Non-Competes Are Alive and Well: FTC Abandons Appeals of Non-Compete Ban Rule

By Ami J. Patel and Stephen S. Zashin*

The legal battle over the FTC’s nationwide non-compete ban has reached a decisive turning point. On September 5, 2025, the FTC dismissed its appeals of two federal court decisions that struck down the FTC’s purported Non-Compete Rule (“Rule”) and announced that it will instead pursue case-by-case enforcement actions.

As mentioned in our previous Alerts, the Federal Trade Commission adopted a rule in April 2024 banning most non-compete agreements. The Rule faced immediate challenges. On August 14, 2024, the U.S. District Court for the Middle District of Florida issued a preliminary injunction in Properties of the Villages Inc. v. FTC, blocking enforcement against a single employer. Days later, on August 20, 2024, the U.S. District Court for the Northern District of Texas went further in Ryan LLC v. FTC, holding that the FTC lacked statutory authority and setting aside the Rule nationwide. The FTC appealed both rulings to the Eleventh Circuit and Fifth Circuit.

In January 2025, Andrew Ferguson was appointed as FTC Chairman, shifting the agency’s posture toward the Rule. On March 7, 2025, the FTC asked the Fifth and Eleventh Circuits to hold its appeals in abeyance for 120 days. Ferguson, who dissented when the FTC first adopted the Rule in April 2024, reiterated that the Rule was unlawful.

The FTC’s shift is now seemingly finalized, as on September 5,2025, the FTC voluntarily dismissed its appeals in Ryan LLC v. FTC and Properties of the Villages Inc. v. FTC, abandoning its defense of the nationwide non-compete ban. Chairman Andrew Ferguson confirmed that the FTC would not continue “tilting at windmills” and instead will target non-competes through case-by-case enforcement. The agency pointed to its recent settlement with Gateway Services Inc., which barred enforcement of non-competes against 1,800 workers, and launched a request for public input to identify additional practices for investigation. Democratic Commissioner Rebecca Kelly Slaughter dissented, criticizing the majority for discarding a rule supported by more than 25,000 public comments.

Employers should not view the dismissal of these appeals as the complete end of FTC scrutiny—but close. The Commission has made clear that it will continue to challenge non-compete agreements on a case-by-case basis. At the same time, some state-level restrictions continue to expand. Employers should take this moment to review their restrictive covenants, confirm they are narrowly tailored to protect legitimate business interests, and ensure they remain defensible under state law. Zashin & Rich stands ready to help employers evaluate and strengthen their agreements in this evolving legal landscape.

*Ami J. Patel is Z&R’s Practice Leader for Trade Secrets/Non-competes. She works extensively in trade secret and restrictive covenant litigation. Stephen Zashin is Z&R’s Managing Partner and also has worked extensively representing clients in trade secret and restrictive covenant litigation. For more information on matters concerning the FTC Rule or non-compete agreements generally, contact Ami J. Patel (ajp@zrlaw.com) or Stephen S. Zashin (ssz@zrlaw.com) via email or by phone at 216.696.4441.

A Change of Course? FTC Requests Abeyance in Non-Compete Rule Appeals

By Ami J. Patel and Stephen S. Zashin*

As mentioned in our previous Alerts, the Federal Trade Commission issued a purported Rule banning employers from enforcing non-competes against “workers,” with limited exceptions. The Rule was set to go into effect on September 4, 2024. However, it faced immediate legal challenges. On August 14, 2024, the U.S. District Court for the Middle District of Florida granted a preliminary injunction blocking enforcement against a single employer. Shortly after, on August 20, 2024, the U.S. District Court for the Northern District of Texas set aside the Rule nationwide, holding that the FTC lacked statutory authority. The FTC appealed both rulings.

The FTC Rule’s next major legal challenge is coming from within the FTC itself. On January 20, 2025, President Trump appointed Andrew Ferguson as the new FTC Chairman. Ferguson, who previously voted against the Rule while serving as a commissioner, has consistently questioned the agency’s authority to implement such a sweeping restriction. Words have now become action, as on March 7, 2025, the FTC requested a 120-day abeyance in the Fifth and Eleventh Circuits to “reconsider its defense of the challenged rule.” And while the Eleventh Circuit has yet to act, on March 12, the Fifth Circuit granted the FTC’s motion.

The abeyance motions cite the change in administration and Ferguson’s view that “the Commission . . . basically needs to decide whether it’s a good idea [and] it’s in the public interest to continue defending this rule. . . . I’m going to be presenting at some point” to “my colleagues the decision about whether to continue defending this Rule.” The likely outcome of Ferguson’s decision is perhaps foreshadowed in his dissenting statement when the Rule was first adopted:

“Whatever the Final Rule’s wisdom as a matter of public policy, it is unlawful. Congress has not authorized us to issue it. The Constitution forbids it. And it violates the basic requirements of the Administrative Procedure Act.”

Although many anticipate the FTC will eventually retract the rule outright, employers should remain vigilant, as the legal landscape surrounding non-competes continues to evolve at the state-level. States such as California, North Dakota, Oklahoma, and Minnesota have enacted bans on non-compete agreements. In New York, a proposed ban was vetoed by Governor Kathy Hochul in December 2023, though revised legislation may be introduced in the future. Similarly, Ohio is considering a bipartisan bill, Senate Bill 11, introduced on January 22, 2025, aiming to prohibit employers from entering into non-compete agreements with workers. As legal uncertainty persists, employers should take the time now to review their restrictive covenants for compliance with state laws and ensure their agreements are narrowly tailored to protect their legitimate business interests.

Zashin & Rich will continue monitoring the FTC’s actions under this new administration and stands ready to assist employers with strategic guidance on the agency’s rule and evolving state-level non-compete laws.

*Ami J. Patel is Z&R’s Practice Leader for Trade Secrets/Non-competes. She works extensively in trade secret and restrictive covenant litigation. Stephen S. Zashin is Z&R’s Managing Partner and also has worked extensively representing clients in trade secret and restrictive covenant litigation. For more information on matters concerning the FTC Rule or non-compete agreements generally, contact Ami J. Patel (ajp@zrlaw.com) or Stephen S. Zashin (ssz@zrlaw.com) via email or by phone at 216.696.4441.

Ohio’s Senate Bill 11 is Aiming to Ban Non-Competes

By Ami J. Patel and Stephen S. Zashin*

Although the Federal Trade Commission’s proposed rule banning non-compete agreements remains stuck in political limbo, states have, in recent years, begun passing or strengthening laws which ban or restrict these clauses. Now Ohio may soon follow suit, as its Senate is considering a total ban on non-compete agreements.

The Bill as Introduced

Senate Bill 11 was introduced by Ohio Senators Louis W. Blessing, III (R) and William P. DeMore (D) on January 22, 2025. Its proposed language prohibits employers from requiring or enforcing any agreement that restricts or penalizes “workers” (defined broadly to include employees, independent contractors, interns, and volunteers) for seeking or accepting new employment or operating a business after their employment ends. This includes agreements that:

• Prevent workers from working for another employer for a specific period, within a certain geographic area, or in a role similar to their previous position.
• Require workers to pay lost profits, lost goodwill, or liquidated damages if they terminate the employment relationship.
• Impose a fee or cost—such as a replacement hire fee, retraining fee, or reimbursement for immigration or visa-related costs—when workers choose to leave.
• Demand reimbursement for expenses (e.g., training, orientation, or evaluation) that were intended to provide or improve the worker’s skills during employment.

Notably, Senate Bill 11 includes no exception related to the sale of a business.

Additionally, the proposed Bill voids any agreement entered into, modified, or extended on or after its effective date which requires a worker who primarily resides and does business in Ohio to adjudicate claims outside Ohio or deprives them of any of the State’s substantive legal protections. However, the Bill does provide an exception for this if, at the time of negotiation, the worker is independently represented by legal counsel (not chosen or paid by the employer) and the worker personally designates the venue or forum for any dispute or the governing law.

In terms of penalties, Senate Bill 11 permits workers or prospective workers to bring a civil action against an employer for any violation, with the possibility of recovering costs and reasonable attorney’s fees, actual damages, punitive damages up to five thousand dollars, and injunctive relief. A worker or prospective worker may also file a complaint with the attorney general or the director of commerce. If the attorney general or director investigates and determines that a violation likely occurred, the attorney general may bring an action on behalf of the worker or prospective worker, and if successful, the court must award the same remedies to the attorney general.

As of this Article’s writing, Senate Bill 11 has been referred to the Ohio Senate’s Judiciary Committee, where it will go through debate and amendment. The first hearing on the Bill is scheduled for February 12, 2025. Anyone looking to testify before the Committee in regard to the Bill should begin that process now.

