Maine and New Hampshire Join National Trend, Enacting Laws Prohibiting Non-Competes for Lower-Wage Workers

As we have previously discussed, there is an ongoing trend of states prohibiting the use of non-compete agreements in certain situations, including with lower-wage workers. Maine and New Hampshire are the most recent examples.

On June 28, 2019, Maine enacted a law that significantly limits an employer’s use of non-competition restrictions. The Act to Promote Keeping Workers in Maine, effective September 18, 2019, provides:

  • Restrictions on use of non-competes for lower-wage workers. Employers cannot require an employee to agree to a non-compete restriction unless the employee earns in excess of 400% of the federal poverty level, or $48,560 per year.
  • Disclosure requirements. Prior to issuing an offer of employment, an employer must disclose in writing to a prospective employee that a non-compete restriction is required. If the employer requires an employee to sign an agreement containing a non-compete, the employer must provide a copy of the agreement at least three business days before the signing deadline.
  • Delayed effective date. A non-competition restriction will not take effect until after one year of employment or six months after the date the agreement containing the restriction is signed, whichever is later. Therefore, employees who accept a job and leave within their first year of employment are not bound by a non-competition restriction.
  • Penalties. Employers that require lower-earning employees to agree to a non-competition restriction or fail to comply with the disclosure requirement can be fined $5,000 or more.

On July 10, 2019, New Hampshire passed a similar law prohibiting non-competition restrictions for lower-wage employees. Effective September 8, 2019, the law provides that employers cannot require an employee to sign an agreement containing a non-competition restriction unless the employee earns in excess of 200% of the federal poverty level, or $24,280 per year.

Note that New Hampshire law already required employers to provide a copy of any agreement containing a non-competition restriction prior to an employee’s acceptance of an offer of employment. New Hampshire law also required (and continues to require) notice to any employee asked to agree to a non-competition restriction for the first time. An employer cannot enforce a non-competition restriction that the employer failed to disclose to an employee pursuant to the law.

As courts and state legislatures continue to regulate the use of non-competition agreements, employers should review their hiring practices, particularly with regard to lower-wage workers and other non-exempt employees. Additionally, employers should remain mindful of timing and notice issues, which are increasingly important. Lastly, employers should remember that non-competition restrictions and other restrictive covenants are regulated almost exclusively at the state level and that laws vary dramatically from state to state. Thus, prior to using an agreement with a non-competition restriction, employers should ensure enforceability under the state law selected in the agreement and, if different, under the law of the state in which the employee will work.

U.S. Department of Labor Issues New FMLA Guidance

On March 14, 2019, the U.S. Department of Labor (DOL) issued an opinion letter concerning the Family Medical Leave Act (FMLA). The FMLA provides eligible employees a maximum of 12 weeks of unpaid, job-protected leave for specified family and personal medical reasons and up to 26 weeks to care for a covered service member per year. In its opinion letter, the DOL addressed whether an employer may delay designating paid leave as FMLA leave or permit employees to expand their FMLA leave beyond the statutory requirements.

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Update: Philadelphia Salary History Ban Decision Appealed

As we previously reported, a federal district court in Philadelphia recently struck down the provision of Philadelphia’s salary history ban prohibiting employers from asking about salary history (the “inquiry provision”), but upheld the provision of the law prohibiting employers from relying on such information (the “reliance provision”). The law was initially scheduled to take effect May 23, 2017, but had been stayed by the district court pending resolution of the Philadelphia Chamber of Commerce’s challenge to the law. The Judge’s decision ostensibly resolved the litigation at the district court level, however, both the Chamber of Commerce and the City of Philadelphia have appealed the ruling to the Third Circuit Court of Appeals. The Third Circuit has not yet issued an order staying the reliance provision, which the district court upheld. We therefore caution Philadelphia employers to act as though the reliance provision is in full effect, and to refrain from relying on salary history information in determining employees’ compensation. We will continue to report on the appellate process as it unfolds.

Marijuana in the Golden State: California Lawmakers Seek to Protect Medical-Marijuana Users in the Workplace

Although California legalized medical marijuana use in 1996 and recreational use in 2016, California employers have always been free to maintain zero-tolerance policies against all users. That could change soon as a result of Assembly Bill 2069 (“AB 2069”), which would amend the California Fair Employment and Housing Act to create a new class of protected persons: medical marijuana cardholders.

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How the New Tax Law Will Impact Employers in 2018

Just before the holiday break, Congress passed the Tax Cuts and Jobs Act (H.R. 1), which was signed into law by President Trump on December 22, 2017. Although the far-reaching implications of the new tax law won’t be fully realized for some time, there are several noteworthy provisions that will impact employers immediately.

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Challenge to Philadelphia Pay History Ordinance Dismissed, But Ordinance’s Future Remains In Doubt

Last week, District Court Judge Mitchell Goldberg granted the City of Philadelphia’s Motion to Dismiss the Philadelphia Chamber of Commerce’s lawsuit challenging Philadelphia’s controversial new pay history ordinance. As we have discussed previously (see Here’s What that New Philadelphia ‘Pay History’ Law Means for Your Business and Philadelphia Wage Equity Ordinance On Hold … For Now), the ordinance would make it unlawful for an employer to inquire about a job applicant’s pay history and would severely restrict an employer’s ability to base a new hire’s initial pay on his or her compensation history. The ordinance had been scheduled to go into effect on May 23, but was stayed by Judge Goldberg, with agreement of the City, pending resolution of the City’s motion to dismiss the Chamber’s lawsuit challenging the ordinance.

Judge Goldberg’s decision is likely not the last word however, as it did not address the merits of the ordinance. Rather, the Court held that the Chamber, because of the way the lawsuit was worded, did not have standing to challenge the ordinance, and it gave the Chamber until June 13, 2017 to file an amended complaint to cure those deficiencies. The Chamber is now expected to do just that.

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