This GT Alert provides an update on employment and pension law in the Netherlands for 2019. Topics covered include diversity in boards of larger companies; the Balanced Labour Market Act (Wab), effective 1 January 2020; amendments to restructuring rules applied by the Employee Insurance Agency (UWV), effective 1 October 2019; Dutch pension system reforms; and Pending acts and regulations, including Transfer of Undertaking in Bankruptcy Act (Wet overgang van onderneming in faillissement), changes to civil servant status, and extended birth leave. We also provide a list of training courses offered by GT and our areas of concentration in Labor & Employment law in the Netherlands.
After the California Second District Court of Appeal’s Oct. 8, 2019, decision in Gonzales v. San Gabriel Transit, Inc., brought as a garden variety wage and hour class action claiming various classifications of drivers who agreed to be and were treated as independent contractors were in fact employees, the California Supreme Court will have the final say on whether the ABC test in Dynamex Operations West v. Superior Court, 4 Cal.5th 903 (2018), generally not well-received by businesses, is a retroactive expression of existing law, or prospective only.
New York employers have until Wednesday, Oct. 9, 2019, to train each of their employees on sexual harassment prevention. The training must be conducted annually thereafter, and must satisfy all of the statutory requirements for content and interaction. Employers who have not yet conducted training should do so as soon as possible. For more information, including training parameters, see our October 2018 GT Alert here.
Contact your Greenberg Traurig attorney to schedule training or for guidance on compliance with these training requirements and related employment laws.
The U.S. Department of Labor (DOL) on Sept. 24, 2019, announced a final rule raising the annual minimum salary requirements for the Fair Labor Standards Act (FLSA) overtime exemptions for executive, administrative, and professional employees. The final rule, effective Jan. 1, 2020, will significantly impact businesses. Experts predict the rule could result in the reclassification of as many as 1.3 million currently exempt employees as non-exempt.
Under the final rule, the salary level for these “white collar” exemptions will increase from $23,660 per year ($455 per week) to $35,568 per year ($684 per week). In this respect, the final rule increases the salary level a few dollars per week more than the original rule proposed on March 7, 2019.
On Sept. 18, California Gov. Gavin Newsom signed Assembly Bill 5 (AB5) into law. AB5, effective Jan. 1, 2020, seeks to codify and clarify a California Supreme Court case (Dynamex Operations West, Inc. v. Superior Court of Los Angeles), which dramatically changed the standard for determining whether workers in California should be classified as employees or as independent contractors. Specifically, the Dynamex court held there is a presumption that workers are employees, and placed the burden on an entity classifying an individual as an independent contractor to prove that such a classification is proper under a three-part “ABC” test.
Although much of the public debate surrounding AB5 has centered around the “gig economy” (such as ridesharing companies), whether AB5 impacts more traditional business relationships, such as franchisee-franchisor relationships, remains up for debate.
On Sept. 12, 2019, the California Supreme Court in ZB, N.A. v. Superior Court of San Diego County (Lawson) delivered a victory for California employers, clarifying that a plaintiff bringing a Private Attorneys General Act (PAGA) action may not recover as a “civil penalty” the “wages” referenced in Cal. Labor Code section 558, and thereby limited the monetary recovery workers can seek under PAGA.
PAGA allows a plaintiff-employee to seek civil penalties on behalf of the plaintiff and other “aggrieved employees” for a Labor Code violation, if the Labor Commissioner first receives proper notice of the claim and declines to take action on it. Among the Labor Code sections often relied on by plaintiffs in such cases is Labor Code section 558, which enables the Labor Commissioner to collect $50 and $100 in civil penalties against employers that unlawfully deny overtime compensation to workers, and allows the Commissioner to recover “an amount sufficient to recover underpaid wages.” Though PAGA provides that amounts recovered by a private litigant are to be distributed 75% to the state and 25% to “aggrieved employees,” section 558 provides that any wage-based recovery under section 558 goes entirely (100%) to the workers.
