The Federal Trade Commission (FTC) ushered in the new year with a proposal to prohibit noncompete agreements nationwide. If implemented, this rule would prohibit companies from issuing new noncompete agreements and require them to revoke any existing agreements. This potential ban could have significant implications for your company, and you may need to consider alternatives for protecting business interests and retaining employees.
A noncompete agreement is a contract between an employer and an employee in which the employee agrees not to compete with the employer during or after the employment relationship. Employers claim these agreements protect business interests, such as trade secrets, confidential information, and customers. Employees argue they exploit workers and impose systemic inequity, and some states agree.
Several states, such as Colorado, Virginia, and Washington state, limit noncompete agreements only to workers above a salary threshold, while others, like California, North Dakota, Oklahoma, and Washington, D.C., ban noncompete agreements with very few exceptions. The states, and now the federal government, argue that noncompetes hinder healthy competition and limit talent pools.
The FTC proposes to prohibit noncompete agreements virtually altogether as a violation of Section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices in or affecting commerce. Companies would be barred from issuing new agreements and forced to rescind agreements in place. The proposal comes following an announcement that the FTC filed complaints against multiple companies and individuals based on noncompete restrictions the Commission views as unfair methods of competition. The Commision will receive public comments for 60 days, review them, and then issue a final rule to become law.
The Federal Trade Commission (FTC) states that approximately 20% of American workers are subject to noncompete agreements, which restrict their wages and job opportunities, as well as bind them to their current employer. Additionally, the FTC argues that these clauses hinder innovation by inhibiting entrepreneurship and obstructing economic liberty.
At this point, the rule is simply proposed, but employers should move forward to implement alternatives for achieving business purposes. While some specifics may adjust from the proposal, it, along with state laws, provide guidance. By establishing alternatives now, you control the timing, scope, and initial messaging.
To protect trade secrets and confidential information, you should use a nondisclosure agreements (NDA) as part of a strong intellectual property (IP) policy. The NDA protects confidentiality and ensures that commercially valuable information is handled appropriately. This standard NDA provides a basic framework for the provisions that this agreement should include, such as confidentiality, compliance with security policies, and long-term protection of the employer’s intellectual property assets.
If noncompete agreements serve as a method to retain employees, then you’ll need to develop employee experience efforts. Employee experience is about the fundamental way an organization chooses to value and treat its employees, contractors, temporary workers, suppliers, and its entire ecosystem of talent. An ideal employee experience is built upon how your employees are empowered, engaged, encouraged, and energized each day to do their best for the company and themselves. These efforts will provide greater positive impact on the company than noncompete agreements ever have. We’ll share more about the employee experience in our Market Guide coming later this year.
HR Compliance made headlines last year and caused some companies to run off the road. A wave of pay equity laws swept across the country, and significant company layoffs brought oft-forgotten regulations into top Google searches. Be aware of these road signs as you prepare your compliance map for 2023.
Caution! Speed bumps ahead.
Overtime - Fair Labor Standards Act (FLSA): The US Department of Labor (DOL) planned to release new overtime rules in October 2022. However, that date came and went with the Wage and Hour Division still heads-down in feedback and formulas and inflation rising. When the proposal is released, we expect a significant increase in the salary threshold for exempt employees, making more workers eligible for overtime pay and possible changes to the duties test.
Minimum Wage - Fair Labor Standards Act (FLSA): The minimum wage rate for federal contractors increased on January 1, 2023, for both standard and tipped employees. The general federal minimum wage has not increased since 2009, so the contractor rate change could indicate an upcoming move to address the general rate.
Straight Ahead Only - Pay Transparency
California SB 1162: California employers with 15+ employees must disclose pay ranges in job postings. Employers with 100 or more employees and/or 100 labor contractors and at least 1 of those employees in California must report on pay data. This includes identifying the mean and median pay data for combinations of gender and race/ethnicity. Take note: The reports must be submitted even if you are not required to send EEO-1 reports to the Equal Employment Opportunity Commission.
New York: New York City enacted the requirement of salary disclosure on job postings for employers with 4+ employees, at least 1 of whom is in NYC. A statewide bill requiring disclosure of compensation or range of compensation to applicants and employees is awaiting the governor’s response.
Not only are states requiring salary disclosure, applicants expect it. Even if you are not affected by one of these laws, your job posting sits alongside those that are. Indeed’s research found that 75% of job seekers are more likely to apply if the salary range is posted. Providing straightforward salary information will be better for the business.
