DOL Announces Higher Minimum Salaries Beginning July 1 for White Collar Employees to Be Exempt from FLSA Overtime and Minimum Wage Requirements

Yesterday, the Department of Labor announced that it had finalized new FLSA regulations that will increase the minimum salary that must be paid to exempt executive, administrative and professional employees and minimum hourly rate for computer employees in order for them to qualify for the FLSA exemptions from overtime and minimum wage requirements.   In general, the minimum salary level will increase to $844/week (or $43,888/year) on July 1, will increase to $1,128/week (or $58,656 on January 1 and will be readjusted based on inflation every three years thereafter on July 1.    There are slightly different levels for employees in academic, American Samoa and Northern Marinara Islands.   The minimum salary level for Highly Compensated Employees will also increase to $132,964/year on July 1 and to $151,164 on January 1.  The new regulation is set forth below:

§ 541.600 Amount of salary required.

(a) Standard salary level. To qualify as an exempt executive, administrative, or professional employee under section 13(a)(1) of the Act, an employee must be compensated on a salary basis at a rate per week of not less than the amount set forth in paragraphs (a)(1) through (3) of this section, exclusive of board, lodging or other facilities, unless paragraph (b) or (c) of this section applies. Administrative and professional employees may also be paid on a fee basis, as defined in § 541.605.

(1) Beginning on July 1, 2024, $844 per week (the 20th percentile of weekly earnings of full-time nonhourly workers in the lowest-wage Census Region and/or retail industry nationally).

(2) Beginning on January 1, 2025, $1,128 per week (the 35th percentile of weekly earnings of full-time nonhourly workers in the lowest-wage Census Region).

(3) As of July 1, 2027, the level calculated pursuant to § 541.607(b)(1).

(b) Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, U.S. Virgin Islands. To qualify as an exempt executive, administrative, or professional employee under section 13(a)(1) of the Act, an employee in the Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, or the U.S. Virgin Islands employed by employers other than the Federal Government must be compensated on a salary basis at a rate of not less than $455 per week, exclusive of board, lodging or other facilities. Administrative and professional employees may also be paid on a fee basis, as defined in § 541.605.

(c) American Samoa. To qualify as an exempt executive, administrative, or professional employee under section 13(a)(1) of the Act, an employee in American Samoa employed by employers other than the Federal Government must be compensated on a salary basis at a rate of not less than $380 per week, exclusive of board, lodging or other facilities. Administrative and professional employees may also be paid on a fee basis, as defined in § 541.605.

(d) Frequency of payment. The salary level requirement may be translated into equivalent amounts for periods longer than one week. For example, the $1,128 per week requirement described in paragraph (a)(2) of this section would be met if the employee is compensated biweekly on a salary basis of not less than $2,256, semimonthly on a salary basis of not less than $2,444, or monthly on a salary basis of not less than $4,888. However, the shortest period of payment that will meet this compensation requirement is one week.

(e) Alternative salary level for academic administrative employees. In the case of academic administrative employees, the salary level requirement also may be met by compensation on a salary basis at a rate at least equal to the entrance salary for teachers in the educational establishment by which the employee is employed, as provided in § 541.204(a)(1).

(f) Hourly rate for computer employees. In the case of computer employees, the compensation requirement also may be met by compensation on an hourly basis at a rate not less than $27.63 an hour, as provided in § 541.400(b).

(g) Exceptions to the standard salary criteria. In the case of professional employees, the compensation requirements in this section shall not apply to employees engaged as teachers (see § 541.303); employees who hold a valid license or certificate permitting the practice of law or medicine or any of their branches and are actually engaged in the practice thereof  (see § 541.304); or to employees who hold the requisite academic degree for the general practice of medicine and are engaged in an internship or resident program pursuant to the practice of the profession (see § 541.304). In the case of medical occupations, the exception from the salary or fee requirement does not apply to pharmacists, nurses, therapists, technologists, sanitarians, dietitians, social workers, psychologists, psychometrists, or other professions which service the medical profession.

9. Amend § 541.601 by revising paragraph (a), the first sentence of paragraph (b)(1), and paragraph (b)(2) to read as follows:

 § 541.601 Highly compensated employees. (a) An employee shall be exempt under section 13(a)(1) of the Act if the employee receives total annual compensation of not less than the amount set forth in paragraph (a)(1) through (4) of this section, and the employee customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative, or professional employee identified in subpart B, C, or D of this part:

(1) Beginning on July 1, 2024, $132,964 per year (the annualized earnings amount of the 80th percentile of full-time nonhourly workers nationally).

