Publications

The District Court for the Northern District of Texas issued a decision striking down the Federal Trade Commission’s rule banning non-compete agreements, which was set to take effect on September 4, 2024. In a decision authored by Judge Ada Brown, the Court held that the ban exceeded the scope of the FTC’s powers and was arbitrary and capricious due to its overbreadth and lack of justification. This development clears up prior confusion stemming from previous rulings that only prevented enforcement of the ban against specific parties, and it eliminates the federal non-compete ban for all employers in the United States. Although the decision is appealable, it is unlikely that the FTC will pursue this course of action, as any appeal would be heard by the Fifth Circuit, and potentially by the Supreme Court of the United States, both of which are expected to be hostile to the ban. Employers should return to their prior practices related to non-compete agreements, keeping in mind that state laws remain unaffected by the Northern District of Texas’s decision, so they are still subject to those laws where applicable.

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The U.S. Court of Appeals for the Fifth Circuit (Texas, Louisiana, and Mississippi) has struck down the Department of Labor’s “80/20/30 Rule,” which had set guidelines for how tipped employees are compensated under the Fair Labor Standards Act (FLSA). To quickly put this in perspective, the Rule applied in states that allowed a tip credit. In those states, the Rule mandated that employers pay the full minimum wage (and not take a tip credit) for non-tipped duties that either lasted over 30 continuous minutes or exceeded 20% of the workweek. The Court determined that the Rule conflicted with the FLSA’s language and faulted it for improperly dividing tasks within a single occupation. Citing the recent Loper Bright case, the Court concluded that tipped employees only lose their status for tip credit eligibility when they take on completely unrelated jobs, not based on the time spent on non-tipped duties within their primary role. This ruling eliminates the 80/20/30 Rule in the Fifth Circuit and could apply nationwide. However, the application of the Rule in states outside of the Fifth Circuit could still be litigated in those states, and the question of the Rule’s nationwide applicability will remain in limbo until a higher court issues a decision or new guidance is issued by the DOL. Currently, the DOL is challenging the Fifth Circuit’s ruling, but if Donald Trump defeats Kamala Harris in the upcoming presidential election, this challenge would likely be dropped and new guidance may be issued. Importantly, states that do not allow a tip credit are unaffected by this ruling.

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Significant amendments to California’s Private Attorneys General Act (PAGA) were enacted into law recently. This legislation, the result of negotiations among Gov. Newsom, legislators, and labor and business groups, equips employers with new and robust tools to address and defend against PAGA claims. Consequently, the initiative to repeal and replace PAGA, which was slated for the November ballot in California, has been withdrawn. The key provisions of the reform legislation are summarized below.

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On June 18, 2024, California’s Governor Newsom announced that an agreement has been reached with business groups to reform the current Private Attorneys’ General Act (“PAGA”).

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After months of stress due to ambiguities in California’s “Hidden Fees Statute,” colloquially known as the “Junk Fee Ban,” it seems the collective outcry from the hospitality industry has finally been heard. Yesterday, Senator Bill Dodd introduced an emergency amendment to the law that would allow for mandatory charges on food and beverage items sold by a restaurant, bar, or pursuant to a banquet or catering contract. The proposed amendment would add the following language to the Hidden Fees Statute:

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Wednesday saw the release of CA Attorney General Bob Bonta’s long-awaited FAQs on the California “junk fee” ban, now rebranded as the “Honest Pricing Law” or “Hidden Fees Statute.” The FAQs largely reiterate the very straightforward requirements of the new law, while confirming its most strict application under certain circumstances that, until now, many in the hospitality industry had trouble believing. In light of the climate of wishful thinking surrounding this new law, it is necessary to plainly state that service charges added at the end of a transaction will be illegal beginning on July 1, 2024, and there are scarce “ifs,” “ands,” or “buts” about it. To be clear, this ban covers nearly every form of fee or charge that is added after the initiation of a transaction, including, but not limited to, health mandate fees, employee wellness fees, employee living wage fees, spa service charges, resort fees, large-party auto gratuities, and surcharges.

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On November 5, 2024, California voters will have the opportunity to repeal and replace the California Private Attorney General Act (“PAGA”). The bill would double down on penalties for willful labor-law violators but entrust enforcement exclusively to a state agency. This would require all monetary penalties be awarded to employees, while barring attorneys from recovering any fees, unless specified by the labor code. The law would also supply resources to employers to ensure compliance.

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Effective March 20, employees in New York City can bring private actions against their employers for violations of the city’s Earned Safe and Sick Time Act, NYC Admin. Code § 20-911 et seq. The ordinance, which like many others around the country, requires employers to provide paid or unpaid safe and sick leave to their employees (depending on company size), had previously been enforceable only by complaint to the City’s Department of Consumer and Worker Protection. The remedies that an employee can seek in a private suit are largely the same as those that could have been pursued by the Department, and include treble damages for unlawful withholding of wages, penalties of $500 for each instance of unlawfully requiring an employee to find a replacement worker or work extra hours to make up leave time, and similar amounts – but private plaintiffs can also seek attorneys’ fees and costs.

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On September 14, 2023, New York’s Governor, Kathy Hochul, signed Assembly Bill 836 (“A836”) into law which prohibits employers from requesting or requiring access to personal accounts such as texts, emails, and mobile applications like WhatsApp from electronic devices. A836, which went into effect on March 12, 2024, also prohibits employers from discharging, disciplining, or failing to hire individuals who refuse to provide access to personal accounts and is subject to only a few exceptions.

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California’s electronic portal for mandatory pay data reporting opened on February 1st, giving employers three months to complete reporting. Employers with at least 100 employees should start, if they have not already, preparing a plan for submitting pay data to the state Civil Rights Department (“CRD”). Pay data reports for calendar year 2023 are due by May 8, 2024.

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