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HR Resource Blog

This blog is published by the attorneys in Capehart Scatchard’s Labor and Employment Group. On this site, employers and human resources professionals will find useful tips as to how to keep the workplace, and workplace policies, in compliance with state and federal employment laws.
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6 New Year’s Resolutions for Your Workplace in 2025

It is hard to believe that we are now in the fall and only a few months away from the start of a new year. Where does time go these days? With 2025 nearing, employers are presented with a wonderful opportunity to review internal policies/procedures and hopefully help avoid future workplace legal problems. Here are six suggested New Year’s Workplace Resolutions for a happy 2025.

  1. When was the last time your employee handbook was reviewed and updated? Policies and procedures need to be revised periodically to keep current with ongoing changes in the law, especially in a place like New Jersey, where it is frequently the case that additional laws and judicial decisions impose new legal requirements. Therefore, 2025 presents a great opportunity for employers to review handbook policies and bring them up to speed with any recent legal changes that impact your workplace, or to reflect changes in your workplace. Alternatively, if you do not have one yet, the upcoming new year provides a wonderful chance for your workplace to reap the benefits of having all relevant workplace policies stored in one collective document. Relatedly, when was the last time you conducted anti-harassment training for your workforce? While the pandemic years made this harder to do, virtual training is a great way to continue to meet all legally mandated employee training requirements, and more and more in person training is happening again. 
  2. When was the last time your job descriptions were reviewed and updated?   Job descriptions are very important, especially in gauging compliance with mandated accommodation requirements for persons with disabilities under both federal and state discrimination laws. Ask yourself: do your job descriptions accurately reflect what an employee actually does in his/her job today?  Because courts often rely on how an employer defines the essential job functions of an employment position in assessing disability discrimination and failure to accommodate issues, it is important that all employers maintain updated job descriptions so there will be a point of reference if any issues arise as to what the essential functions of a job position are for accommodation purposes. Moreover, just like employee handbooks, if you do not have job descriptions today, the beginning of the upcoming year is a good time to commence preparing them.
  3. Are your employee leave policies up to date?  It is important under both federal and state leave laws that leave policies are accurate and current. One of the most effective ways of meeting this requirement is to have updated leave policies in an employee handbook, so use the beginning of next year to check that such policies are accurate and up to date. 
  4. When was the last time you conducted an audit of your payroll practices?  One of the chief concerns to examine here is ensuring that all your employees are properly classified as exempt versus non-exempt employees for purposes of their proper compensation under federal and state wage and hour laws. It is always a good idea for an employer to do a quick review of employment classifications each year in case changes need to be made based upon any modifications in employee job responsibilities. Also, as part of such an audit, make sure that you are paying your employees correctly. If eligible for overtime, are you calculating such payments right and using the appropriate rate of pay? Also, are you paying the correct minimum wage to your employees? Remember, the minimum wage in New Jersey goes up automatically each year, reaching $15.13 per hour in 2024. And, finally, how about independent contractors? If you are using them, are you meeting the stringent requirements here in New Jersey for creating those relationships to withstand legal scrutiny? Failure to follow independent contract rules can lead to significant wage and hour problems, and this topic has been a major subject of investigation in recent New Jersey Department of Labor audits in which I have been involved.   
  5. Are you properly performing background checks on current and prospective employees?  Remember, there are strict requirements concerning how such background checks are conducted under not only the Fair Credit Reporting Act but also under relevant federal employment discrimination laws such as Title VII. Several years ago, the Equal Employment Opportunity Commission issued a detailed compliance guidance on how the results of a background check can be utilized in assessing a person’s suitability for employment, and New Jersey also passed its own restrictions, i.e. Ban the Box rules and prohibitions on demanding that employees share information about their confidential social media sites, so it is important that all background check policies meet these requirements. 
  6. Are your drug testing policies in compliance with the requirements of both of New Jersey’s cannabis use laws, medicinal and recreational?  Take a moment to ensure that your testing policies are in line with the circumstances that an employer can legally require an employee drug screen and know when you can take adverse legal action based upon a positive screen for marijuana use.   