What Now for Employers

If the Bill is enacted, Ohio will join the growing group of states that have effectively banned non-compete agreements, with Minnesota being the most recent to do so in 2023. The Bill’s current language is notably strict, lacking any salary thresholds and containing no provision for grandfathering existing agreements. Its prohibition on “enforcement” makes clear that any previously signed non-competes would be rendered unenforceable once the legislation takes effect.

While the Bill moves through the legislative process, employers should remain vigilant and start reviewing their existing agreements in preparation for what may be a sweeping overhaul of restrictive covenants in Ohio. If the Bill becomes law, any attempt to enforce a non-compete once it takes effect will result in significant legal and financial consequences. As a result, employers will likely need to invest substantial effort in devising new ways to protect their business interests, trade secrets, and client relationships without relying on non-compete restrictions. It is critical to consult legal counsel now to evaluate existing contracts, explore alternative protective measures, and develop contingency plans in anticipation of Senate Bill 11’s potential enactment.

Zashin & Rich will continue monitoring Senate Bill 11 as it progresses and stands ready to assist employers with strategic guidance and compliance.

*Ami Patel is Z&R’s Practice Leader for Trade Secrets/Non-competes. She works extensively in trade secret and restrictive covenant litigation. Stephen Zashin is Z&R’s Managing Partner and also has worked extensively representing clients in trade secret and restrictive covenant litigation. Ami and Stephen have brought numerous trade secret cases to verdict. For more information on matters concerning Senate Bill 11 or non-compete agreements generally, contact Ami J. Patel (ajp@zrlaw.com) or Stephen S. Zashin (ssz@zrlaw.com) via email or by phone at 216.696.4441.

UPDATE: Texas Court Prohibits Enforcement of FTC’s Non-Compete Ban Rule Nationwide

By Ami J. Patel and Kimana A. Bowen*

As you know based on our prior Alerts, the Federal Trade Commission issued a purported Rule banning employers from enforcing non-competes against “workers” with some limited exceptions. The FTC Rule was set to go into effect on September 4, 2024. However, there have been several court challenges to the FTC’s authority and the validity of the Rule.

The Texas Court Prohibits Enforcement of the Rule

On August 20, 2024, the United States District Court for the Northern District of Texas issued a decision against the FTC, prohibiting the enforcement of the FTC’s Rule—nationwide. The court agreed with the Plaintiffs in Ryan LLC, et al v. Federal Trade Commission, finding that Plaintiffs are entitled judgment on their claims under the Administrative Procedure Act (“APA”) and the Declaratory Judgment Act because: (1) the FTC lacks authority to create substantive rules; and (2) the FTC’s rule is arbitrary and capricious since it is overbroad, a one-size-fits-all, with no end date and fails to consider alternatives and the benefits of non-competes.

Because the Texas Court concluded that the FTC exceeded its statutory authority and that the FTC Rule is arbitrary and capricious, under APA § 706(2)(A)–(C), the Texas Court must “hold unlawful” and “set aside” the FTC’s Rule. According to the Texas Court, the APA has nationwide effect because it is “not party-restricted,” and “affects persons in all judicial districts equally.” As such, the Texas Court’s decision applies nationwide and is not limited to just the Plaintiffs in the Texas case.

While the September 4, 2024 effective date for the FTC Rule is set aside, we anticipate that the FTC will challenge this decision.

Florida’s Recent Ruling on the FTC Non-Compete Ban Rule

The Texas court ruling comes just days after a Florida Federal District Court also preliminarily enjoined the FTC from enforcing its Rule on non-competes against a real estate broker. The Florida Court found that the FTC will not face substantial harm if the status quo is maintained until a final decision on the Rule’s validity is made and that there was a substantial likelihood of success based on the “major questions doctrine.”

The major questions doctrine asserts that when an agency claims authority to issue rules of extraordinary economic and political significance, it must point to “clear congressional authorization” for such power. The court concluded that, given the Rule’s extensive application, including its purported application to existing contracts, it is “substantially likely that the rule presents a major question as defined by the Supreme Court.”

What Now for Employers

Sit Tight. For now, employers have a good-faith basis that the Rule will not go into effect on September 4, 2024. However, employers should use this issue as an opportunity to assess whether their current agreements protect their business, information, and interests as desired. Employers should work with experienced trade secret and non-compete lawyers to evaluate whether their workers have well-drafted agreements in place and to revise stale ones.

*Please contact Z&R’s Practice Leader of its Non-Compete/Trade Secret practice, Ami J. Patel (ajp@zrlaw.com) at 216-696-4441 or Kimana A. Bowen (kab@zrlaw.com), if you have any questions about the effect of these decisions on the FTC’s purported Non-Compete Rule or need assistance with review of your existing documents or how to draft new agreements.

A Checklist Guide for Employers on How to Prepare for the Potential Non-Compete Ban Rule by the FTC

By Ami J. Patel and Kimana Bowen*

Understand the Texas and Pennsylvania Courts’ Rulings and Their Potential Impact

• The Texas Court
  On July 3, 2024, the U.S. District Court for the Northern District of Texas granted a stay and preliminary injunction against the Federal Trade Commission’s (“FTC”) Rule banning non-competes. The court found that Ryan LLC (“Ryan”) and the Chamber of Commerce of the United States of America, Business Roundtable, Texas Association of Business, and Longview Chamber of Commerce (collectively the “Chamber”)are likely to succeed on the merits, face irreparable harm without the injunction, and that the balance of harms and public interest favor the injunction.
  
  While the FTC’s Rule is stayed for Ryan and the Chamber, the court has not blocked the Rule nationwide. A final decision on the merits is expected by August 30,2024, which may affect the scope of the injunction.
  
  Be on the lookout for our Alert on the Texas Court’s August 30thruling as it may modify this checklist.

• The Pennsylvania Court
  On July 23, 2024, the United States District Court for the Eastern District of Pennsylvania declined to issue a preliminary injunction enjoining the Federal Trade Commission (“FTC”) from enforcing its Rule banning non-competes. The court found that ATS Tree Services, LLC failed to prove irreparable harm or likelihood of success on the merits.

Know What the Final Rule Requires

The final Rule will invalidate all non-compete clauses for workers who are not senior executives. Existing non-competes for senior executives will remain in effect, but employers cannot require new non-competes for senior executives after the Rule’s effective date. The Rule prohibits:

1. Entering into or attempting to require an employee to enter into a non-compete clause.
2. Enforcing or attempting to enforce a non-compete clause.
3. Representing that a worker is subject to a non-compete clause.

• Non-Compete Clause
  The Rule defines a “non-compete clause” as “a term or condition of employment that prohibits worker from, penalizes a worker for, or functions to prevent a worker from:

1. 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
2. operating a business in the United States after the conclusion of the employment that includes the term or condition.”

A “term or condition of employment” includes, but is not limited to, a contractual term or workplace policy, whether written or oral.

The final Rule defines “worker” as “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 law.

Accordingly, “worker” includes employees, independent contractors, externs, interns, volunteers, apprentices, or sole proprietors who provide services to a person.

Know the Exceptions to the Rule

The FTC Rule has the following exceptions:

Bona fide sales of business. The Rule (ban) does not apply to a noncompete 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.”

Existing causes of action. The Rule (ban) does not apply “where a cause of action related to a non-compete clause accrued prior to the effective date.”

Good faith. The Rule (ban) does not apply “where a person has a good-faith basis to believe that the Rule is inapplicable.”

Review your contracts with non-competes and the existing status of the cases to determine if any of these exceptions apply.

Continue to Enforce Existing Non-Competes with Senior Executives

Even if enforced, the FTC Rule permits enforcement of current non-competes with senior executives. The final Rule defines “senior executive” as “a worker who:

• Was in a policy-making position; and
• Received for employment:

1. a total annual compensation of at least $151,164 in the preceding year; or
2. a total compensation of at least $151,154 when annualized if the worker was employed during only part of the preceding year; or
3. a 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.”

Consider Non-Solicitation and Non-Disclosure/Confidentiality Agreements

As the FTC’s Rule is litigated and set to take effect on September 4, 2024, employers should review their employee contracts and consider the benefits of using or revising non-solicitation and confidentiality provisions to protect their legitimate business interests and their confidential, proprietary and trade secret business information.

• Non-Solicitation Agreements
  An effectively drafted non-solicitation agreement can successfully prevent former employees from soliciting current employees and customers after leaving the company. Such agreements must be reasonable and narrowly tailored to protect legitimate business interests. Review your current agreements to determine if they remain valid under the new Rule and to ensure that they effectively protect your business.
  