WARN (Worker Adjustment and Retraining Notification) Act- The WARN Act has been on the books since 1988 and received recent press during the layoffs in late 2022. Its purpose is to provide workers sufficient time to prepare for the transition between their current and new jobs.
If you plan to do layoffs, plant closings, or significant hour reductions, you must review the WARN Act carefully. It includes multiple formulas to determine if WARN applies and to whom. Generally, private employers with 100+ workers laying off or reducing hours of at least 50 people at a single site must provide written notice at least 60 calendar days before covered plant closings and mass layoffs.
What about remote workers? For WARN purposes, they are considered part of the “home base” site - the location from which they receive assignments or to which they report.
In addition to the federal WARN Act, several states have mini-WARN Acts that reinforce the national standards on a local level, but some (currently, California, Illinois, Maryland, New Jersey, and Tennessee) have additional provisions.
Workers Ahead - Artificial Intelligence (AI) - AI can be found in almost every area of HR tech and affects most workers today. These tools run through applicant resumes at lightning speed and identify high-potential employees from the vast workforce, saving HR teams time and improving accuracy. However, concerns persist that these tools may result in biased decision-making. Federal, state, and local governments are taking action to remind employers that these systems are dealing with actual workers.
Federal AI Training Act - Requires federal government employees to complete training on AI topics to reduce the risk that it will be misused by the federal government. The training hasn’t been developed yet, and could take the full year allotted to create.
White House Blueprint for an AI Bill of Rights - While White House guidance isn’t law, it’s an indicator of the current administration’s intentions, so definitely worth noting. This document outlines how AI systems should be designed and used while protecting American citizens’ rights. While not specifically directed to employment, the principles apply to and include HR tech.
Equal Employment Opportunity Commission Guidance - EEOC guidance isn’t law either, but it indicates the direction of the agency’s position and may be referenced in complaints. The Commission addresses how AI might interact with the Americans with Disabilities Acts, the rights of workers with disabilities, and how companies can avoid illegal discrimination when using these tools.
New York City Local Law 144 of 2021 - The New York City Consumer and Worker Protection Agency regulated the use of “automated employment decision tools.” A company’s tool must pass a “bias audit” to confirm it does not cause a disparate impact on employment decision before its use. While the law went into effect on January 1, 2023, the agency announced it will not be enforced until April due to continued public comments.
Winding Road Ahead - COVID Leave - While most COVID-related regulations have disappeared, some state and local governments extended them, while others offer more flexibility for 2023.
New York State Assembly Bill A9513: New York extended the COVID-19 specific paid leave for up to 4 hours for all employees in the state to receive COVID-19 vaccinations.
California Assembly Bill AB-2693: California amended requirements to allow employers to post a notice of potential COVID-19 exposure at the worksite (and on existing employee portals) instead of providing written notice.
Plan Your Route
The key to compliance is consistency, which requires planning. For upcoming potential changes, begin working through options and decide how to proceed in preparation for the announcements. Be aware of the regulations that impact business decisions and consider them from the start.
Want to be really radical? Move forward before the government announcement because it’s the right thing to do. This approach will increase employee engagement and eliminate the rush to comply, allowing you to control the pace and plan.
Love 146 is a nonprofit with a mission to end trafficking around the world and provide support for survivors. The organization explains that ‘trafficking happens where people are’, and that includes in front of your hospitality staff every day.
Once a child has been identified, they need a range of practical and comforting resources. That’s where their Rapid Response tote bags come in.
Love146 partners with child welfare agencies to deliver Rapid Response bags filled with a variety of essentials such as a cell phone, hotline numbers, blanket, journal, hand sanitizers, granola bars, and more. Each item is carefully selected by the Love146 team so that exploited children feel valued and have access to critical resources.
|3,600+ children reached by their survivor care||68,100+ children reached by their prevention education||17,500+ adults reached by their strategic collaboration|
We partnered with Love146 at HR Technology Conference & Exposition in Las Vegas, and at FSTEC in Texas, to drive awareness of trafficking in hospitality. We believe in Service First – that’s why our team (along with some incredible volunteers) stepped in to help pack Rapid Response Bags with essential supplies at HR Tech and FSTEC.
“The hospitality staff can be on the front lines to help identify signs of trafficking and contact local authorities,” said Jennifer Ravalli, Chief Marketing Officer at Harri. “As a company that puts service at the heart of what we do, it’s important to us to bring awareness to the issue of trafficking in hospitality so that we can protect our most vulnerable guests.”