In sum, the upcoming new year provides a wonderful opportunity for employers to proactively evaluate internal policies and procedures to make 2025 a legally problem free year in your workplace. Take advantage of the opportunity so your business will not be singing the legal blues in 2025! It is never too early to start laying out these goals and the foundation for achieving them.

Enforcement of FTC Non-Compete Rule Enjoined Nationwide

With competing federal court decisions currently existing on whether the Final Non-Compete Rule issued by the Federal Trade Commission was valid, and would go into effect on September 4, 2024, employers were left with a major predicament at their disposal. However, last week, employers breathed a sigh of relief after a federal judge in Texas issued a ruling invalidating this final rule while issuing a nationwide injunction precluding its enforcement anywhere in the United States. In issuing its final decision, the district judge determined that the FTC lacked the legal authority to promulgate such a rule. This means that employers will no longer have to meet the various requirements of the Final Non-Compete Rule. Thus, for now, all non-compete agreements in effect will remain enforceable for the foreseeable future, while the FTC contemplates its next move that could include filing an appeal of the Texas decision. 

We will continue to keep you informed of any new developments. No doubt, this will not be the last time that efforts are made to eliminate or greatly restrict non-compete restrictions. We have already seen many states impose limitations, and while it has not yet happened in New Jersey, many bills have floated around the Legislature that are designed to greatly restrict under what circumstances non-competes may be enforced.  So, for now, employers in New Jersey have dodged a legal bullet. Whether such continues in the future remains to be seen.     

An Update on FTC Non-Compete Rule

 As many of you know, back in April 2024, the Federal Trade Commission (“FTC”) adopted a final rule that would for all intents and purposes ban enforcement of almost all non-compete agreements. Since that time, I have received multiple questions about whether the rule will ever be enforced. Right now, the effective date of the rule is September 4, 2024, but unfortunately it is anyone’s guess as to whether the rule will ever be enforced.  

Shortly after enactment of the final rule, several lawsuits were filed challenging its validity and the authority of the FTC to enact such a rule. In these cases, the parties asked the courts to enjoin and stop enforcement of the rule. So far, the courts have split on this issue. In Texas, a federal judge found that the FTC lacked the power to implement the rule and preliminarily enjoined its enforcement, but it did so only against the plaintiffs in the case and not everywhere nationwide. More recently, just last week, a federal judge in Pennsylvania ruled to the contrary, finding that the rule is indeed enforceable and can go into effect on September 4. These decisions do little to clarify whether the FTC had the power to enact the final rule and also fail to provide the guidance that employers want and need in determining what will happen to existing non-compete agreements.

If the FTC final rule goes into effect on September 4, it will drastically change the non-compete horizon. Most non-compete agreements will be unenforceable, with the exception of highly compensated senior executive employees (i.e. those making at least $151,164), and employers will likewise need to provide written notices to employees letting them know that their non-compete restriction is no longer enforceable. So, for the next month, the best advice we can give on ultimate enforcement is to stay tuned and see if we have any additional litigation developments that provide any further clarity on what employers will need to do after September 4.

Do You Administer Your FLA Correctly?

In my practice, I often get questions regarding the interplay between the leave rights available under the federal Family and Medical Leave Act (“FMLA”) and the New Jersey Family Leave Law (“FLA”). The most frequent question I get is: how do you coordinate the two sets of leave in the case of childbirth and a mother’s child bonding leave. Unfortunately, most employers do this wrong, and it is important that employers understand how these separate leave laws interact so that your administration of such leaves is done in a legally correct way.

The chief difference between the FMLA and FLA is that the FMLA provides leave rights for an employee’s own serious health condition which is something that is not afforded by the FLA. This difference comes into play in childbirth/bonding leave situations.