  
• Non-Disclosure/Confidentiality Agreements
  Non-Disclosure/Confidentiality Agreements are contracts or provisions where a current or former employees agree not to disclose certain types of valuable business information. Review your current agreements to determine if they remain valid under the new Rule and to ensure that they effectively protect your confidential and valuable business information.
  
  

Consider Drafting Notices (but hold off on sending them out)

The Rule requires employers to notify non-senior executive workers with existing non-competes that their non-competes are no longer enforceable.

The final Rule includes a model for employers to use to draft compliant notices. The model notice from the FTC advises employers to inform employees of the following: (1) they may seek or accept a job with any company or any person - even if they compete with the employer; (2) they may run their own business - even if it competes with the employer; and, (3) they may compete with the employer following their employment.

The final Rule also requires that the notice provide the following: (1) the name the person who agreed to the non-compete clause with the worker, and (2) a notice on paper by hand to the worker, or sent by mail to the worker’s last known personal street address, or emailed to an address belonging to the worker, including the worker’s current work email address or last known personal email address, or texted to a mobile number belonging to the worker.

While employers should assess and identify which employees should receive these notices, employers should wait on sending those notices due to the ongoing litigation, which could significantly impact the Rule’s enforceability.

First, as previously stated, one of the exceptions to the final Rule is having a good-faith basis to believe that the Rule is inapplicable. There is a split in the Federal Circuit Courts between Pennsylvania, Texas, and potentially others. Accordingly, if the employer is similarly situated to the Texas Plaintiffs and has a good-faith belief that the Texas Court ruling is the correct interpretation of the law, then the exception could apply. In that scenario, the employer could have a defense to enforcement of the FTC Rule and its notice requirements.

Second, with the Circuit split and the upcoming election, there is a real possibility that the final Rule may be rendered unconstitutional or eliminated.

Continue to Monitor the Alerts from Z&R

As the situation continues to evolve, employers should familiarize themselves with the moving parts, this Checklist, and begin identifying the employees and agreements subject to the potential Rule (ban of non-competes). Once identified, employers should evaluate what types of protections are in the employer’s best interest. While the FTC’s new Rule has been enjoined from enforcement (in one Court) and its validity continues to be litigated, employers should prepare but continue to wait for further guidance as this matter develops. Continue to stay tuned and Z&R will update you.

*Please contact ZR’s Practice Leader of its Non-Compete/Trade Secret practice, Ami J. Patel (ajp@zrlaw.com) at 216-696-4441 or Kimana Bowen (kab@zrlaw.com) if you have any questions about any of the items on the check list regarding the FTC’s new Non-Compete Rule or need assistance with review of your existing and new agreements.

UPDATE: The Court Enjoins the FTC From Enforcing The Non-Compete Ban. We Told You Not To Panic!

By Ami J. Patel* and Kimana Bowen

On July 3, 2024, the United States District Court for the Northern District of Texas, Dallas Division, partially granted a stay and preliminary injunction against the Federal Trade Commission’s (“FTC’s”) rule banning non-competes. The court found that Ryan LLC(“Ryan”) and Chamber of Commerce of the United States of America, Business Roundtable, Texas Association of Business, and Longview Chamber of Commerce (collectively the “Chamber”) are likely to succeed on the merits, will suffer irreparable harm without the injunction, and that the balance of harms and public interest favors granting the injunction.

Likelihood of Success on the Merits

While the court’s injunction is not a final decision, the court gave us a preview of the grounds under which it asserts that Ryan and the Chamber will succeed on the merits. First, the court found that the FTC lacks statutory authority to enforce the rule. Although the FTC can create rules concerning unfair methods of competition, the court concluded that the FTC, under Section 6(g) of Federal Trade Commission Act, can only create "housekeeping," procedural rules, not substantive ones as it tried to do here.

Additionally, the court found that the FTC's actions likely violated the Administrative Procedure Act (APA), which requires courts to set aside agency actions deemed arbitrary, capricious, an abuse of discretion or otherwise not in accordance with the law. Ultimately, the court found that Ryan and the Chamber will likely be able to demonstrate that the FTC's rule is overly broad, lacks a reasonable explanation, and imposes a “one-size-fits-all” approach without addressing alternatives, making it arbitrary and capricious.

Irreparable Harm and Public Interest

The court also determined that Ryan and the Chamber were able to articulate irreparable harm if an injunction was not granted. In particular, the court found that the nonrecoverable costs of complying with the FTC rule, which it determined will likely be invalidated, are irreparable.

The court asserts that granting the preliminary injunction serves the public interest by maintaining the status quo and preventing substantial economic impact, while inflicting no harm on the FTC. The FTC rule, if enforced, would make long-standing contractual agreements, recognized as beneficial to the public interest, unenforceable.

What’s Next for Employers?

The September 4,2024 effective date of the FTC’s non-compete rule is stayed, and the FTC is enjoined from implementing or enforcing its non-compete rule against Ryan and the Chamber. The court intends to issue a merits disposition on this action on or before August 30, 2024, and it is unclear if that ruling will block the FTC rule nationwide or continue to be limited to Ryan and the Chamber. There are other challenges to the FTC rule that will be decided soon.

As the situation continues to evolve, do not panic. While the FTC’s new rule has been enjoined from enforcement and its legitimacy is being litigated, employers should wait for further guidance as this matter develops. Continue to stay tuned and Z&R will continue to update you.

*Please contact ZR’s Practice Leader of its Non-Compete/Trade Secret practice, Ami J. Patel (ajp@zrlaw.com) at 216-696-4441 if you have questions relating to the FTC’s new Non-Compete Rule and need assistance with review of your existing agreements.

UPDATE: The FTC’s Non-Compete Rule Faces Another Lawsuit and Added Pressure. Remember, DO NOT panic!

By Ami J. Patel*

In our previous Alert, we discussed two pending lawsuits against the Federal Trade Commission(“FTC”) regarding its new non-compete ban rule. The Final Rule was published in the Federal Register on May 7, 2024, and is set to go into effect on September 4, 2024. However, as of May 9, 2024, the U.S. District Court for The Northern District of Texas Dallas Division granted the United States Chamber of Commerce, Texas Association of Business, and Longview Chamber of Commerce the right to intervene as Plaintiffs in Ryan LLC’s case against the FTC. The Court found it necessary to allow intervention because the Chamber’s interest may be inadequately represented by Ryan alone and the two separately-filed lawsuits share a common question of law or fact.

As a result, the Court in Texas expects to issue a decision on whether it will preliminarily stop enforcement of the FTC’s Non-Compete Rule, by July 3, 2024.

In addition to the case in Texas, there is another case pending in the U.S. Court for the Eastern District of Pennsylvania. In that case, ATS Tree Services, LLC (“ATS”), a tree service company, seeks both a preliminary and permanent injunction to prohibit the enforcement of the FTC’s Final Rule and to set it aside completely. ATS asserts similar arguments made by the U.S. Chamber and Ryan, LLC about the importance of non-competes. Accordingly, there is the potential for a split between the Circuits now that litigation exists in two different Circuits which could potentially create an issue for the United States Supreme Court to review.

So What Now for Employers?

As stated before, do not panic. While the legitimacy of the FTC’s new rule is being litigated and still not in effect, employers do NOT need to make any changes and should wait for further guidance as this matter develops. Continue to stay tuned and Z&R will continue to update you.

*Please contact ZR’s Practice Leader of its Non-Compete/Trade Secret practice, Ami J. Patel (ajp@zrlaw.com) at 216-696-4441 if you have questions relating to the FTC’s new Non-Compete Rule and need assistance with review of your existing agreements.

The FTC Faces Lawsuit From The Chamber of Commerce and Others Following The Passage of Its Purported New Non-Compete Ban Rule

By Ami J. Patel*

On April 23, 2024, the Federal Trade Commission (“FTC”) voted 3-2 to pass a new rule that virtually bans all non-compete clauses as were ported in a prior Alert. The two dissenting Commissioners asserted that the FTC does not have the power to pass this new rule and anticipated litigation has followed based on that very assertion.

On April 24, 2024, the United States Chamber of Commerce filed a lawsuit which challenged the FTC’s authority. The Chamber filed a Complaint in the United States District Court Eastern Division of Texas against the FTC and Lina Khan in her official capacity as Chair of the FTC. The Chamber was joined by three other business groups: the Longview Chamber of Commerce, the Business Roundtable, and the Texas Association of Business.

