Breaking Down the “Buy American and Hire American” Executive Order

By Alexa E. Miller

On April 18, 2017, President Trump signed an Executive Order stating that “it shall be the policy of the executive branch to buy American and hire American.” Here’s what you need know:

Buy American:  In an effort to promote American manufacturing and domestic purchasing, federal agencies are tasked with improving enforcement of what the Executive Order collectively refers to as “Buy American Laws.” This assortment of laws consists of all existing statutes, regulations, rules and executive orders relating to federal procurement or federal grants that require or provide a preference for goods, products or materials produced in the United States, including iron, steel, and manufactured goods.

Under the Executive Order, federal agencies are directed to:

  • Assess the use of waivers based on type and impact on domestic jobs and manufacturing;
  • Develop policies for federally funded projects to maximize the use of U.S.-manufactured products, including components of manufactured products, and materials such as steel, iron, aluminum, and cement;
  • Review all U.S. free trade agreements, including the World Trade Organization Agreement on Government Procurement, and their impact on Buy American Laws; and
  • Re-examine the bidding process for government procurement contracts by ensuring that the relevant agency considers whether a significant portion of the cost advantage of a foreign-sourced product is the result of injuriously dumped steel, iron or manufactured goods, including those made from unfairly traded steel, before a public interest waiver is granted.

This Executive Order requires the Secretary of Commerce to provide a report to the President with recommendations on how to strengthen implementation of the “Buy American” laws by mid-November 2017.

Hire American: In an effort to prevent fraud and abuse of the U.S. immigration system, the Executive Order calls for federal agencies (Department of Labor, Department of Justice and Department of Homeland Security) to review the visa system regarding the H-1B and lottery programs, and “rigorously enforce” the laws governing entry into the United States of workers from abroad.

Specifically, federal agencies are directed to review and reform the rules that award H-1B temporary visas to highly skilled foreign workers to protect US workers from lower-cost foreign labor. The H-1B visa program allows companies to bring skilled foreign workers to work in the U.S. for a few years.  Under the current program, visas are awarded under a random lottery system.  Agencies are now directed to consider ways to allocate H-1B visas based on merit to “ensure that H-1B visas are awarded to the most-skilled or highest-paid petition beneficiaries” and propose reforms to address any problems.

Takeaway: Importantly, the Executive Order does not create any new requirements for employers or immediately change existing laws.  Nevertheless, the Executive Order signals that further regulations and significant changes may be forthcoming.  With the government’s emphasis on “Buy American,” we anticipate that there will be heightened enforcement on domestic source restrictions, as well as the potential renegotiation (or revocation) of a number of trade treaties.  With respect to the “Hire American” priority, we expect to see major reforms to the H-1B visa program, which may include dismantling the lottery system and awarding visas to the highest-paid positions and/or positions with master’s degrees or other higher qualifications thereby limiting the ability of companies to petition for temporary work authorization visas for highly skilled workers.  Employers stay tuned!

Philadelphia Wage Equity Ordinance On Hold … For Now

By Alexa E. Miller and David J. Woolf

Earlier this year, Philadelphia became the first city to pass a law prohibiting employers from inquiring about a job applicant’s wage history and restricting their ability to consider wage history in setting new employee compensation. The pay equity ordinance was enacted to halt the perpetuation of gender discrimination in compensation practices.

As has been widely reported, the Philadelphia Chamber of Commerce filed a lawsuit on April 6, 2017 to challenge the ordinance, which was scheduled to go into effect on May 23, 2017. The Chamber also filed a motion for a preliminary injunction, asking the Court to enjoin the enforcement of the ordinance while its lawsuit is pending, on the grounds that the ordinance violates businesses’ free speech rights under the First Amendment and is unconstitutionally vague.  The City of Philadelphia’s apparent first response has been to question whether the Chamber of Commerce even has standing to bring a lawsuit challenging the ordinance.