When you combine the leave available to a new mother under both the FMLA and FLA the employee could technically be out for as long as 24 weeks. Likely because of the potential length of time that an employee can be out in these situations, employers often make the mistake of running FLA bonding leave immediately when the employee’s child is born. In such circumstances, it is often the case that the mother’s doctor will prescribe a period of recovery after childbirth for the mother. Depending upon the manner of the childbirth, the period prescribed often is different. For example, most doctors will prescribe a 6-week recovery period after a caesarian birth and 4 weeks for a regular delivery. When that occurs, significantly, the mother’s time out of work counts against that employee’s FMLA leave, not FLA leave. Why? Because there is a New Jersey FLA regulation that requires that child bonding leave cannot start until after the mother has exhausted any leave time she has under the FMLA. Most employers are not aware of this requirement, and it results in the employer’s mistaken administration of such coordinated leave periods. Many employers run the time concurrently, but this is not proper because the two leaves are not for the same qualifying reason.

Let’s consider an example that illustrates how this leave coordination is done correctly. It is not unusual that here in New Jersey an expectant mother will be taken out on a disability related leave 6 weeks before her expected delivery date. Then let’s suppose that mom delivers by way of a caesarian delivery and the doctor then prescribes 6 weeks of recovery. The temptation for many employers is to start the bonding time leave immediately upon birth, but with the mother in my example still having a doctor prescribed leave for her recovery from giving birth, those 6 weeks of leave must be exhausted before bonding leave can be run under the FLA; if of course, the new mother actually wants to take her bonding leave at that time. Another fun fact about the FLA: bonding leave can be taken anytime within 1 year of the actual birth, so employers cannot assume that bonding leave will be taken immediately after birth.

Therefore, be careful in how you as an employer run leave in these situations to ensure that you follow these unique coordination rules for leave for new parent employees. Before starting to run any leave in this situation, get information from your employee. Find out what the new parent’s intentions are about using her FLA bonding leave and determine how long of a recovery period her doctor has prescribed post-birth. With such information, you as an employer will be better equipped to meet your dual leave law responsibilities correctly

New Jersey Supreme Court Restricts Use of Employee Non-Disparagement Agreements

During the midst of the Me-Too Movement, the New Jersey Law Against Discrimination (“NJLAD”) was amended to make it easier for victims of harassment, retaliation, and discrimination to avoid onerous confidentiality restrictions that prevented those employees from discussing such claims after those matters were resolved with their employer. Specifically, that amendment, N.J.S.A. 10:5-12.8(a), provides that “[a] provision in any employment contract or settlement agreement which has the purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment (hereinafter referred to as a non-disclosure provision) shall be deemed against public policy and unenforceable against a current or former employee.” An open issue that was left unaddressed in the law was whether a contractual non-disparagement provision that typically precludes the employee from saying anything derogatory or damaging about an employer was covered by this statutory restriction. On May 7, 2024, the New Jersey Supreme Court finally provided its answer to this important open statutory issue.

In Savage v. Township of Neptune, 257 N.J. 204 (2024), the New Jersey Supreme Court was asked to determine whether a broad contractual non-disparagement clause in a settlement agreement between the Defendant employer and Plaintiff former employee fell within the statutory restrictions of N.J.S.A. 10:5-12.8(a). The Township of Neptune sought to enforce a non-disparagement provision in a settlement agreement between it and the Plaintiff, who during a television news program, discussed her settled case and made unflattering statements about those she believed had harassed her. The trial court granted the Township’s motion to enforce the provision, finding that the NJLAD amendment barred only non-disclosure and confidentiality agreements, and Plaintiff here had instead violated an enforceable non-disparagement provision. This decision was then upheld by the appellate court which similarly determined that a non-disparagement clause was nevertheless enforceable despite N.J.S.A. 10:5-12.8(a).   