The Chamber’s complaint is based on several assertions:

1. the Commission does not have the substantive rulemaking authority under Sections 5 and 6 of the Federal Trade Commission Act to enact this rule;
2. this enactment is based on an unlawful interpretation of “unfair methods of competition”;
3. the regulation constitutes unconstitutional delegation of Congressional rulemaking authority;
4. this regulation creates a form of unlawful retroactivity;
5. the FTC failed to engage in “Reasoned Decision Making” as required by the Administrative Procedure Act (“APA”), and;
6. the FTC failed to consider alternative proposals.

The Chamber has also filed a Motion of Stay and Preliminary Injunction to stop enforcement of the FTC’s new rule while the Court considers the merits of the Chamber’s claims. The FTC has until May 15, 2024 (21 days) to respond to the Chamber’s Complaint and Motion to Stay. After the Chamber’s opportunity to respond, the Court should determine whether to enjoin the FTC’s rule while the Court decides the merits of the Chamber’s case.

Another lawsuit has been filed by Ryan, a tax services and software firm, asserting that the new rule places a tremendous burden on companies looking to maintain top people in the professional services sectors and safeguard their intellectual property (IP). Ryan aims to stop what it believes are unjustified restrictions that the FTC's regulation would have on service-oriented businesses across the country, regardless of size. We anticipate many more lawsuits to come challenging the FTC’s new rule.

What Now For Employers?

As we stated in a prior alert, Employers should not panic! Employers should continue to assess their current use of non-competes, non-solicitation provisions, and non-disclosure agreements to identify changes, adjustments, and notices. However, employers do NOT need to make any changes as of now. Stay tuned and we will update you on any future developments on this matter.

*Please contact ZR’s Practice Leader of its Non-Compete/Trade Secret practice, Ami J. Patel (ajp@zrlaw.com) at 216-696-4441 if you have questions relating to the FTC’s new Non-Compete Rule and need assistance with review of your existing agreements.

Federal Trade Commission Votes 3-2 to Ban Virtually All Non-Competes – DON’T PANIC

By Ami Patel*

During a live Commission Hearing on April 23, 2024, the FTC voted 3-2 to pass a new rule that virtually bans all non-compete clauses. This new rule comes after the FTC received over 26,000 comments to its original proposed rule. The new rule is set to go into effect 120 days after its publication in the federal register. But not so fast….

The Final Rule on Future Non-Competes

The final new rule purports to ban all new non-competes with workers including independent contractors and senior executives. The final rule states that for “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.” The final rule provides includes a notice requirement to workers for existing non-compete agreements.

However, there are limited exceptions to the non-compete ban for senior executives with existing non-competes and for non-competes entered 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.” The final rule likewise does not apply to breaches and existing claims related to a non-compete clause that accrued prior to the effective date of the rule.

The rule defines a “non-compete clause” as “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.” The final rule further provides that a “term or condition of employment” includes, but is not limited to, a contractual term or workplace policy, whether written or oral.

The final rule defines “worker” as “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 law. Accordingly, “worker” includes employees, independent contractors, externs, interns, volunteers, apprentices, or sole proprietors who provide services to a person.

The final rule defines “senior executive” as “a worker who: (1) was in a policy-making position; and (2) received from a person for employment: (i) total annual compensation of at least $151,164 in the preceding year; or (ii) total compensation of at least $151,154 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.”

FTC’s Rationale for the Final Rule

The FTC’s reasoning for passing the rule is that, based on its empirical research, the rule will reduce health care costs, will aid in new business formation, lead to higher worker earnings, and an increase in innovation. After implementation, any employer that enters a non-compete with a worker (or attempts to enforce a non-compete) will violate the new rule.

The New Rule’s Effect on Current Non-Competes

The rule will render null and void all current non-competes with workers who are not considered senior executives or fit within the bona fide sale of business exception. Any current non-competes with senior executives will remain in effect by the terms set forth in the contractual language. However, under the rule, employers cannot require senior executives to enter a non-compete after the effective date of the rule.

What Now For Employers?

The final rule will take effect 120 days after it is published in the federal register and challenges to the rule are expected. To stay compliant with the new rule, employers must (1) stop enforcing existing non-competes with workers other than senior executives, (2) provide notice to such workers of the new rule, and (3) cease from entering any new non-competes with any worker. As a result, employers should immediately begin to assess their current use of non-competes, non-solicitation provisions and non-disclosure agreements to determine where changes, adjustments, and notices maybe be required. It is highly likely that this law will be challenged and will not go into effect as scheduled. Stay tuned and don’t panic – you have time to (and should) assess your current and future contracts.

*Please contact ZR’s Practice Leader of its Non-Compete/Trade Secret practice, Ami J. Patel (ajp@zrlaw.com) if you have questions relating to the FTC’s new Non-Compete Rule and need assistance with review of your existing agreements.

New York’s Governor Vetoes New York Non-Compete Ban

By Ami Patel*

On June 20, 2023,the New York State Assembly voted in favor of Bill No. S03100, which would“[prohibit] non-compete agreements and certain restrictive covenants;[authorize] covered individuals to bring a civil action in a court of competent jurisdiction against any employer or persons alleged to have violated such a prohibition.” The bill then moved to Governor Kathy Hochul, who on December 22, 2023, declined to sign the legislation.

Bill No. S03100defined a non-compete agreement as, “any agreement, or clause contained in any agreement, between an employer and a covered individual that prohibits or restricts such covered individual from obtaining employment, after the conclusion of employment with the employer included as a party to the agreement.”

Further, Bill No.S03100 defined those covered individuals as, “any other person who, whether or not employed under a contract of employment, performs work or services for another person on such terms and conditions that they are, in relation to that other person, in a position of economic dependence on, and under an obligation to perform duties for, that other person.” This broad prohibition, if signed into law, would have voided any contract, to the extent a provision restrained a party from engaging in any kind of lawful profession, trade or business.

New York Governor Hochul could not agree with the legislature’s “one-size-fits-all” approach. Had New York signed this bill into law, it would become the fifth state to provide a complete prohibition on non-compete agreements, joining California, North Dakota, Oklahoma, and Minnesota.

While New York decided to protect employers' business interests in protecting confidential and proprietary information for the time being, the Federal Trade Commission continues to contemplate a nationwide ban on restrictive covenants with a decision expected in early 2024.

Recommendations Continuing Forward

Employers should continue to monitor proposed and existing legislation in the states within which they operate, as well as any federal legislation, to forecast any potential issues with their current non-compete and non-solicitation practices. Additionally, employers should assess their current non-compete agreements against any legislation already in place.

*If you have questions relating to the proposed bans of non-compete agreements, restrictive covenants, or any other labor and employment law issues, please contact Zashin & Rich’s Non-Compete/Trade Secret Practice Leader, Ami Patel (ajp@zrlaw.com) at (216) 696-4441.

FOOL’S GOLD: When HR Policies Are Not Enough

By Lisa A. Kainec*

Every HR professional knows that solid policies are essential to protect a company against legal claims and liabilities. Unfortunately, even the best policies cannot provide the best protections. Ask yourself a few “what if” scenarios about your key employees, your monetary investment in those employees, the information they have at their fingertips, and what would happen to your business if that information made its way to your competition? If your answers to those questions raise concerns, let’s talk about getting your best protections in place now and hope you’ll never need to use them.

Consider the following policies:

• Confidential Information: Most employee handbooks clearly set forth the employer’s policies on protecting the proprietary and confidential nature of information available to the employees. Those policies certainly provide the basis for corrective action up to and including termination of the employment relationship. But do those handbook policies adequately protect the employer if the employee takes confidential information – in paper or electronic form – prior to leaving the company?
• Relocation Benefits: Does your company provide relocation benefits to new employees? Many employers have great relocation packages that afford new employees payment for numerous relocating expenses. However, does your company only have a relocation policy that explains the benefits, but no contractual agreement that permits you to recoup those expenses if the employee leaves employment after a short time?
• Non-Compete and Non-Solicitation: What if the employee leaves and solicits his or her existing accounts to work with his or her new company? What if the employee solicits co-workers to join his or her new company? What happens when an employee leaves and attempts to compete with the prior employer? Is the employer protected from losing its customers and employees?

So why isn’t an employee handbook enough to protect you? In virtually every instance, a company’s employee handbook is not a contract of employment and the employer can amend, change, or modify the handbook at any time. In light of such rights, the statements made in an employee handbook are not contractual. The same also holds largely true for offer letters, codes of conduct, and other employer communications. In virtually all of these documents, the employer correctly advises employees that the policies are not contracts and that either the employer or the employer can terminate the relationship at any time.

While those disclaimers protect an employer from certain contractual claims, many employers are left vulnerable and unprotected. The above examples (among others) are instances where an employer’s best protection is a simple written agreement with the employee that specifies their obligations during and after employment. That is why a separate written agreement is essential for certain employees and situations. It also is critically important that a company work with labor and employment lawyers to ensure that their policies will hold up when challenged and are otherwise lawful.