(2) Beginning on January 1, 2025, $151,164 per year (the annualized earnings amount of the 85th percentile of full-time nonhourly workers nationally).

(3) As of July 1, 2027, the total annual compensation level calculated pursuant to § 541.607(b)(2).

(4) Where the annual period covers periods during which multiple total annual compensation levels apply, the amount of total annual compensation due will be determined on a proportional basis.

(b)(1) Total annual compensation must include at least a weekly amount equal to that required by § 541.600(a)(1) through (3) paid on a salary or fee basis as set forth in §§ 541.602 and 541.605, except that § 541.602(a)(3) shall not apply to highly compensated employees. * * *

(2) If an employee’s total annual compensation does not total at least the amount set forth in paragraph (a) of this section by the last pay period of the 52-week period, the employer may, during the last pay period or within one month after the end of the 52-week period, make one final payment sufficient to achieve the required level. For example, for a 52-week period beginning January 1, 2025, an employee may earn $135,000 in base salary, and the employer may anticipate based upon past sales that the employee also will earn $20,000 in commissions. However, due to poor sales in the final quarter of the year, the employee only earns $14,000 in commissions. In this situation, the employer may within one month after the end of the year make a payment of at least $2,164 to the employee. Any such final payment made after the end of the 52-week period may count only toward the prior year’s total annual compensation and not toward the total annual compensation in the year it was paid. If the employer fails to make such a payment, the employee does not qualify as a highly compensated employee, but may still qualify as exempt under subpart B, C, or D of this part. * * * * *

10. Amend § 541.602 by revising the first sentence of paragraph (a)(3) and the first sentence of paragraph (a)(3)(i) to read as follows:

§ 541.602 Salary basis. * * * * * (a)(3) Up to ten percent of the salary amount required by § 541.600(a) through (c) may be satisfied by the payment of nondiscretionary bonuses, incentives, and commissions, that are paid annually or more frequently. * * *

(i) If by the last pay period of the 52-week period the sum of the employee’s weekly salary plus nondiscretionary bonus, incentive, and commission payments received is less than 52 times the weekly salary amount required by § 541.600(a) through (c), the employer may make one final payment sufficient to achieve the required level no later than the next pay period after the end of the year. * * * * * * * *

11. Amend § 541.604 by a. Revising the second, third, and fourth sentences of paragraph (a) and; b. Revising the third sentence in paragraph (b). The revisions and additions read as follows:

§ 541.604 Minimum guarantee plus extras. (a) * * * Thus, for example under the salary requirement described in § 541.600(a)(2), an exempt employee guaranteed at least $1,128 each week paid on a salary basis may also receive additional compensation of a one percent commission on sales. An exempt employee also may receive a percentage of the sales or profits of the employer if the employment arrangement also includes a guarantee of at least $1,128 each week paid on a salary basis. Similarly, the exemption is not lost if an exempt employee who is guaranteed at least $1,128 each week paid on a salary basis also receives additional compensation based on hours worked for work beyond the normal workweek. * * *

b) * * * Thus, for example under the salary requirement described in § 541.600(a)(2), an exempt employee guaranteed compensation of at least $1,210 for any week in which the employee performs any work, and who normally works four or five shifts each week, may be paid $350 per shift without violating the $1,128 per week salary basis requirement. * * *

12. Amend § 541.605 by revising paragraph (b) to read as follows:

§ 541.605 Fee basis. * * * * * (b) To determine whether the fee payment meets the minimum amount of salary required for exemption under these regulations, the amount paid to the employee will be tested by determining the time worked on the job and whether the fee payment is at a rate that would amount to at least the minimum salary per week, as required by §§ 541.600(a) through (c) and 541.602(a), if the employee worked 40 hours. Thus, for example under the salary requirement described in § 541.600(a)(2), an artist paid $600 for a picture that took 20 hours to complete meets the $1,128 minimum salary requirement for exemption since earnings at this rate would yield the artist $1,200 if 40 hours were worked.

13. Add § 541.607 to read as follows:

§ 541.607 Regular updates to amounts of salary and compensation required. (a) Initial update—(1) Standard salary level. Beginning on July 1, 2024, the amount required to be paid per week to an exempt employee on a salary or fee basis, as applicable, pursuant to § 541.600(a)(1) will be not less than $844.