Disagreeing with the lower courts that previously considered the issue, the New Jersey Supreme Court ruled that any contractual provision that has the effect of stopping an employee or former employee from being able to discuss or disclose the factual circumstances or details of a harassment, discrimination or retaliation claim violates N.J.S.A. 10:5-12.8(a) and is thus not enforceable as it is contrary to public policy. Applying that standard to the non-disparagement provision before it, the Court ruled that as written it was violative of N.J.S.A. 10:5-12.8(a) and could not be enforced against Plaintiff because its effect was to silence the former employee’s ability to discuss her past harassment and discrimination claims against Defendant.

Significantly for employers, while the Savage case may have ultimately been a win for the Plaintiff, it could have been far worse. Thankfully the Court’s ruling did not go so far as to categorically ban all non-disparagement provisions. Instead, the decision still leaves open the possibility of enforcement of more narrowly tailored non-disparagement provisions that do not impair an employee’s ability to address the details relating to harassment, discrimination, and retaliation claims. Thus, a properly drafted contractual non-disparagement clause can still be enforceable and beneficial for the employer, as the employer may continue to prevent the making of defamatory and disparaging comments regarding other unrelated subjects and topics that do not fall within the express restrictions of N.J.S.A. 10:5-12.8(a).

Accordingly, in light of the Savage decision, employers should immediately commence a review of all their employment contracts and severance agreements and bring any non-disparagement provisions in line with the new limitations on enforceability recently announced by the New Jersey Supreme Court.           

USDOL Issues Final Overtime Rule

As I wrote a few months ago, the United States Department of Labor (“USDOL”) was taking the necessary legal steps to modify federal overtime requirements by increasing the salary threshold needed to render employees exempt from the overtime requirements of the Fair Labor Standards Act (“FLSA”). On April 23, 2024, the USDOL released its long-awaited final rule raising the salary thresholds for overtime exemptions, meaning that employers will now need to pay overtime to a larger group of employees, unless employee salaries are adjusted to meet these new thresholds. 

The new rule raises the salary threshold under which salaried employees are eligible for overtime in two stages. The threshold will increase to the equivalent of an annual salary of $43,888, or $844 a week, starting July 1,2024 and then to $58,656, or $1,128 a week, on January 1, 2025. (The current threshold is $35,568 a year, or $684 per week.) The salary threshold will then be updated every three years, starting July 1, 2027. Also increased was the exemption salary amount for those employees’ ineligible for overtime because they are high earner employees. The minimum threshold for the highly compensated employee exemption will increase significantly too, as follows: July 1, 2024: The annualized compensation threshold will increase from $107,432 to $132,964. January 1, 2025: The annualized salary threshold will increase again to $151,164.

It is also important for employers to remember that paying employees a certain salary does not alone make such employees exempt. Employees must also qualify for one of the exempt classifications under the FLSA (i.e. executive, administrative, professional, etc.), along with meeting the new salary thresholds to be deemed ineligible for overtime. Those exemption categories are unaffected by the recent change to the salary requirements.

Already there have been significant rumblings that these new salary rules will face legal challenges that could impact whether they ever are enforced, and we will keep you updated on any such efforts. In the meantime, employers will need to start preparing for life under the new rules if they ever do go into effect. Employers should at a minimum canvas their workforce and determine whether increasing employee salaries to the new overtime exemption rate is a justifiable step for your company and is commensurate with the duties performed by those employees. Or alternatively employers will need to come up with other strategies for minimizing overtime costs for your business by better controlling what overtime gets worked to reduce possible increased exposure to overtime payments. The time for taking such steps is now and your business should not wait until July to decide the best way to legally cope with these new overtime requirements.  

Is Your Company Ready for an NJDOL Audit?

In past articles I have referenced many times the potential audit risks that companies face if they are not in compliance with both federal and state wage and hour laws. As businesses began the quest to return to what was pre-COVID-19 pandemic normalcy, so too did the United States and New Jersey Departments of Labor as the agencies again started to aggressively audit companies for legal compliance. While compliance with each of the specific federal wage and hour laws continues to be the primary focus of these audits, the New Jersey Department of Labor (“NJDOL”) added one more compliance issue that is now an important part of that agency’s audit process. This emerging issue now presents a potential trap for the unwary about which employers must be ever vigilant to avoid a failing audit result.

