Perhaps no area of employment law has changed more recently than the law surrounding employee non-competition agreements. Two federal agencies are actively working to regulate most non-competes out of existence. More states have joined the list of jurisdictions that prohibit or limit non-competes (including many non-solicitation agreements) by enacting broad bans. Other states, although not barring all non-competes, have created new restrictions, all while courts are recognizing new legal theories for challenging them.
Nonetheless, many situations remain where employers can use non-competes to protect their proprietary information and defend against unfair competition. But there are major new hurdles to overcome, and the landscape could change even more soon.
Parts 1-4 below discuss the status of key recent changes. Readers primarily interested in the high points should turn to Part 5 for key takeaways and practical suggestions to help navigate this new landscape.
Back in February I offered here some thoughts on the main practical problems implicit in what was then the Workers (Predictable Terms and Conditions) Bill. It was a mess, missing explanations of key concepts and grossly over-engineered for its objectives. That makes it all the more depressing to report that it has now received Royal Assent in (so far as I can see on the main issues, at least) completely unchanged form. Yes, for the princely sum of just £8.14, you can now get your very own copy of the Workers (Predictable Terms and Conditions) Act 2023. Pages 2 and 4 of this publication are completely blank and so probably represent the high points of this new legislation, as the rest goes downhill fast. Don’t say you weren’t warned.
Explanatory Notes and Acas Guidance will be available to cast some light on what the new Act is all about, but the general idea is to “give workers and agency workers the right to request more predictable terms and conditions of work” through a regime superficially similar to the existing flexible working rules – employee has right to ask and employer can say no only on certain specified grounds, with compensation if the employer mis-steps in the process and suitable protections for those subjected to detriment or dismissal for seeking to exercise that right.
Latest California court decision is another example of judicial hostility to employment arbitration agreements.
California employers and their employees frequently agree to resolve disputes through binding private arbitration, rather than the more time-consuming and costly process of litigating claims in court. However, to require arbitration, California employers are required to pay all fees unique to arbitration. Under the California Arbitration Act, “if the fees or costs required to continue the arbitration proceeding are not paid within 30 days after the due date [defined as the date the invoice issues], the drafting party is in material breach of the arbitration agreement, is in default of the arbitration, and waives its right to compel the employee or consumer to proceed with that arbitration as a result of the material breach.” (Cal Code Civ. Proc. 1281.98(a)(1)). In Doe v. Superior Court of the City and County of San Francisco, the California Court of Appeal, First District was called on to interpret the meaning of “paid” within this statute.
I went to sleep with gum in my mouth and now there’s gum in my hair and when I got out of bed in the morning I tripped on the skateboard and by mistake I dropped my sweater in the sink while the water was running and I could tell it was going to be a terrible, horrible, no good, very bad day.[1]
It may not have been gum in the hair or a wet sweater, but thanks to a flurry of decisions issued by the National Labor Relations Board, the last week of August 2023 was indeed a very bad week for employers.
On August 30, 2023, the US Department of Labor announced a Notice of Proposed Rulemaking (NPRM) that could significantly change the “white collar exemptions” to the overtime compensation requirements of the Fair Labor Standards Act (FLSA).
Under current law, by default all employees covered by the FLSA are entitled to overtime pay at the rate of 1.5 times their regular rate of pay for all hours worked in excess of 40 hours in a workweek. However, under the FLSA’s “white collar” exemptions, employees who perform certain administrative, executive, computer and/or professional duties and who are paid at least $35,568 per year on a salary basis ($684/week) are exempt from the FLSA’s overtime pay requirements. “Highly compensated employees” – those that perform office or non-manual work and at least one of the exempt executive, administrative, or professional duties and are paid on a salary basis – are exempt if their salary is $107,432 or greater.
Since the launch of ChatGPT in November 2022, Generative Artificial Intelligence (“AI”) has taken the world by storm, attracting over 100 million users for both personal and professional use in less than one year. Given the growing popularity of ChatGPT and similar AI tools, it is likely that they will soon infiltrate your workplaces, if they haven’t already. Although AI holds the potential to enhance and make more efficient the way work is done across industries, there also are numerous pitfalls that employers need to be aware of and should address head on. Employers in nearly all industries thus should consider implementing AI policies that explain whether (or to what extent) they will allow employees to use AI at work, and what parameters will apply to internal or external tools to ensure ethical and practical use by their employees.
The Home Office is picking up the pace on immigration compliance matters – we have seen increased activity on everything from right to work enforcement to visa curtailments as well as requests for further evidence across all aspects of sponsorship. We will be focusing on these and other challenges in our webinar on 14 September 2023: UK Business Immigration – Ten Tricky Sponsor Compliance Issues.