On Aug. 23, 2019, a federal judge in the United States District Court for the Eastern District of Pennsylvania awarded over a million dollars in lost wages and punitive damages to two former employees of Lloyd Industries after a jury found the company and its owner fired them in retaliation for their participation in a 2014 federal safety investigation by the Occupational Safety and Health Administration (OSHA). The company fired one of the employees after OSHA began an onsite investigation, and fired the other employee shortly after OSHA issued the Citation and Notification of Penalty, assessing monetary penalties on Lloyd Industries.
Significantly, the court’s award of $500,000 in punitive damages is the largest punitive award under the anti-retaliation provision (Section 11(c)) of the Occupational Safety and Health Act (OSH Act). In addition to the punitive damages, the judge awarded the former employees more than $500,000 in front and back pay and prejudgment interest. The judge also required that the employer and its owner post an anti-retaliation notice at the plant and never again violate the OSH Act’s anti-retaliation provision.
For those companies employing Massachusetts workers, payroll withholdings to fund the leave program established by the Massachusetts Paid Family and Medical Leave Act (PFML) will begin Oct. 1, 2019.
As reported in previous GT Alerts (see July 2018 and May 2019), the PFML provides eligible employees with paid medical and family leave benefits effective Jan. 1, 2021. Individuals will be entitled to up to 20 weeks of paid medical leave and 12 weeks of paid family leave per year, with a combined maximum amount of family and medical leave of 26 weeks per year. The benefit amount is based on an individual’s earnings and is capped at $850 per week.
Several amendments to the Illinois Equal Pay Act will become effective Sept. 29, 2019. The most significant of these amendments is a ban that prohibits inquiry into and the use of a job applicant’s pay history in making hiring and employment decisions. Illinois has now joined with 13 states that have imposed such a ban. This GT Alert summarizes the amendments that will take effect, and also reviews the Illinois Cannabis Regulation and Tax Act (CRTA), the so-called “Recreational Marijuana Law,” which takes effect Jan. 1, 2020. Under the CRTA, Illinois residents 21 years of age and older will be able to possess 30 grams of marijuana flower and five grams of marijuana concentrate for their personal use. The CRTA contains many favorable protections for employers concerning marijuana in the workplace, but other provisions that may well require employers to modify their current drug use policies.
The enforceability of restrictive covenants, particularly non-compete agreements, can be very difficult for employers to navigate, especially for companies in their “start-up” phase. Technology companies in particular face challenges in structuring non-competes that balance their need to attract talent with their need to protect confidential and sensitive information, while preventing unfair competition by former employees. Many states have developed common law precedent as to what constitutes a permissible non-compete, while others have enacted statutes. Emerging technology companies must be aware of the laws in their jurisdictions in order to draft enforceable restrictive covenants that adequately protect business needs. The below chart presents a summary of employee non-competition laws and applicable standards in four states where emerging technology companies often do business: California, Massachusetts, New York, and Texas.
|Statutes/ regulations governing non-competes||Sections 16600 to 16607 of the California Business and Professions Code govern non-competes.||Massachusetts Noncompetition Agreement, Act, M.G.L. c. 149, § 24L (effective for agreements made on or after Oct. 1, 2018).||No statute or regulation governing non-competes generally.||Texas Covenants Not to Compete Act, Tex Bus. & Com. Code Ann. §§ 15.50 to 15.52.|
|Essential Elements||Post-employment non-compete agreements are unlawful except in the context of a sale of a business.||
To be valid and enforceable, a non-compete agreement must:
-be in writing and signed by both the employer and employee;
-expressly state that the employee may consult with an attorney before signing;
-be provided, if made before employment begins, to the employee by the earlier of either: (a) formal offer of employment; or (b) at least 10 business days before employment begins;
-be supported, if made after employment begins but not in connection with termination of employment, by fair and reasonable consideration independent from continued employment; and provided to the employee at least 10 business before agreement is effective;
-be no broader than necessary to protect the following legitimate interests of the employer: (a) trade secrets; (b) confidential information that is not a trade secret; or (c) the employer’s goodwill.