On April 19, Judge Mitchell Goldberg issued an order temporarily staying the enforcement of the ordinance until he can decide the Chamber’s preliminary injunction motion. Briefing on the standing issue will extend until at least May 12, with the Court’s decision on standing and possibly additional briefing related to the ordinance itself to follow.  Thus, it is unlikely that the ordinance will go into effect on May 23 as originally planned.

Although Philadelphia employers may be tempted to delay implementing changes to their hiring practices, we recommend that they remain alert and ready to comply. Legislation restricting employers’ ability to rely on a job candidate’s wage history in setting compensation is the latest trend in equal pay laws.  We predict that this trend will continue to gain momentum in other cities and states across the country.  Most recently, the New York City Council passed similar legislation amending the New York City Human Rights Law to prohibit employers from inquiring about an applicant’s wage history, which Mayor de Blasio is expected to sign shortly.  Prudent employers should review their hiring practices (e.g., update job applications and train managers about appropriate interview questions) and be prepared to comply with the law if the Chamber’s challenge is unsuccessful.

Additional background about the ordinance is available here.  We will continue to monitor the status of Philadelphia’s wage equity ordinance and update this site as developments occur.

Recruiting and “Off-Limits” Questions about Salary History – What Employers Need to Know

By Lynne Anderson

By October of 2017, NYC employers – and their recruiting agencies – will no longer be allowed to ask about an applicant’s salary and benefits history during the interview process due to a recent amendment to the NYC Human Rights Law. This law follows Executive Orders signed in November 2016 by Mayor de Blasio, and in January 2017 by Governor Cuomo, banning questions about salary history for NYC and NY state public-sector applicants prior to a conditional offer of employment. In addition, private employers in Philadelphia as of May 2017, and Massachusetts as of July 1, 2018, will also be banned from asking applicants about their compensation history. These laws are intended to help break the perpetuation of salary inequities by prohibiting reliance on prior, possibly inequitable compensation levels, as a means to set salaries and other compensation for incoming employees. Public Advocate Letitia James co-sponsored the NYC bill after a study conducted by her office found that women in New York earn $5.8 billion less in wages than men every year, or 87 cents for every dollar that men make, and the wage discrepancies were worse for minority females.

What does the NYC law prohibit?

It will be a discriminatory employment practice to do the following.

(1) Ask an applicant, or their current/prior employer – either in writing or during the interview process – about the applicant’s wage, benefits or other compensation history. This prohibition extends to inquiries made by search firms on behalf of the prospective employer. However, applicants can be asked about their historic productivity metrics, such as their level of revenue or sales at their current or prior employers.

(2) Conduct internet or other searches of public records in an effort to determine the candidate’s salary history. Employers are still permitted to conduct background checks of applicants, but if the background check discloses an applicant’s salary history, the employer may not rely on such disclosure for purposes of determining an applicant’s compensation.

(3) Rely on the compensation history of an applicant in determining what to offer the applicant with regards to salary, benefits or other compensation, unless the applicant “unprompted” and “willingly” discloses that information. However, this exception is not necessarily that helpful as employers can expect that the issue of whether a disclosure was truly “willing and unprompted” to be the subject of much debate.

What are the penalties for violations?

The NYC Commission on Human Rights will enforce the prohibition, and may impose a civil penalty of up to $125 for an intentional violation, and up to $250,000 for an “intentional malicious violation.” Plaintiffs’ employment lawyers will also file private cause of actions, and will likely seek discovery related to recruiting practices in an effort to ferret out potential violations they will cite to as evidence in support of disparate impact sex discrimination claims.

What should employers do now?

Employers are watching to see if these laws will be challenged before implementation. For example, Philadelphia’s law is currently being challenged in a federal lawsuit filed in early April by The Chamber of Commerce for Greater Philadelphia seeking to block implementation of the law on ground of violation of First Amendment rights. The NYC law is also expected to face a challenge from industry groups, although the Bronx Chamber of Commerce has publicly supported the new law.