(2) Highly compensated employees. Beginning on July 1, 2024, the amount required to be paid in total annual compensation to an exempt highly compensated employee pursuant to § 541.601(a)(1) will be not less than $132,964.

(b) Future updates—(1) Standard salary level.

(i) As of July 1, 2027, and every 3 years thereafter, the amount required to be paid to an exempt employee on a salary or fee basis, as applicable, pursuant to § 541.600(a) will be updated to reflect current earnings data.

(ii) The Secretary will determine the future update amounts by applying the methodology in effect under § 541.600(a) at the time the Secretary issues the notice required by paragraph (b)(3) of this section to current earnings data.

(2) Highly compensated employees.

(i) As of July 1, 2027, and every 3 years thereafter, the amount required to be paid in total annual compensation to an exempt highly compensated employee pursuant to § 541.601(a) will be updated to reflect current earnings data.

(ii) The Secretary will determine the future update amounts by applying the methodology used to determine the total annual compensation amount in effect under § 541.601(a) at the time the Secretary issues the notice required by paragraph (b)(3) of this section to current earnings data.

(3) Notice.

(i) Not fewer than 150 days before each future update of the earnings requirements under paragraphs (b)(1) and (2) of this section, the Secretary will publish a notice in the Federal Register stating the updated amounts based on the most recent available 4 quarters of CPS MORG data, or its successor publication, as published by the Bureau of Labor Statistics.

(ii) No later than the effective date of the updated earnings requirements, the Wage and Hour Division will publish on its website the updated amounts for employees paid pursuant to this part.

(4) Delay of updates. A future update to the earnings thresholds under this section is delayed from taking effect for a period of 120 days if the Secretary has separately published a notice of proposed rulemaking in the Federal Register, not fewer than 150 days before the date the update is set to take effect, proposing changes to the earnings threshold(s) and/or updating mechanism due to unforeseen economic or other conditions. The Secretary must state in the notice issued pursuant to paragraph (b)(3)(i) of this section that the scheduled update is delayed in accordance with this paragraph (b)(4). If the Secretary does not issue a final rule affecting the scheduled update to the earnings thresholds by the end of the 120-day extension period, the updated amounts published in accordance with paragraph (b)(3) of this section will take effect upon the expiration of the 120-day period. The 120-day delay of a scheduled update under this paragraph will not change the effective dates for future updates of the earnings requirements under this section.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

FTC Adopts Rules Barring Non-Competition Agreements Within the U.S.

Last year I reported that the Federal Trade Commission planned to prohibit non-competition clauses.  That day has come.  It has issued its final rule, which will be effective in approximately 120 days (depending on when it is published in the Federal Register).   The new rule, with very limited exceptions,  prohibits any contract or policy that prohibits, penalizes or functions to prevent any current or former workers (including independent contractors, volunteers and interns, etc.) from starting their own business or going to work elsewhere after their employment with the employer concludes.  Prior to the effective date (in 120 days), employers are also required to notify any current and former workers (including independent contractors) who are subject to a non-compete that the non-compete is no longer enforceable.   I have included the regulation's language below.

Now for the exceptions:

·       It does not apply to the sale of a business.  The proposed rule’s exception only applied if the worker owned at least 25% of the business, but that restriction has been eliminated.  The current rule does not ban non-competes if a worker sells his or her shares or ownership interest in the practice subject to a non-compete, etc.

·       The new rule does not require employers to notify “senior executives” who were in a policy making position and being paid an annual salary of more than $150K that their non-compete is no longer enforceable; their existing non-competes remain enforceable.   However, employers may no longer enter into new non-competes with senior executives after the rule's effective date.

·       The new rule does not apply to concurrent employment.  It is still lawful to restrict employees to working only for one employer or to restrict competition while on a payroll or under contract.  In other words, the restrictions are only on post-employment requirements.

·       The new rule does not apply to employment outside the U.S.

There is also a question about FTC jurisdiction over non-profit organizations, which could create a disparity between enforcement of these agreements by non-profit employers, but prohibited by for-profit employers.    

Application:

·       It does not bar all restrictive covenants unless they function to prevent the worker from working elsewhere or starting their own business. 

o   Non-solicitation agreements are still valid unless they are unduly restrictive.  That restriction only prevent contact with customers, not with competition.