So, I suspect at this point that many of you are wondering what this new issue can be that has sparked the interest of the NJDOL. Is it a new wage and hour requirement under a new recent law? Well, no, believe it or not, it involves New Jersey’s Paid Sick Law. On first glance, this law seems very different from the usual wage and hour rules that the NJDOL enforces. However, when you examine the paid sick time law closer, you see that the New Jersey legislature gave the NJDOL responsibility for monitoring employer compliance with the requirements imposed by the paid sick time law. And now during wage and hour audits by the NJDOL, the agency is using these examinations as an opportunity to remind employers about their recordkeeping and tracking obligations under the law. I found this out firsthand in a recent audit that I handled with the NJDOL.

Hopefully, as every employer who is doing business and has employees in New Jersey knows, the paid sick time law gives employees the opportunity to utilize paid sick time for certain absences from work. Whether employees obtain the time through actual work accrual, or where employers grant employees such time at the beginning of each benefit year, employees are entitled to use up to 40 hours of sick time in any benefit year. The statute also recognizes the right to carry over unused time from benefit year to benefit year or alternatively allows a buyback arrangement to be negotiated between the employee or employee. Along with these basic requirements, the law also directs that employers must keep detailed records relating to both the amount of leave accrued by or provided to the employer and the use of that time so there is effective tracking of such use. It is regarding these recordkeeping rules that the NJDOL has taken a special interest in its current auditing activities.

If your company is ever selected for a wage and hour audit by the NJDOL, you are now being asked to produce such accrual/tracking records so that the agency can confirm that you are meeting these recordkeeping requirements. If there are deficiencies in such recordkeeping, the NJDOL is holding employers accountable as just happened in a recent audit where a client of mine was cited for a violation. In that audit, the investigator expressed concerns that employees did not have a readily available way to check what current paid sick time they had and how much was available for future use. The auditor also claimed that other basic tracking records were missing as well. All of this led to a rather unexpected violation citation when the remaining aspects of the audit proved rather uneventful. 

The moral of this story is that employers need to make sure that they have in place an effective recordkeeping and tracking system for overseeing your company’s compliance with the paid sick law because the NJDOL is actively monitoring compliance as part of its ever increasing audit activities. If you don’t, you can find yourself on the wrong side of failed audit findings that could have easily been avoided with greater attention to simple legal details.        

THE NLRB DOES IT AGAIN!

When Democrats took control of the White House in 2021, most experts expected that there would be a drastic change in the direction of the decisions of the National Labor Relations Board (“NLRB”), which had been up to that point a quite hospitable forum for employers during the prior administration. Since this change, as predicted, the NLRB has issued a series of decisions that are far more deferential in nature to employee interests, and in several cases, has in fact even reversed relatively recent NLRB precedent that set far more favorable legal rules and standards for employers. 

One case that was clearly in the cross hairs for possible reversal by the Board when the new administration took over in 2021 was the Boeing Co. case (2017). In Boeing Co., the Board adopted what it then believed was a more reasonable approach to evaluating whether facially neutral workplace rules violated federal labor law. The new Board was just waiting for a case to come before it that would provide a vehicle for overturning its Boeing Co. decision. In August 2023, the Board finally found that case, Stericycle, Inc. In this case, the Board seized upon the opportunity presented to drastically change the legal landscape for evaluating workplace rules and policies challenged as being violative of employee rights under federal law laws.