Until a challenge is successful, employers should consider the following action items with regards to the NYC law:

  • Remove salary history questions from job applications, including online applications.
  • Provide notice, in writing, to recruiting agencies and background check companies, to exclude salary history inquiries as part of their process, and direct them not to provide salary history information to your company as the potential employer. You can also work this into contract renewals and any Statement of Work or recruiting search request, along with an indemnification obligation if a lawsuit ensues due to an agency’s failure to comply.
  • Train HR, internal recruiters and other employees who interface with job applicants not to ask about salary/benefits/compensation history, but to explore other permissible areas. For example, the NYC law allows employers to discuss an applicant’s compensation expectations, including with regards to unvested equity or deferred compensation that an applicant would forfeit if they left their current employer to accept a new job offer. Interviewers are also still able to ask questions to probe the candidate’s level of experience and proficiency such as performance results, management experience, etc.
  • Train these same individuals about the need to document, in writing, when a candidate makes an unprompted disclosure of his/her salary history.
  • Consider posting salaries, or salary ranges, for open jobs. The new NYC law does not require this, but the bill suggests to businesses that they post salaries for jobs instead of relying on salary history to set compensation.
  • Don’t ignore ongoing obligations to audit to protect against potential pay inequities. As we have been discussing, all private employers with 100 or more employees will likely have to report pay data broken down by gender and race as part of the new federal EEO-1 reports due in March 2018 for 2017 data, and California employers must comply with record keeping requirements imposed by California’s Fair Pay Law in effect since 2016. California’s Fair Pay Law was also amended, effective January 1, 2017, to provide that prior salary will not, by itself, justify a disparity between the salaries of similarly situated employees.

Also, keep in mind that while removing prior salary history from the hiring process may help limit perpetuation of wage gaps, the practical reality is that a candidate’s ability to negotiate a higher salary will likely still drive salary differentials. Employers will need to protect against unintended pay inequities resulting from the recruiting process.

Part II of “The Restricting Covenant” Series: Barbers and Beauty Shops

By Lawrence J. Del Rossi

This is the second article in a continuing series, “The Restricting Covenant.” In this article, I discuss a topic that is near and dear to me – my hair and my long-time relationship with my barber.  I have used the same barber to cut my hair since high school, even after moving many miles away.  I sit in his chair, he cuts my hair with expert precision, and I am a satisfied customer.  This got me to think about one of the most basic reasons why employers want to impose non-compete and non-solicitation obligations on their employees – the value and strength of a long-term customer relationship.  Courts have long recognized that protecting customer relationships is a legitimate protectable business interest that can support the enforcement of a restrictive covenant if it satisfies standards of “reasonableness.”  So if my barber was to leave his current location, could his employer enforce a post-employment covenant that would prohibit him from cutting my hair?  Yikes!

The Art of Barbering

The barber’s trade has a long history, dating back to Ancient Egypt.  Many states require a barber to have a license in order to practice barbering professionally.  There are quite a few cases throughout the country that discuss the enforceability of restrictive covenants in the context of barbers, barbershops, hair stylists, hair, nail and beauty salons, and beauty shops.  Many of these decisions involve the sale of an entire business, not just the transition of one employee to a competitor.  Courts generally tend to be more willing to enforce broader restrictions in the sale of a business context.

One interesting case in my home state of New Jersey that involves barbers and non-competes is Dellacorte v. Gentile, 98 N.J. Eq. 194 (1925). The plaintiff-barber Victor Dellacorte obtained a preliminary injunction to stop the defendant-barber Jean Gentile from directly competing against him in Summit, New Jersey.

In 1922, Gentile sold his barbershop, including “fixtures and goodwill,” to Paula Tally for $2,500.  The bill of sale had the following non-compete:

The party . . . agrees that he will not, directly or indirectly, either as employer or employee, engage in any branch of the barber business within a radius of one mile from No. 13 Maple Street, Summit, New Jersey, for a period of five years from the date hereof.

As discussed below, the key phrase was “any branch of the barber business.” Thereafter, Tally sold the business, including the non-compete, to Dellacorte.