“Non-solicitation agreements are generally not non-compete clauses under the final rule because, while they restrict who a worker may contact after they leave their job, they do not by their terms or necessarily in their effect prevent a worker from seeking or accepting other work or starting a business. However, non-solicitation agreements can satisfy the definition of non-compete clause in § 910.1 where they function to prevent a worker from seeking or accepting other work or starting a business after their employment ends.”

o   Non-disclosure agreements are still valid unless they are overly broad and prevent the worker from using general knowledge and skills or information that is already available to competitors, etc. For instance, it could be overly broad to prevent disclosure of information that relates to or is usable in an industry.

o   Reimbursement agreements are still valid unless they are prohibitively punitive and/or do not apply unless the employee works elsewhere or for him/herself.    These are tricky because the rule prohibits penalizing an employee for going to work elsewhere by requiring them to repay training costs, etc., but notes that only requiring the employee to repay a bonus (or to lose sick leave) if they resign within a certain period of time are presumptively valid.

o   Evergreen or garden leave agreements are still valid if the worker technically still remains employed by you even though they may not be given any work to do, etc.  In other words, you can pay a worker to not work as a means of keeping them from competing for a certain period of time, but they must still remain employed by you.  The rule only prohibits post-employment restrictions. 

:Here is the language of the new regulation

16 CFR Part 910 Antitrust.

For the reasons set forth above, the Federal Trade Commission adds a new subchapter J, consisting of part 910, to chapter I in title 16 of the Code of Federal Regulations:

1. Add new subchapter J, consisting of parts 910 and 915, to read as follows:

SUBCHAPTER J—RULES CONCERNING UNFAIR METHODS OF COMPETITION PART 910—NON-COMPETE CLAUSES

. . .

§ 910.1 Definitions. As used in this part:

Business entity means a partnership, corporation, association, limited liability company, or other legal entity, or a division or subsidiary thereof. Employment means work for a person.

Non-compete clause means:

(1) A term or condition of employment that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from:

(i) seeking or accepting work in the United States with a different person where such work would begin after the conclusion of the employment that includes the term or condition; or

(ii) operating a business in the United States after the conclusion of the employment that includes the term or condition.

(2) For the purposes of this part 910, term or condition of employment includes, but is not limited to, a contractual term or workplace policy, whether written or oral.

Officer means a president, vice president, secretary, treasurer or principal financial officer, comptroller or principal accounting officer, and any natural person routinely performing corresponding functions with respect to any business entity whether incorporated or unincorporated.

Person means any natural person, partnership, corporation, association, or other legal entity within the Commission’s jurisdiction, including any person acting under color or authority of State law.

Policy-making authority means final authority to make policy decisions that control significant aspects of a business entity or common enterprise and does not include authority limited to advising or exerting influence over such policy decisions or having final authority to make policy decisions for only a subsidiary of or affiliate of a common enterprise.

Policy-making position means a business entity’s president, chief executive officer or the equivalent, any other officer of a business entity who has policy-making authority, or any other natural person who has policy-making authority for the business entity similar to an officer with policy-making authority.  An officer of a subsidiary or affiliate of a business entity that is part of a common enterprise who has policy-making authority for the common enterprise may be deemed to have a policy-making position for purposes of this paragraph. A natural person who does not have policy-making authority over a common enterprise may not be deemed to have a policy-making position even if the person has policy-making authority over a subsidiary or affiliate of a business entity that is part of the common enterprise.

Preceding year means a person’s choice among the following time periods: the most recent 52-week year, the most recent calendar year, the most recent fiscal year, or the most recent anniversary of hire year.

Senior executive means a worker who:

(1) Was in a policy-making position; and

(2) Received from a person for the employment:

(i) Total annual compensation of at least $151,164 in the preceding year; or

(ii) Total compensation of at least $151,164 when annualized if the worker was employed during only part of the preceding year; or

 (iii) Total compensation of at least $151,164 when annualized in the preceding year prior to the worker’s departure if the worker departed from employment prior to the preceding year and the worker is subject to a non-compete clause.

Total annual compensation is based on the worker’s earnings over the preceding year. Total annual compensation may include salary, commissions, nondiscretionary bonuses and other nondiscretionary compensation earned during that 52-week period. Total annual compensation does not include board, lodging and other facilities as defined in 29 CFR 541.606, and does not include payments for medical insurance, payments for life insurance, contributions to retirement plans and the cost of other similar fringe benefits.