*Lisa A. Kainec, former Vice President of Human Resources and Senior Employment Counsel for Jo-Ann Stores, recently joined the firm’s labor and employment group in its Cleveland office. Lisa represents employers in all areas of labor and employment law including policy review and compliance. If you have questions about employer policy or contract drafting, please contact Lisa A. Kainec | lak@zrlaw.com | 216.696.4441

EMPLOYMENT LAW QUARTERLY | Spring 2013, Volume XV, Issue i

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• Non-Compete Agreements and Separation Agreements — Are They Incompatible?
• PUBLIC SECTOR EMPLOYERS: "Which Hat Is He Wearing?"
• FIRE YOU? OK!...I Think
• DO THE MATH: Unpaid Interns Don't Equal Free Labor
• ENOUGH IS ENOUGH: How Much Time Must an Employer Give an Employee as a Form of a Reasonable Accommodation Under the ADA?
• THE DUKES OF HAZZARD: OSHA and Workplace Bullying
• Z&R Shorts

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Non-Compete Agreements and Separation Agreements — Are They Incompatible?

By Helena Oroz*

Does a separation agreement nullify an earlier covenant not to compete? It depends. In Try Hours, Inc. v. Douville, 2013 WL 139584 (January 11, 2013), the Ohio Sixth District Court of Appeals recently held that a one year non-compete agreement was not superseded by a separation agreement between the two parties. Try Hours, a national trucking company focused on the expedited freight industry, was the plaintiff-employer in the case. Try Hours hired the defendant, Bryan Douville (“Douville”), in 2010 as its director of operations. Douville signed an employment agreement that contained a non-compete and non-solicitation clause. The clause provided that Douville could not work for any company within the United States in direct competition with Try Hours for a period of one year after his employment with Try Hours ended. Finding Douville was not a good fit for the organization, Try Hours terminated his employment in October 2011.

At the time of Douville’s discharge, the parties entered into a separation agreement that included an integration clause. The integration clause stated that the separation agreement constituted the entire agreement between the parties and that “no prior or subsequent oral Agreements, representations or understandings shall be binding upon the parties and such shall be null and void and shall have no effect.” Douville, believing that the separation agreement freed him from his obligation to abide by the non-compete agreement, began work at a competitor.

Try Hours brought suit alleging that Douville violated the non-compete agreement, and sought a preliminary injunction to enjoin Douville from working for the competitor. The trial court granted Try Hours' motion for preliminary injunction. On appeal Douville asserted: (1) the separation agreement effectively nullified the original employment agreement; (2) that the grant of the preliminary injunction was error; and (3) that the duration and scope of the injunction was unreasonable.

The court first determined the separation agreement did not supersede the employment agreement between the parties. Douville argued that the integration clause contained within the separation agreement was ambiguous as to whether the separation agreement was meant to supersede the employment agreement. The court found the separation agreement merely limited the rights of Douville to bring a claim against Try Hours stemming from his employment. Furthermore, the court found that the integration clause only excluded oral agreements. Therefore, the court reasoned that since the non-compete clause was a written agreement it should not be superseded by the separation agreement’s reference to “subsequent oral Agreements.”

The court then looked to determine whether a preliminary injunction should have been granted in favor of Try Hours. Try Hours argued that the competitive nature of the freight trucking industry required that its sensitive company information be kept confidential. It asserted that information such as the company’s drivers’ names, customer list, pricing information, and quality and service scores was crucial to Try Hours’ performance and was therefore confidential. Try Hours was especially protective of its drivers’ information, arguing that the demand for quality expedited freight truck drivers far exceeded the actual number of such drivers. The court agreed with Try Hours and found that this sensitive information was indeed confidential, especially in light of the fact that Douville’s job at PFM included securing truck drivers to haul expedited freight, which placed him in direct competition with Try Hours.

Douville argued that the injunction placed an undue hardship on him as it prevented him from procuring employment in an industry in which he had worked for 11 years. The court, however, determined that the “direct competition” language of the non-compete agreement limited his ability to work in the freight industry only. The court reasoned that while Douville would experience some hardship throughout the duration of the injunction, he must demonstrate more. The court noted that Douville was still free to seek employment with any trucking company not engaged in the expedited freight business. The court also determined that the non-compete agreement’s provision prohibiting Douville from working for any expedited freight trucking company across the United States was appropriate as the trucking industry is a multistate industry. Finally, the court determined that the one year duration of the restriction period was a reasonable amount of time. As such, the court reaffirmed Try Hours’ injunction.

This case presents two important lessons for employers. First, employers should craft carefully separation agreements that do not accidentally supersede any prior non-compete or other agreements. Second, employers should draft non-compete agreements narrowly (in both scope and duration) and consider the degree of hardship to the employee. Both of these concepts will help employers achieve their objectives as to departing employees.

*Helena Oroz practices in all areas of employment litigation and has extensive experience helping employers draft, enforce, and otherwise advise clients about non-compete agreements. For more information about this ever changing area, please contact Helena (hot@zrlaw.com) at 216.696.4441.

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PUBLIC SECTOR EMPLOYERS: “Which Hat Is He Wearing?”

By Jonathan J. Downes*

Everyone knows the First Amendment protects free speech, but no right is absolute. Public employee speech is no different.

The First Amendment protects a public employee’s speech if he or she speaks as a citizen about matters of public interest. When that public employee speaks in his or her official capacity regarding his or her official duties or matters not of public interest, that employee is not insulated from discipline. Does this same rule apply to a public employee who is also a union official criticizing or challenging decisions or policy of an employer?

The U.S. Court of Appeals for the Ninth Circuit (which covers much of the west coast) recently decided how First Amendment free speech protections apply to a union “no-confidence vote.” The case is Ellins v. City of Sierra Madre, 710 F. 3d 1049 (9th Cir. 2013).

John Ellins, a police officer for the City of Sierra Madre, California, led a no-confidence vote of the police officers’ union against the Chief of Police, Marilyn Diaz in 2008. According to Ellins, the union initiated the vote due to Diaz’s “lack of leadership, wasting of citizens’ tax dollars, hypocrisy, expensive paranoia, and damaging inability to conduct her job.”

In 2009, Ellins submitted an application to Diaz for a certification that, under the City’s Memorandum of Understanding with the police officers’ union, would have entitled him to a five percent raise. When Diaz delayed approving his application, Ellins filed suit, claiming that the failure to process his application was in retaliation for his exercise of free expression and association and his union activities related to the “no confidence” vote.

The district court ruled in favor of the City and Diaz, holding that Ellins had not established a claim of First Amendment retaliation. In addition to failing to establish the other elements of his claim, Ellins failed to establish that he spoke as a private citizen in leading the no-confidence vote.

The Ninth Circuit reversed on this issue, rejecting the City’s position that Ellins conducted the no-confidence vote as a police officer, not as a citizen. The Court found that Ellins’ conduct was in his capacity as a union representative, noting that there is an “inherent institutional conflict of interest between an employer and its employees’ union.” Therefore, the Court held that a reasonable jury could find that Ellins’ speech, made as a representative and president of the police union, was made in his capacity as a private citizen.

The Court also concluded that the concerns raised by the no-confidence vote addressed the Chief’s leadership and other department-wide matters. The Court found that “these departmental problems were of inherent interest to the public because they could affect the ability of the Sierra Madre police force to attract and retain officers.”

*Jonathan J. Downes, an OSBA certified specialist in labor and employment law, practices in the firm’s Columbus, Ohio office and has extensive experience representing public sector employers. If you have any questions about the above or any other union/employee issue, contact Jonathan (jjd@zrlaw.com) at 614.224.4411.

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FireYou? Ok!...I Think

By B. Jason Rossiter*

The prevalence of social media increases by the minute. Every day millions of people login to their Facebook, Twitter, LinkedIn, and other social networking accounts and post their thoughts to the world. Sometimes, these broadcasted postings include an employee’s disdain for his or her job or, in many cases, his or her boss.

The increase in social media activity by employees has led to the development of new programs and applications designed to track such activity, including “FireMe!” FireMe! is a new Twitter application developed to alert users of the likelihood of termination as a result of what they post. FireMe! was developed by Ricardo Kawase, a PhD student in Hannover, Germany, with the goal of raising awareness about the danger of public online data. FireMe! scans a user’s Twitter accounts for keywords such as “kill,” “boss,” and “job,” as well as any combination of foul language to identify problematic tweets concerning the workplace. It also notifies users about tweets that may jeopardize the user’s employment.