A few years later (during the restricted period), Gentile opened a “beauty parlor” about 250 feet (in the restricted territory) from Dellacorte’s (formerly Gentile’s) barbershop.  Gentile argued that his new shop did not compete with Dellacorte because it “cut and bobbed ladies and children’s hair,” and was “in no sense a branch of the barber business.”  To bolster this argument, Gentile’s attorney cited the Latin root of the word “barber” (“barba,” meaning “beard”), and provided the court with “opinions of the courts in some of the Western states, to the effect that a beauty shop is not a barbershop, and that hair bobbing is not barbering.”  The court was not persuaded.

Barber’s Hair Bobbing Activities Cut it Too Close to His Competitor

After examining several different authorities, including the Standard Dictionary’s definition of “barber,” the judge found that “the bobbing of ladies’ hair is a distinct and important part of the business of a modern barber shop, as much as, or more than, was cupping a branch of that business in ancient times.”  The judge observed that it was “not uncommon today to see members of the female sex occupying chairs in barber shops having their hair bobbed in an effort to keep pace with the ever-changing styles.”  The judge then discussed “Samson and Delilah” and the “Holy Writ,” but I will leave those portions of the court’s opinion for you to read yourself.

The court focused on Gentile’s activities before he sold his business.  Gentile’s barbershop had engaged in the bobbing of women’s hair for several years before he sold his business.  Accordingly, this line of work “must have been in the minds of the parties when the covenant was entered into.”  The court also looked at Gentile’s conduct leading up to the opening of his new competing shop.  Gentile had tried unsuccessfully to purchase a release from the covenant, and therefore it was “quite apparent to [the judge] that this defendant went into the new business with his eyes open, and has no right to now complain if the successor of his vendee insists upon compliance with the covenant solemnly entered into.”  Based on these facts, the court enjoined Gentile from engaging in any branch of the barber business within the restricted territory pending a final hearing.

Courts Will Look Beyond Labels and Examine Actual Job Functions

Fortunately, for me (and my hair), my barber owns his own barbershop and does not have to worry about non-competes.  However, if he were to hire an apprentice, or merge with another barbershop, he would need to consider the pros and cons of having them sign a non-compete or some other form of restrictive covenant.  Not only is the Dellacorte decision an interesting case about the history of barbers and barbering, it highlights the searching view that some courts will undertake to determine whether someone should be enjoined from working based on a non-compete agreement.  Courts will look behind the “labels” and examine the person’s actual job functions to determine whether a business is truly engaged in unlawful competition.  The judge in Dellacorte, for example, did not take Gentile’s representation at face value that “bobbing ladies’ and children’s hair” was not “a branch of the barber business.”  Instead, he reviewed extraneous sources regarding the meaning of “barbers.”  He also relied on his own experience and observations at barbershops.  He looked at the parties’ conduct before and after the sale of the barbershop.  Did Dellacorte get the benefit of the bargain on the non-compete?  The judge did not think so.  Could Gentile earn a living in his trade outside of the restricted territory?  The judge thought he could.  The balancing of the equities, which is an unpredictable and nebulous concept of “fairness,” favored Dellacorte.

The Dellacorte decision also highlights the critical importance of focusing on the language used in the non-compete itself to determine its scope.  For example, if Gentile’s covenant had contained only the words “barber business,” as opposed to “any branch of the barber business,” would the court have stopped him from operating a “beauty parlor”?  Would it have been more helpful if Gentile had defined “the barber business” in the bill of sale?  While the duration of the restriction and the geographic scope are usually straightforward, the description of the prohibited activity can generate much dispute and litigation.  When drafting non-compete agreements, give careful attention to the description of the activity-based restrictions.

The goal of this Series is to provide a brief overview and some interesting insights and practical pointers when dealing with unique issues that might arise in the context of restrictive covenants and a particular occupation or industry.  It is not intended to provide and should not be construed as providing legal advice.  Each situation is different, and if legal advice is needed, you should seek the services of a qualified attorney who is knowledgeable and experienced in this area of the law to address your specific issues or needs.  Stay tuned for future articles in this Series, which will discuss the restrictive covenant landscape for other occupations and industries, including brokers, bankers, broadcasters, and more.

Click here to view all of the posts in “The Restricting Covenant” series.