Worker means a natural person who works or who previously worked, whether paid or unpaid, without regard to the worker’s title or the worker’s status under any other State or Federal laws, including, but not limited to, whether the worker is an employee, independent contractor, extern, intern, volunteer, apprentice, or a sole proprietor who provides a service to a person. The term worker includes a natural person who works for a franchisee or franchisor, but does not include a franchisee in the context of a franchisee-franchisor relationship.

§ 910.2 Unfair methods of competition.

(a) Unfair methods of competition—

(1) Workers other than senior executives. With respect to a worker other than a senior executive, it is an unfair method of competition for a person:

(i) To enter into or attempt to enter into a non-compete clause;

(ii) To enforce or attempt to enforce a non-compete clause; or

 (iii) To represent that the worker is subject to a non-compete clause.

 (2) Senior executives. With respect to a senior executive, it is an unfair method of competition for a person:

(i) To enter into or attempt to enter into a non-compete clause;

(ii) To enforce or attempt to enforce a non-compete clause entered into after the effective date; or (iii) To represent that the senior executive is subject to a non-compete clause, where the non-compete clause was entered into after the effective date.

(b) Notice requirement for existing non-compete clauses—

(1) Notice required. For each existing non-compete clause that it is an unfair method of competition to enforce or attempt to enforce under paragraph (a)(1)(ii) of this section, the person who entered into the non-compete clause with the worker must provide clear and conspicuous notice to the worker by the effective date that the worker’s non-compete clause will not be, and cannot legally be, enforced against the worker.

(2) Form of notice. The notice to the worker required by paragraph (b)(1) of this section must:

(i) Identify the person who entered into the non-compete clause with the worker;

(ii) Be on paper delivered by hand to the worker, or by mail at the worker’s last known personal street address, or by email at an email address belonging to the worker, including the worker’s current work email address or last known personal email address, or by text message at a mobile telephone number belonging to the worker.

 (3) Exception. If a person that is required to provide notice under paragraph (b)(1) of this section has no record of a street address, email address, or mobile telephone number, such person is exempt from the notice requirement in paragraph (b)(1) of this section with respect to such worker.

(4) Model language. For purposes of paragraph (b)(1) of this section, the following model language constitutes notice to the worker that the worker’s non-compete clause cannot legally be enforced and will not be enforced against the worker.

Figure 1 to paragraph (b)(4)—Model Language

                  A new rule enforced by the Federal Trade Commision makes it unlawful for us to enforce a non-compete clause.  As of [DATE EMPLOYER CHOOSES BUT NO LATER THAN EFFECTIVE DATE OF THE FINAL RULE], [EMPLOYER NAME] will not enforce any non-compete clause against you.  This means that as of [DATE EMPLOYER CHOOSES BUT NO LATER THAN EFFECTIVE DATE OF THE FINAL RULE]:

·       You may seek or accept a job with any company or person -- even if they compete with [EMPLOYER NAME].

·       You may run your own business -- even it competes with [EMPLOYER NAME].

·       You may compete with [EMPLOYER NAME] following your employment with [EMPLOYER NAME]. 

The FTC’s new rule does not affect any other terms or conditions of your employment.  For more information about the rule, visit [link to final rule landing page].  Complete and accurate translation of the notice in certain languages other than English, including Spanish, Chinese, Arabic, Vietnamese, Tagalog and Korean, are available at [URL on FTC’s website]. 

(5) Safe harbor. A person complies with the requirement in paragraph (b)(1) of this section if the person provides notice to a worker pursuant to paragraph (b)(4) of this section.

(6) Optional notice in additional languages. In addition to providing the notice required in paragraph (b)(1) of this section in English, a person is permitted to provide such notice in a language (or in languages) other than English or to include internet links to translations in additional languages. If providing optional notice under this paragraph (b)(6), a person may use any Commission-provided translation of the model language in paragraph (b)(4) of this section.

§ 910.3 Exceptions.

(a) Bona fide sales of business. The requirements of this part 910 shall not apply to a non-compete clause that is entered into by a person pursuant to a bona fide sale of a business entity, of the person’s ownership interest in a business entity, or of all or substantially all of a business entity’s operating assets.