Employers may be tempted to utilize this or similar applications to identify employees tweeting about the workplace. If an employer knows an employee’s twitter account name, they can log onto the FireMe! website, enter the employee’s twitter account, and a ranking will appear, indicating how “likely” that Twitter user is to be fired for the content of their tweets.

Employers beware, though. The National Labor Relations Board (“NLRB”) already has held on numerous occasions that Section 7 of the National Labor Relations Act (“NLRA”) protects employee postings on the internet. The NLRA protects employees in “circumstances where individual employees seek to initiate or to induce or to prepare for group action, as well as individual employees bringing truly group complaints to the attention of management,” even if that action takes place online. 

The NLRB has taken the position that, in general, so long as an employee’s online posting is related to the terms and conditions of his or her employment, it is considered protected speech and the employee cannot be fired for it. The NLRB also has routinely struck down employer policies prohibiting employee statements that could damage the company, defame any individual, or damage any person's reputation. However, online postings of threats of violence against co-workers, supervisors, or company property generally are not protected and an employer typically may terminate an employee for such conduct.

Ultimately, the determination of whether a social media post constitutes protected activity under the NLRA requires an individualized inquiry. The slightest difference in wording can mean the difference between a lawful and an unlawful termination. As social media continues to play a larger role in employees’ lives, enterprising individuals and companies will continue to develop tools such as the FireMe! application. However, employers should cautiously decide whether to utilize such tools. In addition, employers may want to consider using such tools for constructive purposes. Employees may take to Twitter and other social media outlets to vent workplace-related frustrations of which an employer is simply unaware. Employers can then take steps to remedy these issues, leading to a happier and more productive workplace.

*B. Jason Rossiter practices in all areas of employment litigation. He has extensive experience helping employers navigate through social media and related employment issues. For more information about this ever changing area, please contact Zashin & Rich at 216.696.4441.

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Do the Math: Unpaid Interns Don’t Equal Free Labor 

By David R. Vance*

According to the National Association of Colleges and Employers, 55% of students in 2012 graduated with some internship experience on their resume. While unpaid internships can benefit students and employers, employers must ensure any such internship comply with both federal and state wage and hour laws. Failure to do so may result in a lawsuit with a potentially large damage award.

In 2010, the Deputy Wage and Hour Administrator for the United States Department of Labor (“DOL”) told the New York Times, “If you’re a for-profit employer or you want to pursue an internship with a for-profit employer, there aren’t going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law.” Since then, unpaid interns have filed numerous class action lawsuits claiming that the companies for which they interned violated the Fair Labor Standards Act (“FLSA”) by failing to pay them for their work.

The FLSA does not specifically contain an exception for student interns. Rather, the DOL has provided a small exception for “trainees,” and has recognized that student interns may qualify as trainees. If an intern is considered a “trainee” under the FLSA, employers are not required to pay the intern minimum wage or overtime. In order to constitute a trainee, unpaid interns must satisfy the six factors set out by the United States Supreme Court in Walling v. Portland Terminal Co., 330 U.S. 148 (1947).

After Walling, the DOL released Fact Sheet number 71 which applies the six factors to unpaid interns. According to the DOL, if all of the following requirements are met, the intern does not constitute an employee under federal law:

• The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school;
• The training is for the benefit of the trainees or students;
• The trainees or students do not displace regular employees, but work under close supervision;
• The employer that provides the training receives no immediate advantage from the activities of the trainees or students and, on occasion, the employer’s operations may even be impeded;
• The trainees or students are not necessarily entitled to a job at the conclusion of the training period; and
• The employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training.

While many courts look to these factors to determine whether an unpaid internship is proper, the United States Court of Appeals for the Sixth Circuit, which covers Ohio, does not. Instead, the 6th Circuit uses the “primary benefit test” articulated in Solis v. Laurelbrook Sanitarium & Sch., Inc., 642 F.3d 518 (6th Cir. Tenn. 2011). The primary benefit test determines “whether an employment relationship exists in the context of a training or learning situation [by ascertaining] which party derives the primary benefit from the relationship. Solis at 529. According to the Sixth Circuit, if an employer derives the primary benefit, then an employment relationship exists, and the FLSA and other pertinent laws apply.

Unpaid internships at non-profit organizations are generally permissible because the FLSA includes exceptions for volunteers who perform services for state or local government agencies and those who volunteer at food banks. The Wage and Hour Division of the DOL also has recognized other exceptions for interns working at religious, charitable, civic or humanitarian non-profit organizations who freely volunteer their time without any expectation of compensation.

To help ensure compliance with the FLSA, employers should have interns sign a written agreement when their internship commences. This agreement should make clear that the intern is not entitled to wages or a permanent position upon completion of the program. Companies also should rotate interns through different departments, have specific goals for interns, and closely supervise interns so that the experience is truly educational.

Employers and students alike can benefit from internship programs. However, employers must carefully navigate through FLSA and DOL rules and regulations (as well as applicable state laws) to ensure that a mutually beneficial experience does not become a very costly lawsuit.

*David R. Vance practices in all areas of employment law and has extensive experience representing employers in wage and hour matters as well as advising employers about internship programs. If you have any questions about the FLSA or wage and hour issues affecting your workplace, contact David (drv@zrlaw.com) at 216.696.4441.

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Enough is Enough: How Much Time Must an Employer Give an Employee as a Form of a Reasonable Accommodation Under the ADA?

By Emily A. Smith*

An employee ventures into his or her manager’s office and requests medical leave for a disability. The employee produces a note from his or her doctor that supports the employee’s request, so the employer grants the employee’s request for leave. The employee’s leave expires and the employee subsequently submits another request. The employer once again grants the employee’s request. This scene replays itself over again and again and again, like a scene out of Groundhog Day. The employer is left stranded, wondering “When is enough, enough?”

The Americans with Disabilities Act (“ADA”) does not mandate that employers grant employees indefinite leaves of absence. However, the ADA provides employers little assistance in determining how much leave is reasonable in situations like the one described above. Are employers’ hands tied when an employee makes repeated requests for leave?

The Eleventh Circuit recently provided some clarity in Santandreu v. Miami Dade County, 2013 U.S. App. LEXIS 5542 (11th Cir. 2013). In this case, Juan Santandreu alleged that his employer failed to provide reasonable accommodations for his disability. Santandreu worked as an engineer in the Miami Dade County Water and Sewer Department (“Miami Dade”). He went out on medical leave in January 2006 due to an “illness.” Santandreu then requested four extensions of his leave, each request coming just as the previous request was set to expire. In all, Santandreu requested, and Miami Dade granted, leave from January 2006 through May 4, 2007.

On May 1, 2007, Miami Dade sent Santandreu a letter advising him that he was to return to work on May 5, 2007. He did not return to work but advised Miami Dade on May 15, 2007, that his leave of absence should be extended until July 25, 2007. Miami Dade informed Santandreu he had exhausted all available leave and would be terminated if he did not return to work. Miami Dade subsequently sent Santandreu a Disciplinary Action Report (“DAR”), and Santandreu voluntarily resigned in lieu of receiving or opposing the DAR. Santandreu then attempted to rescind his resignation, and Miami Dade denied his request.

Santandreu filed suit against Miami Dade, claiming disability discrimination and retaliation in violation of the ADA. At trial, Miami Dade moved for judgment as a matter of law. The trial court granted the motion, finding that Santandreu had failed to show that additional leave would have enabled him to return to work in a reasonably definite period of time. The trial court also found that the DAR did not constitute retaliation because Santandreu had voluntarily resigned before the DAR became part of his record.

On appeal, the Eleventh Circuit affirmed the decision of the trial court. The court first rejected Santandreu’s argument that Miami Dade should have provided additional leave or transferred him to a vacant position. The court noted that Santandreu bore the burden of identifying an accommodation and demonstrating that the accommodation allowed him to perform the essential functions of his job. It further noted that the ADA does not require an employer to provide leave for an indefinite period of time when an employee is uncertain about the duration of his leave. The court found that Santandreu never demonstrated he could return to work within a reasonable time. Even after fifteen months of leave, he did not know when his doctor would allow him to resume working. Therefore, because Santandreu could not show that he could perform the essential functions of his job in the reasonably immediate future, his request for additional leave was not a request for a reasonable accommodation. For similar reasons, the court found that Miami Dade was not required to transfer Santandreu to another position. Since his medical condition prevented him from performing any work, he was not qualified for any alternate position.

Finally, the court found that Miami Dade did not retaliate against Santandreu by issuing him the DAR, because Santandreu voluntarily resigned in lieu of accepting or responding to the DAR. As such, the court found that Santandreu did not suffer an adverse employment action.

