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.
The current National Labor Relations Board (NLRB or Board) continues to take steps toward reversing union-friendly Obama-era NLRB rules and regulations. Previously, the Board sought public comment on whether it should change the NLRB rules and regulations established in 2015, also referred to by some as the “Ambush Election” Rules or “Quickie Election” Rules. On Aug. 12, 2019, the Board published a Notice of Proposed Rulemaking involving Representation Election procedures (Proposed Rule). The Proposed Rule is consistent with the Board’s use of formal notice-and-comment rulemaking to reshape labor law. It seeks to modify three policies that currently simplify unions’ ability to achieve and retain their status as the exclusive representative of employees for the purpose of collective bargaining: (1) the use of unfair labor practice charges to block petitions for a decertification election, (2) the use of voluntary recognition to prevent challenges to a union’s majority status via NLRB election procedures, and (3) the use of collective bargaining agreement language to convert a construction industry pre-hire agreement into a Section 9(a) collective bargaining relationship without an NLRB election or a showing of majority status.
On August 12, 2019, New York Governor Andrew Cuomo signed new legislation amending the New York State Human Rights Law (the “NYSHRL”), changing the State law’s previous adherence to certain fundamental principles of federal law concerning employment harassment generally, including the standard for determining employer liability for “hostile work environment” discrimination claims and the availability of punitive damages, among other issues. Whereas New York courts have historically interpreted the NYSHRL based on interpretations of claims filed under Title VII of the federal Civil Rights Act of 1964, the new amendments will alter the applicability of many significant precedents.
The amendment addresses workplace harassment, including but not limited to sexual harassment, against employees in any protected group. Claims of harassment based on age, race, creed, color, national origin, sexual orientation, gender identity or expression, military status, sex, disability, predisposing genetic characteristics, familial status, marital status, domestic violence victim status, or claims based on an employee’s opposition to such misconduct, are subject to the new provisions.
To begin with, the revised NYSHRL will now cover employers of all sizes, and even includes new protections for domestic workers, who will now be protected on the same grounds as other types of employees. Some of the law’s provisions take effect immediately, others within 60 days or 120 days of the law’s passage. Broadly stated, the law purports to provide “increased protections for protected classes and special protections for employees who have been sexually harassed.”
On August 9, 2019, New York state amended its Human Rights Law (NYSHRL) to expressly include the workplace protection of religious attire, clothing, and facial hair. The law becomes effective in sixty (60) days, on October 8, 2019.
While religious discrimination has long been outlawed under both state and federal law, this amendment makes clear that the definition of religion in New York state’s existing anti-discrimination statute includes bias against any employee’s religious clothing, facial hair, or attire.
Click here for the full GT Alert.
On July 24, 2019, the city of Chicago enacted the Chicago Fair Workweek Ordinance, intended to “enact and enforce fair and equitable employment scheduling practices in the City of Chicago…” Most provisions of the Ordinance go into effect on July 1, 2020.
The Ordinance covers employers primarily engaged in building services, health care, hotel, manufacturing, restaurant, retail and warehouse services industries and who employ 100 or more employees (250 or more employees for not-for-profit corporations), at least 50 of whom are considered “Covered Employees.” A Covered Employee spends the majority of his or her time at work in a covered industry while physically present in the city of Chicago and who earns $50,000 or less per year as a salaried employee, or $26.00 or less per hour as an hourly employee. For purposes of meeting these minimums, the number of Covered Employees is aggregated if they are employed by members of a unitary business group for Illinois income tax purposes.
The Ordinance covers restaurants only if the business has at least 30 locations and 250 employees. Restaurant businesses having three or fewer locations in the city under a sole franchise are exempt from coverage. In addition, there are certain other exceptions for employees who self-schedule or who work at certain types of venues or events.
Click here for the full GT Alert, which covers the requirements of the Ordinance, rights of Covered Employees, and enforcement and penalties.
On Aug. 6, 2019, New Jersey Acting Gov. Sheila Oliver signed a new “wage theft” law that expands the fines, penalties, and damages to be imposed for violations of the state’s wage payment law for an extended six-year statute of limitations period. The law takes effect immediately. In this GT Alert we explore the new law’s civil and criminal penalties for violators, additional retaliation protection, the expansive application of the new law, and key takeaways for employers.
Click here for the full GT Alert.
Last year was the most destructive fire season in California’s history. Over 7,600 wildfires burned nearly two million acres. As a result, on July 18, the California Department of Industrial Relations (DIR) Occupational Safety Health Standards Board adopted an emergency regulation to protect workers from hazards associated with wildfire smoke. The regulation is now in effect, following its approval on July 29, 2019, by the Office of Administrative Law.
The emergency regulation will be effective for one year, and applies where the current Air Quality Index (AQI) for airborne particulate matter (PM) 2.5 is 151 or greater (the AQI scale is from 0 to 500, and a 151 AQI is considered “unhealthy”), or where employers should reasonably anticipate that employees could be exposed to wildfire smoke.
Click here for the full GT Alert.
On June 27, 2019, New Jersey’s Appellate Division ruled that New Jersey’s Law Against Discrimination (NJLAD) can extend “in appropriate circumstances” to plaintiffs who reside or work outside of the state where New Jersey has the “most significant relationship” to the claims. Calabotta v. Phibro Animal Health Corp., et al.
In 2008, New Jersey-based Phibro Animal Health Corporation hired plaintiff David Calabotta to serve as vice president of marketing and technology deployment for Prince Agri Products Incorporated, a Phibro subsidiary located in Quincy, Illinois.
In June 2016, Phibro created a new position based at its headquarters in New Jersey for a senior vice president of marketing and product management. Plaintiff alleged that despite expressing interest in the new position, he was not interviewed because of his wife’s terminal breast cancer diagnosis. Plaintiff was terminated in August 2016, following allegations he acted inappropriately at a national conference.
Plaintiff filed a complaint in the Superior Court of New Jersey against Phibro, his supervisor, and the senior VP of human resources, who investigated the allegations and terminated his employment. Plaintiff alleged defendants discriminated against him in violation of NJLAD “on account of his association with a person with a disability” when (1) they refused to consider him for a promotion in New Jersey, and (2) they subsequently terminated his employment. The trial court originally dismissed plaintiff’s complaint, reasoning he had no viable cause of action under NJLAD as an Illinois resident who worked for the company’s subsidiary in Illinois.
Click here for the full GT Alert, which summarizes the Appellate Division’s decision.
There have been many significant developments in the first half of 2019 impacting private employers in New York and New Jersey. Federal, state, and local legislatures and agencies have been particularly busy in the employment arena, promulgating sweeping laws and regulations affecting a broad range of well-entrenched employment practices. For instance, New Jersey adopted prohibitions against non-disclosure provisions in settlement agreements resolving discrimination and harassment claims (with, as discussed in this GT Alert, New York expected to follow shortly), and New York enacted its Gender Expression Non-Discrimination Act.
So too have our courts been active, rendering decisions fleshing out some of these recent laws, as well as revisiting other, more familiar questions under longstanding principles. If you overlooked any of these developments, or need a quick and easy reference of what has occurred and what is on the horizon, we hope this topline recap helps.
Click here to read the full GT Alert.