(b) Existing causes of action. The requirements of this part 910 do not apply where a cause of action related to a non-compete clause accrued prior to the effective date.

(c) Good faith. It is not an unfair method of competition to enforce or attempt to enforce a non-compete clause or to make representations about a non-compete clause where a person has a good-faith basis to believe that this part 910 is inapplicable.

§ 910.4 Relation to State laws and preservation of State authority and private rights of action.

(a) This part 910 will not be construed to annul, or exempt any person from complying with any State statute, regulation, order, or interpretation applicable to a non-compete clause, including, but not limited to, State antitrust and consumer protection laws and State common law, except that this part 910 supersedes such laws to the extent, and only to the extent, that such laws would otherwise permit or authorize a person to engage in conduct that is an unfair method of competition under § 910.2(a) or conflict with the notice requirement in § 910.2(b).

(b) Except with respect to laws superseded under paragraph (a) of this section, no provision of this part 910 shall be construed as altering, limiting, or affecting the authority of a State attorney general or any other regulatory or enforcement agency or entity or the rights of a 568 person to bring a claim or regulatory action arising under any State statute, regulation, order, or interpretation, including, but not limited to, State antitrust and consumer protection laws and State common law.

§ 910.5 Severability. If any provision of this part 910 is held to be invalid or unenforceable by its terms, or as applied to any person or circumstance, or stayed pending further agency action, the provision shall be construed so as to continue to give the maximum effect to the provision permitted by law and such invalidity shall not affect the application of the provision to other persons or circumstances or the validity or application of other provisions. If any provision or application of this part is held to be invalid or unenforceable, the provision or application shall be severable from this part 910 and shall not affect the remainder thereof.

§ 910.6 Effective date. This part 910 is effective [INSERT DATE 120 DAYS AFTER DATE OF PUBLICATION OF THE FINAL RULE].

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

EEOC Finalizes Regulations and Interpretative Guidance for PWFA, Including Minimal Requirements for Communicating a Need for Accommodation to Any Supervisor

On Friday, the EEOC finally published its final rule, or regulation, and Interpretative Guidance governing and explaining the enforcement of the Pregnant Worker Fairness Act (PFWA).   While not quite as expansive as the proposed regulation, it makes significant changes in how employers with more than 15 employees are required to treat workers who may become, are or have recent been pregnant. For instance, 40 weeks of leave is expected (albeit much of it can be unpaid), as is the temporary (i.e., not indefinite) suspension of essential job functions to reasonably accommodate limitations (which need not be impairments or disabilities).    This will take several days to summarize, so today, I will focus on communication.

Employees need only communicate their limitations to anyone in authority -- including supervisors, managers, HR, recruiters or anyone who directs their tasks and such communication need not be in writing or on any particular form or using any particular words.  29 C.F.R. §1636.3(d).  Employees also need not state whether they are requesting an accommodation under the ADA or PWFA since a limitation may be covered by either or both of these statutes.   Employers may confirm the information in writing to promote clarity and create a record of the request.   Employers should immediately train their supervisory and other management staff about how to recognize a request for an accommodation under the PWFA because any delay in providing the requested or an interim accommodation can create liability for the employer.

 As the EEOC explains in its Interpretative Guidance:

• [A]n employee does not need to “ask” but may provide a statement of their need for an Accommodation.
• Employees should not be made to wait for a reasonable accommodation, especially one that is simple and imposes negligible cost or is temporary, because they spoke to the “wrong” supervisor.
• Employees may inform the employer of the limitation and request an accommodation in a conversation or may use another mode of communication to inform the employer. A covered entity may choose to confirm a request in writing or may ask the employee to fill out a form or otherwise confirm the request in writing.  . . .  the covered entity cannot ignore or close an initial request that satisfies § 1636.3(h)(2) if the employee does not complete such confirmation procedures, because that initial request is sufficient to place the employer on notice.
• [T]he employee need not determine whether this is a “limitation” or a “related medical condition” in order to request an accommodation under the PWFA . . . . . Employees are not required to specifically identify whether a condition is “pregnancy, childbirth, or related medical conditions” or whether it is a “physical or mental condition.”
• Many, but not all, conditions related to pregnancy and childbirth can be both a “limitation” and a “related medical condition.”