New York common law disfavors non-compete agreements as an unreasonable restraint of trade.
Courts may enforce a non-compete if the restriction is reasonable. Although courts evaluate non-competes on a case-by-case basis, a non-compete can be enforced only if it:
-is no greater than required to protect an employer’s legitimate protectable interests;
-does not impose undue hardship on the employee;
-does not cause injury to the public;
-is reasonable in: duration; and geographic scope
New York courts have recognized the following protectable interests that may be sufficient to support a reasonable non-compete:
-employer’s trade secrets or confidential information;
-employer’s interest in preventing loss to a competitor of an employee whose services are special, unique, or extraordinary.
To be enforceable under Texas law, a non-compete must:
-be ancillary to or part of an otherwise enforceable agreement when the agreement is made;
-be reasonable concerning time, geographical area, and scope of activity to be restrained;
-impose no greater restraint than necessary to protect the employer’s (or promisee’s) goodwill or other business interest.
|Burden of Proof||Plaintiff-former employer bears the burden of proving that a statutory exception applies to the general rule prohibiting non-compete agreements.||Employer has the burden of proof to enforce a non-compete.||
Party seeking enforcement of the non-compete (typically, the employer) has the burden of proof.
|If primary purpose of the ancillary agreement is to obligate the employee to provide personal services, the employer has the burden of proof to show that the covenant is reasonable.|
|Circumstances of Departure Relevant||Does not matter whether employer or employee terminates the relationship. Post-employment non-competes are unenforceable in California unless a narrow exception applies.||
Employers may not enforce non-compete agreements entered into on or after Oct. 1, 2018, against employees who have been:
-terminated without cause;
While NY courts are not entirely in agreement regarding whether non-compete agreements are enforceable against employees who have been terminated by the employer without cause, an increasing number of cases seem to find that they are not enforceable under those circumstances.
If the termination constitutes a breach of contract by an employer, any post-employment non-compete in that agreement cannot be enforced by the breaching employer.
|Unless non-compete says otherwise, whether employee terminated or voluntarily departed is not-relevant.|
|Consideration||Not applicable, as non-competes are not enforceable in California and are void against public policy, unless narrow exception applies.||
Massachusetts courts have determined that the employment relationship itself is sufficient consideration for a non-compete agreement signed at the beginning of the employment relationship.
For agreements signed after hire, continued employment is not sufficient consideration as required under the Massachusetts Noncompetition Agreement Act.
Initial employment, and under certain circumstances, continued employment, suffices.
Payments to the employee.
Intangibles, including the employee’s receipt of increased:
|To be considered sufficient in Texas, consideration must give rise to the employer’s interest in restraining the employee from competing, and the covenant must be designed to enforce the employer’s consideration or return promise.|
|Time Range||Not applicable, as non-competes are not enforceable in California and are void against public policy, unless narrow exception applies.||
Massachusetts Noncompetition Agreement Act prohibits a restricted period of longer than one year from the date the employment ends. A restricted period may extend to a maximum of two years only if the employee:
-breached her fiduciary duty to the employer; or
-has unlawfully taken the employer’s property, either physically or electronically.
Courts have repeatedly held that six months or less is reasonable.
Courts have found longer restrictions to be either reasonable or unreasonable depending on facts of particular case.
|Time restrictions ranging from two to five years have repeatedly been enforced in non-competes.|
|Geographic Restrictions (or other scope of enforcement)||Not applicable, as non-competes are not enforceable in California and are void against public policy, unless narrow exception applies.||
Under the Massachusetts Noncompetition Agreement Act, a geographic restriction is presumed reasonable when the reach is limited to regions where, for the last two years of employment, the employee:
-had a material presence of influence.
|When determining whether a non-compete is reasonable in its geographic reach, New York courts focus on the facts and circumstances of each case.||
Limitations based on the former employee’s territory during employment are valid.
Another approach, applicable in some circumstances, is to limit the geographic restriction to the area of the employer’s operations.