Employment Law Roundup: A Busy First Six Months of 2024

It’s six months into 2024 and the legal landscape for employers has been busy to say the least.  New laws and regulations are popping up almost daily it seems and while many workers are thrilled with the new protections, most employers are struggling to keep up.  With everything from updates to overtime eligibility to total bans on non-compete agreements, changes are coming and they are coming fast.  Next month, employers will see the first of three earnings threshold changes for salary workers’ entitlement to overtime.  Starting July 1, 2024, most salaried workers in the United States who earn less than $844 per week will become eligible for overtime pay, and by 2027, the earnings thresholds will be automatically updated every three years (which is intended to help employers better manage the changing overtime salary threshold).  In addition to overtime changes, employers are facing increased protections for workers across all areas, including workplace accommodations, drug testing, and pay transparency, among many others.  It’s crucial for employers to stay on top of these changes to avoid penalties, keep employees engaged to lower attrition rates, and protect themselves from lawsuits and increased competition.  Let’s take a brief look at the top three hot-button issues in employment law in the first half of 2024.

The PWFA

The Pregnant Workers Fairness Act, which went into effect on June 18, 2024, has recently had its fair share of controversy.  The law is aimed at providing “‘reasonable accommodation’ to a qualified employee’s or applicant’s known limitations related to, affected by, or arising out of pregnancy, childbirth, or related medical conditions, unless the accommodation will cause the employer an ‘undue hardship.’”  The PWFA applies to accommodations only – not acts of discrimination (that’s what Title VII is for, among other federal and state discrimination laws).  It does not replace other federal, state, or local laws that are more protective of a qualified employee or applicant. 

While a challenge brought by several attorneys general as it relates to the law’s protections around abortions was dismissed by a district judge in Arkansas, a district judge in Louisiana did grant a preliminary injunction. In that fight, the attorneys general from Louisiana and Mississippi, along with others, were successful in their challenge that the EEOC “overstepped its authority by requiring workplace accommodations for ‘purely elective abortions.’” This means that while this fight continues to play out in court, employers in Louisiana and Mississippi need not comply with the PWFA with respect to purely elective abortions only, but the law is still in effect in all other respects in those two states. As of June 18, every other state must comply in all respects with the PWFA. We should expect to see more challenges to portions of the PWFA in the coming months.

The War on Non-Competition Agreements

Non-competition agreements, or as they are more universally known, non-competes, have been a hot topic for pretty much as long as they have been around. As a refresher, non-compete agreements are a type of restrictive covenant that prohibit a person from owning, working for, or being otherwise involved in a defined type of business for a set period of time after leaving a business or employer. Over the course of the last several years, both federal and state law have looked at these types of restrictions with increasing disfavor, with states having their own specific laws surrounding scope and enforceability (and in many cases severely limiting their application and enforcement). Last year, things began to shake up when the National Labor Relations Board (“NLRB”) first issued its decision in McLaren Macomb, determining that proffering employees a severance agreement with certain non-disclosure and confidentiality provisions amounted to an unfair labor practice under the National Labor Relations Act (“NLRA). Only three months later, NLRB General Counsel Jennifer A. Abruzzo issued a memorandum stating that non-compete agreements violated the NLRA with very limited exceptions.

Fast forward to April 2024, when the Federal Trade Commission (“FTC”) decided in a 3-2 vote to approve a rule that would almost entirely outlaw the use or enforcement of non-compete agreements in the United States (excluding non-profit employers), with very narrow exceptions. The rule will go into effect on September 4, 2024, provided that there are no court challenges decided before then that could impede that enactment date. Currently, there are three pending lawsuits (two in Texas and one in Pennsylvania), all seeking a nationwide stay or injunction against the rule going into effect.

While the rule is battled out in court, employers must be prepared to act accordingly come September 4th. While there are several carve-outs and exceptions regarding the non-compete ban, for the most part, with respect to existing non-competes (those already agreed to and in effect), virtually all of them will no longer be enforceable except for those affecting certain high-level senior executives who comprise a limited percentage of the workforce. For those non-competes, employers will be required to notify affected employees that they are no longer bound by the non-competes. Employers will also have to inform employees who agreed to the non-competes that the employer will no longer seek to enforce the terms. Future non-competes will only be permissible in limited situations, such as when the party subject to the restraints has made a genuine sale of all or substantially all of a business and may not compete with that business for a defined period.

Pay Transparency Laws

While the Paycheck Fairness Act is once again making its way through Congress, pay transparency laws at the state level are gaining momentum across the country, although many states have been slow to enact such laws. These laws cover a wide range of areas for employers, from requiring salary thresholds to be included in public postings to a prohibition against retaliating against employees who discuss pay to a prohibition against asking questions about an applicant’s salary history and everything in between. Earlier this year, Colorado expanded its law by requiring employers to share more information about internal job openings with existing employees.

Opponents argue that disclosing minimum and maximum salary thresholds in public job postings will create competition issues, flatten salaries that could decrease employee motivation, and result in tension when employees know what their coworkers earn – something that many employers want to steer clear of. While those are legitimate concerns, they do not outweigh the benefits of pay transparency. In fact, such laws aim to prevent pay disparity and close the wage gap, especially for white and diverse women, who still earn a small fraction of every dollar that a male colleague earns in the same position. However, the benefits extend beyond closing the gap, with proponents arguing that allowing applicants to see the salary thresholds for positions will increase the number of qualified applicants an employer receives as well as increase productivity when the employee feels that their pay is at or above what they expected to make.

While Colorado was the first state to enact pay transparency laws in 2019, several other states have added their own versions since then. As of today, a total of nine states, including California and New York, have laws surrounding pay transparency, in addition to several localities like Jersey City and Cincinnati (even though neither New Jersey nor Ohio has a state law in effect). In Pennsylvania, state agencies are prohibited from asking applicants for their salary history, although there is no such law for private employers. The City of Philadelphia had its wage history law challenged by the local chamber of commerce but ultimately prevailed when the Third Circuit reversed the district court’s preliminary injunction against the law’s enactment.

Several states, including Minnesota and Vermont, have pay transparency laws slated to go into effect in early 2025, and more states are expected to follow suit. Each state law has a variety of factors that govern the types of employers that are or are not covered (usually determined by the number of employees) and limits to the requirements (such as not requiring job listings for internal transfers or promotions to comply). Some states like Colorado publically post employers by name who have been assessed fines for violating its pay transparency act. Employers should be careful when posting jobs in states with pay transparency laws, even if their home state does not have such laws, as fines can extend beyond state lines.

No Plans on Stopping

With the employment landscape changing rapidly, it is no wonder that many employers are scrambling to keep up. Pay transparency and non-competes will be on the forefront for the rest of year and presumably well into 2025. With cannabis use becoming legal in many states (and with the expectation that it will become legal at the federal level in the next presidential administration), expect lawsuits and laws surrounding workplace drug testing to become the next hot-button issue. For instance, there have been lawsuits stemming from employees’ and applicants’ legal use of cannabis where those individuals received an adverse action from their employer for failing a drug screening. As of this year, both California and Washington have laws restricting certain pre-employment drug testing as it relates to cannabis only. Employers need to remain diligent with the progression of employee-friendly laws on the rise. Ensuring that human resource departments remain abreast of these ever-changing issues remains critical for employers' compliance.

Reprinted with permission from the June 28, 2024  issue of The Legal Intelligencer. © 2024 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.