In Boeing Co., the NLRB previously held that it would no longer presume that workplace rules improperly interfered with employee rights simply because an employee could perceive that to be the possible case, and instead adopted a standard that would focus on the actual nature and extent of a rule’s impact on Section 7 rights, balancing that impact against the employer’s legitimate interests and justifications for the rule. Boeing created three categories of employer rules:

  • Rules that, when reasonably interpreted, do not interfere with the exercise of rights protected by the National Labor Relations Act (“NLRA”), or the potential adverse impact on protected rights of which is outweighed by justifications associated with the rule;
  • Rules that warrant individualized scrutiny in each case as to whether the rule would prohibit or interfere with NLRA rights, and if so, whether any adverse impact on NLRA-protected conduct is outweighed by legitimate employer justifications; and
  • Rules that are always unlawful because they would prohibit or limit NLRA-protected conduct where the adverse impact on NLRA rights is not outweighed by justifications associated with the rule.

The idea behind this more categorical approach was to give employers greater clarity in the kinds of rules that could be problematic for employers to implement in their workplace. Stericycle, Inc. has now reversed this standard, and in essence goes back to (and almost readopts) what for many years was the legally amorphous standard that Boeing Co. was designed to replace, a past standard that frequently premised findings of NLRA Section 7 violations upon the hypothetical possibility that a reasonable employee could conclude that their right to engage in protected activities was “chilled” by the rule.

Under the new standard announced by the NLRB, if a workplace rule is shown to have a “reasonable tendency” to chill employees from exercising Section 7 rights, it is presumptively illegal. This possible “tendency” is to be interpreted “from the perspective of an employee who is subject to the rule and economically dependent on the employer, and who also contemplates engaging in protected concerted activity.” According to the Board, the employer’s intent in creating the rule is “immaterial.” Now, what matters most is whether the employee could interpret the rule to have a coercive effect, even if the rule could also be reasonably interpreted as being non-coercive. Once that happens, the burden then falls on the employer to rebut this presumption of illegality by showing that the rule advances “a legitimate and substantial business interest” and that this interest could not be advanced by a more “narrowly tailored” rule, a far more dauting burden than what was placed upon employers by Boeing. 

Given this new standard, employers can expect that many sensible workplace rules that were adopted to create a harmonious workplace without any desire to curb employee rights will be closely scrutinized and potentially determined by the NLRB to violate employee rights under federal labor law. Therefore, more so than ever, employers are wise to conduct prompt legal reviews of their existing employee handbooks and other workplace policies to ensure that all employer rules and policies do not run afoul of this newly issued precedent from the NLRB.   

New Federal Independent Contractor Rule

The United States Department of Labor (“DOL”) has continued the implementation process for its adoption of a new federal standard for determining questions of independent contractor status under federal law. On January 10, 2024, the DOL published a final rule that revises the DOL’s past guidance on how to analyze independent contractor issues under the Fair Labor Standards Act (“FLSA”).

The final rule largely tracks the DOL’s October 2022 proposed rule. It specifically retains the multifactor, “totality-of-the-circumstances” framework for analyzing independent contractor status included in that proposal. Under this framework, the DOL will consider six non-exhaustive factors when examining the relationship between a worker and a potential employer, including:

  • Worker’s opportunity for profit or loss.
  • Investments made by the worker and the employer.
  • Degree of permanence of the work relationship.
  • Nature and degree of control over performance of the work.
  • Extent to which the work performed is an integral part of the employer’s business; and
  • Use of the worker’s skill and initiative.

The final rule was published in the Federal Register on Wednesday, January 10, 2024, and is expected to take effect March 11, 2024. When it goes into effect, independent contractor issues under the FLSA will need to be examined under this new framework that will require an analysis of how each of the foregoing characteristics impact the overall relationship to decide if there is either employment or instead independent contractor status. The DOL believes that this new standard is more consistent with how courts have interpreted this issue in the past, while also providing a more consistent approach for companies that engage with individuals who are in business for themselves.  