While this case does not establish a bright-line test that can be used by employers to determine when an employee’s requests for leave become unreasonable, it does provide some guidance. This case reaffirms that the employee bears the burden of showing a reasonably definite return-to-work date on which the employee will be able to perform the tasks required of him or her upon the employee’s return.

An employer who is faced with a situation like that in Santandreu should err on the side of caution when denying a request for leave. If the employee’s request for leave is reasonable in length and the employee will be able to perform the essential tasks required of him or her at the end of the period of leave, the leave should be granted. However, if the employee continuously requests time off, and has given no indication of returning to work, the employer may carefully consider discharging the employee so long as other reasonable accommodations, such as a transfer, are given serious consideration. Employers also should engage in the interactive process with the employee to ensure that they understand the employee’s condition and whether a reasonable accommodation exists in order to avoid liability under the ADA.

*Emily A. Smith practices at the firm’s Columbus, Ohio office in all areas of employment litigation. Emily has extensive experience in resolving ADA claims and helping employers create and implement medical leave policies and procedures. For more information about ADA compliance, or any other labor and employment issue, please contact Zashin & Rich at 614.224.4411.

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The Dukes of Hazzard: OSHA and Workplace Bullying

By Scott Coghlan*

Earlier this year the Occupational Safety and Health Administration (“OSHA”) and the Department of Labor (“DOL”) filed suit against an employer for terminating an employee who reported workplace violence. OSHA argued that the employee’s discharge was tantamount to discharging an employee for complaining about unsafe work conditions. The fact that the alleged unsafe working conditions involved an employee’s fear of workplace violence made this case unusual.

The employee worked for Duane Thomas Marine Construction and its owner, Duane Thomas (“Thomas”). The employee claimed Thomas engaged in workplace violence and created hostile working conditions on several occasions between 2009 and 2011. Thomas allegedly was abusive, made inappropriate sexual comments, yelled, screamed, and withheld the employee’s paycheck.

The employee worked directly for and reported to Thomas. The employee claimed that Thomas’ verbal, mental, and emotional abuse in the workplace had forced her and a coworker to walk off the job. The next day, Thomas requested that the employee (and her coworker) return to work in exchange for Thomas’ promise to stop any workplace bullying or abuse. However, the employee alleged that the workplace bullying and abuse continued despite Thomas’ repeated promises to cease such behavior.

In February 2011, the employee filed a whistleblower complaint with OSHA. After filing this complaint, she alleged that Thomas retaliated against her due to her complaints. Thomas, upon receiving notice of the employee’s OSHA complaint, denied the employee remote access to files, and ultimately discharged the employee. After the employee’s discharge, the OSHA investigation found merit to the employee’s complaint.

This suit seems to indicate a shift in OSHA’s focus from addressing traditional workplace hazards toward protecting the overall health and well-being of employees. The General Duty clause of the Occupational Safety and Health Act of 1970 (“OSH Act”) requires “each employer to furnish to each of his employees employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm to his employees.” 29 USCS § 654(a)(1). OSHA has typically used the General Duty clause to enforce safety standards relating to industrial hazards such as high noise levels, chemical exposure, or electrical hazards. However, this case involves one of the first – if not the first – OSHA lawsuit against an employer for workplace bullying.

Historically, OSHA used the General Duty clause to cite hazards not yet addressed by a specific standard. Therefore, it makes sense that OSHA is now trying to combat workplace bullying through this clause because no specific provision in the OSH Act currently prevents bullying in the workplace. However, in order prevail on a general duty clause violation, OSHA must prove four basic elements: (1) the existence of an alleged condition or practice at the employer's workplace, (2) risk, presented by the alleged condition or practice, of event likely to cause death or serious physical harm, (3) employer or industry knowledge that the condition or practice is hazardous and exists or potentially exists at the employer's workplace, and (4) a feasible method by which the employer could have eliminated or materially reduced the alleged hazardous condition or practice.

Importantly, the OSH Act does not require that an employee’s concerns about workplace safety be valid. The alleged atmosphere of abuse and bullying caused by the employer and owner in this case may or may not have actually presented a valid safety hazard. Regardless, the OSH Act makes it unlawful for an employer to terminate an employee for complaining about a workplace safety concern. Employers must be wary not to retaliate against an employee who complains about workplace bullying, violence, or abuse, as it appears OSHA may subject them to a whistleblowing action.

In addition to liability under federal law, employees may also bring civil actions against employers under state law for workplace bullying. A number of theories of liability exist such as negligent hiring, supervision and retention, respondeat superior and failure to warn.

In order to combat workplace bullying and its legal implications, employers should consider workplace violence policies, which include reporting mechanisms for employees to report workplace violence or threats of violence. Employers should also conduct robust investigations of any and all complaints. Finally, employers can limit liability by fully investigating a potential new hire’s references for any patterns or signs of past violent behavior or improper work conduct.

*Scott Coghlan, the chair of the firms’ Workers’ Compensation Group, has extensive experience in all aspects of OSHA and workers’ compensation. For more information about OSHA compliance, please contact Scott (sc@zrlaw.com) at 216.696.4441.

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Z&R SHORTS

State Law Update

On May 2, 2013, Maryland governor Martin O’Malley signed Senate Bill 4, making Maryland the ninth state to “ban the box,” removing questions about criminal history from state job applicants and postponing such questions until later in the hiring process. Maryland’s “ban the box” law applies to state applications and prohibits authorities in the judicial, legislative and executive branches of the Maryland State Government from inquiring into an applicant’s criminal history until after the applicant has been interviewed. This law, however, does not prohibit notifications to applicants that certain previous convictions may disqualify an applicant from consideration.

On May 21, 2013, Washington governor Jay Inslee signed Senate Bill 5211 into law, making Washington the latest state to ban employers from requiring or requesting that applicants and current employees disclose their username and password to their personal social media accounts. The law also prohibits an employer from requiring or coercing an applicant or current employee to add a person to the list of contacts or followers associated with the individual’s personal social networking account. However, this new law does not apply to a social network or intranet the employer uses to facilitate work-related information exchange.

On May 25, 2013, Nevada governor Brian Sandoval signed Senate Bill 127 into law, making Nevada the tenth state to prohibit employers from using credit information for employment purposes. The new law will become effective on October 1, 2013. This law prohibits employers from requiring or requesting an applicant or employee to submit credit information as a condition of employment. Employers also may not use or refer to credit information when making employment decisions. The law also prohibits an employer from refusing to hire an applicant or taking an adverse employment action against an employee who refuses to divulge credit information or who has filed a complaint or lawsuit under this law.

Zashin & Rich Continues its Columbus, Ohio Expansion

Zashin & Rich is pleased to announce the addition of Jonathan Downes to its Employment and Labor Group in its Columbus office. Jonathan Downes brings more than thirty years of experience and expertise in representing employers in all aspects of labor and employment law. In 1990, Jonathan co-founded a Columbus labor and employment law firm where he successfully represented public and private employers in all aspects of labor relations and human resource management. In addition to negotiating over 500 labor contracts, Jonathan has represented employers in hundreds of arbitrations, organizing campaigns, and administrative hearings. Jonathan has also defended employers in state courts, appellate courts, the Ohio Supreme Court, and the United States Court of Appeals for the Sixth Circuit.

Wednesday, July 31, 2013 4:20 pm
Stephen Zashin will be part of a panel presenting “Disability and Leaves of Absence: How to Combat the Rise in FMLA & ADA Claims (and Manage the Interplay Between Both) and Increased Policy Targeting by the EEOC” at the American Conference Institute’s 4th Annual Forum on Defending and Managing Employment Discrimination Litigation. For more details, go to AmericanConference.com/Discrimination.

Wednesday, August 21, 2013 8:30 pm
George Crisci presents “Internal Investigations” and “Separation of Employment” at the National Business Institute’s Employment Laws Made Simple in Akron, Ohio. For more details, go to www.nbi-sems.com.

Thursday, September 12, 2013
Jonathan Downes presents “Employment Law Update for Local Government” for the Ohio Government Finance Officers Association Annual Conference at the Hilton Columbus at Easton. For more details, go to www.ohgfoa.com.

Wednesday, November 13 2013
Jonathan Downes presents “Managing the Discipline Process” for the Ohio Association of Chiefs of Police at the Richfield BCII Facility. For more details, go to www.oacp.org.

The Ohio Supreme Court Has Vacated and Modified Its Opinion in Fishel

*By Jason Rossiter

Today, the Ohio Supreme Court reversed itself. The Court has vacated its earlier opinion in Acordia of Ohio LLC v. Fishel, and has held instead that a successor entity can jump into the shoes of its predecessor and enforce the predecessor’s noncompetition agreements.