 

In these examples, the employee is communicating both their limitation and that they need an adjustment or change at work due to the limitation. The Commission expects that in the vast majority of cases these two communications will happen at the same time. All of these are examples of requests for reasonable accommodations under the PWFA.

 

Example #6: A pregnant employee tells her supervisor, “I’m having trouble getting to work at my scheduled starting time because of morning sickness.”

 

Example #7: An employee who gave birth 3 months ago tells the person who assigns her work at the employment agency, “I need an hour off once a week for treatments to help with my back problem that started during my pregnancy.”

 

Example #8: An employee tells a human resources specialist that they are worried about

continuing to lift heavy boxes because they are concerned that it will harm their pregnancy.

 

Example #9: At the employee’s request, an employee’s spouse requests light duty for the

employee because the employee has a lifting restriction related to pregnancy; the employee’s spouse uses the employer’s established process for requesting a reasonable accommodation.

 

Example #10: An employee tells a manager of her need for more frequent bathroom breaks, explains that the breaks are needed because the employee is pregnant, but does not complete the employer’s online form for requesting an accommodation.

 

Example #11: An employee tells a supervisor that she needs time off to recover from childbirth.

 

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Supreme Court Finds FAA Exemption Depends on the Work Performed and Not the Industry.

Last week, the unanimous Supreme Court held that a worker need not work in the transportation industry to qualify for the Federal Arbitration Act exemption for the “class of workers engaged in foreign or interstate commerce.”  Bissonette v. LePage Bakeries Start St. LLC, No. 23-51 (4-12-24).  The statutory language providing the exemption focuses on the worker and not the industry.  “A transportation worker need not work in the transportation industry to fall within the exemption from the FAA provided by §1 of the Act.”

According to the Court’s opinion, the plaintiffs filed suit alleging that they had been misclassified as independent contractors by the defendant baking company and were entitled to minimum and overtime wages.  The plaintiffs’ work included delivering and marketing the defendant’s baked goods within the state of Connecticut.  They had signed franchise/distributor agreements giving them rights to distribute the defendant’s baked goods within Connecticut.  The defendant moved to compel arbitration pursuant to arbitration clauses in their distributor agreements.  The plaintiffs argued that they were exempt from the FAA as members of “class of workers engaged in foreign or interstate commerce.” The District Court found that they were not transportation workers because their duties involved more than merely driving trucks.  The Second Circuit affirmed on the grounds that they were not employed in the transportation industry.

Section 1 of the FAA contains an exemption for certain employees:  “ . . . . nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”  The Court had previously held that a “class of workers” is properly defined based on what a worker does for an employer, “not what [the employer] does generally.”  

Nor does construing §1 to cover transportation workers render “seamen” and “railroad employees” superfluous, as [the employer] contends.  . . .  That argument gets ejusdem generis exactly backwards. It is the specific terms “seamen” and “railroad employees” that limit the residual clause, not the residual clause that swallows up these narrower terms.

The Court also rejected the argument that virtually all workers are essentially engaged in internet commerce, making the exemption swallow the general rule:

a transportation worker is one who is “actively” “‘engaged in transportation’ of . . . goods across borders via the channels of foreign or interstate commerce.”  . . . .  In other words, any exempt worker “must at least play a direct and ‘necessary role in the free flow of goods’ across borders.” . . . . These requirements “undermine[] any attempt to give the provision a sweeping, open-ended construction,” instead limiting §1 to its appropriately “narrow” scope.

The Court remanded the matter back to the Court of Appeals.  Reversal did not resolve whether the plaintiffs were covered by the exemption since a question remained whether they were involved in interstate commerce. 

We express no opinion on any alternative grounds in favor of arbitration raised below, including that petitioners are not transportation workers and that petitioners are not “engaged in foreign or interstate commerce” within the meaning of §1 because they deliver baked goods only in Connecticut.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Supreme Court Rejects Requirement of Materially Adverse or Significant Changes in Terms and Conditions of Employment to Prove Discriminatory Lateral Transfers

This morning, in a long-awaited decision without any dissents, the Supreme Court reversed the summary judgment dismissal of a sex discrimination lawsuit on the grounds that the plaintiff is not required to prove that an involuntary lateral transfer significantly affected the terms and conditions of her employment.   Muldrow v. City of St. Louise, MO, No. 22-193 (4/17/24).  In particular, the plaintiff alleged that, even though her pay and title remained the same after the transfer, she was denied the use of an unmarked vehicle to use after her shift, was required to sometimes work weekends and no longer worked with higher ranking officers.   “Although an employee must show some harm from a forced transfer to prevail in a Title VII suit, she need not show that the injury satisfies a significance test.”  Nonetheless, the Court observed that the significance of the changed working conditions may be considered in assessing whether the employer intentionally discriminated.  “[A] court may consider whether a less harmful act is, in a given context, less suggestive of intentional discrimination.”

