and commissions. If successful, the employee could recover not only the unpaid wages, but also liquidated damages (up to three times the amount of unpaid wages for knowing violations), prejudgment interest, and reasonable attorneys' fees and costs. An employer acts knowingly if it has actual knowledge, deliberately ignores the truth or recklessly disregards the truth.