As part of this drive, the Home Office has announced that from January 2024, employer fines for a first breach will increase from £15,000 to a swingeing £45,000 for each employee found to be working without permission or in breach of their visa conditions. For subsequent breaches, the fine triples from £20,000 to £60,000 a time for each employee.
The UK government has announced changes to the EU Settlement Scheme from September 2023 which will affect those living in the UK with pre-settled status. The changes have been made following the case of R (Independent Monitoring Authority for the Citizens’ Rights Agreements) v the Secretary of State for the Home Department [2022] in which the High Court held, in summary, that:
by imposing a requirement on pre-settled status holders to apply for settled status after 5 years or lose their right of residence, the Home Office was acting unlawfully; and
those granted pre-settled status are entitled to stay permanently in the UK once they have lived here for the required five-year period, even if they do not apply for settled status.
What is the EU Settlement Scheme?
The EU Settlement Scheme was introduced to protect the rights of EU, EEA and Swiss citizens and their family members after the UK’s departure from the European Union. Under the Scheme, individuals living in the UK as at 31 December 2020 could apply for status to enable them to continue living and working in the UK beyond the application deadline of 30 June 2021. Applicants were granted settled status if the Home Office was satisfied that they had been living in the UK for a continuous 5 years or more at the time of applying, or pre-settled status (which lasts for 5 years) if they had been in the UK for less than 5 years. Until now, pre-settled status holders have been obliged to apply for settled status prior to the expiry of their pre-settled status or lose their right to live in the UK.
What are the changes to the EU Settlement Scheme?
From September 2023, pre-settled status holders will automatically have their status extended by two years before it expires, on a rolling basis, assuming they have already not obtained settled status. The Home Office says that there will be an automated process to update each pre-settled status holder’s digital status to reflect the extension and affected individuals will be notified directly. This means that those pre-settled status will effectively retain their status indefinitely without having to take any further action.
Additionally, the Home Office has said that from 2024 it aims to grant settled status automatically to as many pre-settled status holders as possible who meet the relevant criteria (i.e. 5 years’ continuous residence in the UK and no criminal convictions), using available data such as National Insurance records, without the need for a separate application. If the Home Office cannot make a decision based on the information available to it, pre-settled status holders will be able to apply for settled status if they want to or they can simply retain their pre-settled status which will then continue to be renewed every two years. It remains to be seen how this will work in practice – the Home Office’s roll-out of digital status and online right to work checks has not been what you might call glitch-free.
What is the impact on employers of pre-settled status holders?
The changes will be particularly helpful for employers who have been concerned about losing critical staff on the expiry of their pre-settled status.
Employers should continue to carry out right to work checks (and follow-up checks prior to status expiry) in the usual way and to maintain accurate records, including expiry dates for pre-settled status holders, to ensure that they always have valid permission to work in the UK (not least because we do not know whether or how the Home Office’s ‘automatic’ extension process will work in practice). Employers are required to do right to work checks on those with settled status but as this status has no expiry, they do not need to carry out follow-up checks.
If you have any questions relating to UK visa applications, right to work checks or other immigration matters, please contact your usual Squire Patton Boggs business immigration team member or Annabel Mace, partner and Head of UK Immigration.
In a much anticipated (yet thoroughly unsurprising) decision, on August 2, 2023, the National Labor Relations Board (NLRB or Board) again reversed precedent, crafting a what’s-old-is-new-again standard for evaluating – and easily invalidating – employer work rules. The long and short of the Board’s decision in Stericycle, Inc. is that employers can now expect, much as they did prior to 2017, that the NLRB will declare unlawful many commonplace, and common sense, employer rules designed to foster a productive and harmonious work environment.
The I-9 employment verification process is taking a giant step into the 21st Century making onboarding remote hires a wee bit easier for many U.S. employers. This new alternative process will take effect on August 1, 2023, in conjunction with the implementation of a new version of the I-9, Employment Eligibility Verification form.
Form I-9 Reengineered
In March 2022, the Department of Homeland Security (DHS), U.S. Citizenship and Immigration Services (USCIS) issued a regulatory notice and previewed a newly designed version of the Form I-9. Then on July 25, 2023, the DHS and USCIS announced the new I-9 (Rev. 08/01/23) will be available on August 1, 2023. The current version (Rev. 10/21/19) can be used through October 31, 2023, and all employers will be required to use the new version from November 1, 2023.