When it comes to creating independent contractor relationships, it is important that companies are aware of not only this new rule, but also any other standards applied under state wage and hour laws. If state standards are more favorable to workers than this new federal rule, the state standard takes priority and must be followed. Some states like New Jersey have a more difficult standard that must be met, known as the ABC Rule, in deciding worker classification issues. Under the ABC Standard applied here in New Jersey, an independent contractor relationship is established only if each of the foregoing requirements are met:

  1. The individual has been and will continue to be free from control or direction over the performance of work performed, both under contract of service and in fact; and
  2. The work is either outside the usual course of the business for which such service is performed, or the work is performed outside of all the places of business of the enterprise for which such service is performed; and
  3. The individual is customarily engaged in an independently established trade, occupation, profession, or business.

The failure to meet any one of these prongs means that, rather than having an independent contractor, you have an employee who is entitled to all the usual available benefits that are applicable to such persons under state wage and hour laws.

While the new federal standard under the recently announced final rule seemingly provides greater flexibility in analyzing independent contractor issues under federal law, companies will face significant legal peril if they stop their analysis of this issue prematurely just at this federal rule while ignoring companion state wage and hour standards. Accordingly, it is important to remember in this area of the law to analyze independent contractor questions under both federal and state rules to avoid possible employee misclassification issues.   

Yes, Virginia, Non-Compete Agreements are Still Enforceable in New Jersey

Over the last several weeks, as 2023 was drawing to a close, I received several questions about whether non-compete agreements are still enforceable in New Jersey. The confusion in this area is understandable. With efforts happening at the federal government level to ban non-compete agreements nationally, and initiatives working their way through the New Jersey legislature to radically modify the law on enforcement of such agreements here in New Jersey, no wonder employers are currently baffled about the present state of the law in this very important area.

As things currently stand, non-compete restrictions are still enforceable in New Jersey. None of the bills working their way through the New Jersey Legislature have succeeded yet and none are on the verge of being presented to the governor for enactment. So, at present, New Jersey law in this area remains as it has been for quite some time: that so long as non-compete agreements contain reasonable restrictions (in both time and geographical reach) and are narrowly tailored to serve legitimate business interests (such as protection of client relationships or proprietary information), they are still enforceable in New Jersey. 

On the federal level, the situation continues to evolve. The rule that the Federal Trade Commission (“FTC”) proposed back in January 2023 that would ban almost all non-compete restrictions nationally is still not in effect. While the period for public comment on the proposed rule has long passed, the FTC has still not formally adopted the rule and it is unclear when such action will happen, though some media outlets have reported based on internal agency sources that this could occur in April 2024. Even if that actually occurs, one can expect there to be legal challenges filed by private parties so it is unclear whether such a rule will ever be allowed to be enforced by the courts. This dynamic is even more legally unsettling since this legal fight over enforcement of the rule will be happening during an election year.

Along with the FTC, the National Labor Relations Board (“NLRB”) has also jumped into the fray in challenging the enforceability of non-compete restrictions. The General Counsel for the NLRB issued an enforcement guidance memo back in May 2023 that announced that, in theory, non-compete restrictions could under some circumstances infringe upon an employee’s right to engage in certain protected activities under federal labor law by restricting an employee’s access to future employment opportunities.  While noting that non-compete restrictions may be legitimate under certain limited circumstances, the memo does not provide any details on what those circumstances might be leaving employers with scant advice on what the General Counsel may view as legally viable restrictions. The good news for employers is that while the memo may reflect the views of the current General Counsel, it is not the law, meaning that it currently has no binding impact on enforceability of non-compete restrictions nationwide, though it could come into play for a litigant before the NLRB.

With 2024 around the corner, it should be an interesting year for non-compete legal developments. With this cascading environment of possible legal restrictions on enforcement, employers are wise to proceed cautiously in both how they draft non-compete agreements and in deciding from whom non-compete agreements are to be sought. Making sure that such agreements are narrowly tailored to serve legitimate business interests and that they are sought only from employees whose departure could indeed threaten the welfare of a business will go a long way in ensuring the enforceability of such arrangements.

May everyone have a happy and (legally) healthy 2024!           

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