According to the Court’s opinion, when a new commander took over, the plaintiff was involuntarily transferred from a plainclothes officer position in the Intelligence Division (where she had worked for almost 10 years) to a uniformed officer position in another department supervising patrol officers.  The new commander allegedly called her “Mrs.” instead of “Sergeant” and indicated that a male officer was better suited for the Division’s dangerous work.   Her pay and rank remained the same following the transfer.  However, she “no longer worked with high-ranking officials on the departmental priorities lodged in the Intelligence Division” and “also lost access to an unmarked take-home vehicle and had a less regular schedule involving weekend shifts.”   She lost a “prestigious” role for an “administrative” role.  She alleged that she was transferred because of her sex in violation of Title VII.  However, the trial and appellate courts granted judgment to the city employer on the grounds that she had not suffered any materially significant adverse affects from the transfer and she only suffered minor changes in her working conditions.   The  Supreme Court reversed.

The plaintiff’s involuntary “transfer  . . .  implicated “terms” and “conditions” of [her] employment, changing nothing less than the what, where, and when of her police work.”

Title VII makes it unlawful for an employer “to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin.” §2000e–2(a)(1).

This “language requires [the plaintiff] to show that the transfer brought about some ‘disadvantageous’ change in an employment term or condition.  . . . . The words ‘discriminate against,’ we have explained, refer to ‘differences in treatment that injure’ employees.”  Title VII “targets practices that “treat[] a person worse” because of sex or other protected trait.”  The Court has clarified in the past that the “terms [or] conditions” statutory language  “is not used ‘in the narrow contractual sense’; it covers more than the ‘economic or tangible.’”  Nonetheless, it limits that kinds of harm that is actionable.  “To make out a Title VII discrimination claim, a transferee must show some harm respecting an identifiable term or condition of employment.”

What the transferee does not have to show, according to the relevant text, is that the harm incurred was “significant.”  . . . . Or serious, or substantial, or any similar adjective suggesting that the disadvantage to the employee must exceed a heightened bar . . . “Discriminate against” means treat worse, here based on sex.  . . . But neither that phrase nor any other says anything about how much worse. There is nothing in the provision to distinguish, as the courts below did, between transfers causing significant disadvantages and transfers causing not-so-significant ones. And there is nothing to otherwise establish an elevated threshold of harm. To demand “significance” is to add words—and significant words, as it were—to the statute Congress enacted. It is to impose a new requirement on a Title VII claimant, so that the law as applied demands something more of her than the law as written. And that difference can make a real difference for complaining transferees. Many forced transfers leave workers worse off respecting employment terms or conditions. (After all, a transfer is not usually forced when it leaves the employee better off.) But now add another question— whether the harm is significant. As appellate decisions reveal, the answers can lie in the eye of the beholder—and can disregard varied kinds of disadvantage.

The Court rejected the employer’s policy argument that removing the significance factor will open the litigation floodgates and discovery issues:

In the City’s view, a significant-injury requirement is needed to prevent transferred employees from “swamp[ing] courts and employers” with insubstantial lawsuits requiring “burdensome discovery and trials.”  . . . . As we have explained, the anti-discrimination provision at issue requires that the employee show some injury.  . . . It requires that the injury asserted concern the terms or conditions of her employment. . . . Perhaps most notably, it requires that the employer have acted for discriminatory reasons—“because of ” sex or race or other protected trait. §2000e–2(a)(1). And in addressing that issue, a court may consider whether a less harmful act is, in a given context, less suggestive of intentional discrimination. So courts retain multiple ways to dispose of meritless Title VII claims challenging transfer decisions. But even supposing the City’s worst predictions come true, that would be the result of the statute Congress drafted.  As we noted in another Title VII decision, we will not “add words to the law” to achieve what some employers might think “a desirable result.” . . . Had Congress wanted to limit liability for job transfers to those causing a significant disadvantage, it could have done so.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.