The earlier opinion had stated that the predecessor entity met its end once the merger took place, and that this event started the running of the “noncompete clock” if that clock was triggered by the employee’s termination of employment with the predecessor entity (as opposed to termination of employment with the predecessor entity “or its successors and assigns”).

The problem with the earlier opinion, according to the Court, was its false assumption that once an entity merged into some other entity, the older entity necessarily ceased to exist. That is a wrong statement of Ohio corporation law, according to today’s opinion.

Instead, “the absorbed company becomes a part of the resulting company following merger. The merged company has the ability to enforce noncompete agreements as if the resulting company had stepped into the shoes of the absorbed company. It follows that omission of any ‘successors or assigns’ language in the employees’ noncompete agreements in this case does not prevent the L.L.C. from enforcing the noncompete agreements.”

The Supreme Court did note that this does not necessarily mean that old noncompetes that had passed through several iterations of mergers and whatnot are always enforceable. “[T]he employees still may challenge the continued validity of the noncompete agreements based on whether the agreements are reasonable and whether the numerous mergers in this case created additional obligations or duties so that the agreements should not be enforced on their original terms.”

Since the lower courts had not yet analyzed whether or not the particular noncompete agreement at issue in Fishel was reasonable under this test, the Supreme Court sent the case back down to the lower court for that analysis to be conducted.

*Jason Rossiter practices in all areas of labor and employment law.

Ohio Supreme Court: Surviving Entity Inherited Expired and Unenforceable Noncompetition Agreements

*By Jason Rossiter

This morning, the Ohio Supreme Court has held, in a long-awaited decision, that noncompetition agreements that lacked assignment and successorship language did indeed transfer "by operation of law" to an LLC that was the product of a series of mergers and similar transactions. However, it was a pyrrhic victory, since the Supreme Court also held that this LLC could only enforce what it acquired "as written," and what it had acquired in this instance were worthless covenants that had expired long ago and that by their terms could only be enforced by the original signatory entity.

The case is Acordia of Ohio, LLC v. Fishel.

The noncompetition agreement in question had stated that the employees who signed them could not engage in certain acts of competition "[f]or a period of two years following termination of employment with the company for any reason." [Ed. note - emphasis is both mine and the Court's]. Each agreement defined "the company" as being simply the particular company that the employee worked with at the time. None of the agreements had language stating that successors or assignees could enforce them.

The Supreme Court held that the lack of successorship or assignment language in the documents did not preclude the agreements from transferring to the successor entity (affectionately referred to as "the L.L.C." throughout the Supreme Court's opinion) "by operation of law":

Because the statute [Ohio Rev. Code 1701.82] specifies that the new company takes over all the previous company’s assets and property postmerger, it is clear that employee contracts transfer to the resulting company. In this case, the employees’ contracts came under the control of the L.L.C. after it merged with Acordia, Inc. Because the statute specifies that the new company takes over all the previous company’s assets and property postmerger, it is clear that employee contracts transfer to the resulting company. In this case, the employees’ contracts came under the control of the L.L.C. after it merged with Acordia, Inc.

But what, exactly, did this LLC inherit? According to the Supreme Court, not much. It inherited only the ability to enforce the agreements "as written." And in this case, that amounted to practically nothing.

As noted, the agreements contained no language that contemplated enforcement of the covenants by successors or assignees. Instead, they provided that only the signatory "company" could enforce them. The Supreme Court held that this language meant what it said. The LLC argued that, regardless, it should be able to jump "into the shoes" of the former entity and enforce the covenants based on Ohio corporation law. The Supreme Court said no, since this would "require a rewriting of the agreements":

The L.L.C. may not enforce the noncompete agreements as if the L.L.C. had stepped into the shoes of the company that originally contracted with the employees. Appellant’s proposed outcome would require a rewriting of the agreements. By their terms, the noncompete agreements are between only the employees and the companies that hired them.

And to twist the knife, the Supreme Court held that even if the agreements had contained language allowing successors or assignees to enforce the noncompetition covenants in addition to the signatory "company," the covenants had expired. By their terms, all of the covenants had begun to run when employment with the signatory "company" ended, and by necessity, all employment with each of these signatory "companies" had ended when the entities themselves had ceased to exist:

Because the noncompete agreements transferred to the L.L.C. upon completion of the merger, the L.L.C. obtained the right to enforce the agreements as written. In other words, the employees were unable to compete with the L.L.C. for the two years following their termination from the “company” with which they each had signed their respective noncompete agreements.

In this case, the termination, or complete severance of the employer-employee relationship, occurred when the company with which the employee agreed not to compete ceased to exist, an event triggered by merger. The triggering event for Fishel, Freytag, and Taber occurred when Acordia of Cincinnati, Inc. merged with other Ohio companies to become Acordia of Ohio, Inc. in December 1997. Consequently, their noncompete periods expired in December 1999. The triggering event for Diefenbach occurred when Acordia of Ohio, Inc. merged with the L.L.C. in December 2001. Her noncompete period accordingly expired in December 2003. Because the employees’ noncompete January Term, 2012 periods had all expired before their resignations from the L.L.C. and subsequent employment with Neace Lukens, the L.L.C. had no legal right to enforce the noncompete agreements against the employees. [Ed. note - emphasis is mine.]

Whoops.

The lesson here is rather obvious. If your company uses noncompetition agreements (or some similar type of post-employment restriction), best check to make sure that assignees and successors are explicitly given rights of enforcement. You may also want to check to see how your agreements "start the clock" on post-employment restrictions, lest those restrictions expire before the employee is even out the door.

*Jason Rossiter practices in all areas of labor and employment law. For more information about noncompete agreements contact Zashin & Rich at 216.696.4441.

EMPLOYMENT LAW QUARTERLY | Fall 2010, Volume XII, Issue iii

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• Lock It Up: Safeguard company property against trade secret theft
• Special Delivery: Workers' compensation awards must account for all jobs
• Unions Winning a Higher Percentage of Representation Elections, but the Numbers Don't Tell the Full Story
• Taking It All Off: Are employers required to pay employees for changing clothes?
• Child's Play: U.S. Department of Labor issues final child labor regulations
• Z&R Shorts

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Lock It Up: Safeguard company property against trade secret theft

By Lois A. Gruhin

In today's difficult economic times, trade secret theft is becoming more frequent, particularly in the areas of corporate information technology, finance, accounting, sales, marketing, human resources, and communications. Employers have found that former employees steal data by transferring it to a CD or DVD and copy e-mail lists, employee records, and customer information. Often, former employees then use this information to find a new job or with their new employer.

There are a number of different methods and safeguarding techniques employers should consider to protect their confidential business information. Some of these include:

• Ensuring that documents and electronic data are adequately protected with locks, passwords, or other restrictions on access;
• Requiring employees to sign non-compete/non-disclosure agreements;
• Conducting exit interviews and obtaining assurance form the exiting employee that he/she has returned all company property and reminding the employee of any agreements he/she may have signed;
• Terminating computer access immediately after the employee leaves the company; and
• Conducting trade secret/non-compete audits regulary.

It is critical for companies to safeguard their trade secrets and technical information. Companies must be able to maintain customer relationships without worrying that former employees might use stolen information to the company's detriment. Implementing proper procedures and safeguards to protect confidential business information can help alleviate these concerns and assure your company's viability.

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Special Delivery: Workers' compensation awards must account for all jobs

By Scott Coghlan*

Recently, the Ohio Supreme Court held in State ex rel. FedEx Ground Package Sys., Inc. v. Indus. Comm. that a Workers' Compensation claimant is entitled to both an average weekly wage (AWW) and full weekly wage (FWW) which includes income from a second job, even when that second job is unrelated to the first and when the second job pays more than the first.

In that case, Christopher Roper, injured himself while working for FedEx. In addition to his job at FedEx, Roper worked a second job with a pest control company and also operated another business on the side. After his injury at FedEx, FedEx set Roper's AWW at $160.45 and set his FWW at $250.80. FedEx derived these figures from his earnings at FedEx without taking into account his earnings from his second job at the pest control company.

Roper then moved the Industrial Commission of Ohio to increase his AWW and FWW to reflect his combined earnings from FedEx and the pest control company. The district hearing officer did so based on the "special circumstances" provision of R.C. 4123.61, increasing his AWW award to $417.05 and his FWW award to $457.36. The Franklin County Court of Appeals eventually affirmed the order.

The Ohio Supreme Court similarly affirmed, holding that the AWW, as the basis for benefit computation, "should approximate the average amount that the claimant would have received had he continued working after the injury as he had before the injury." The Court further stated that, while R.C. 4123.61 refers to the "average weekly wage for the year preceding the injury," the formula may be discarded if the AWW cannot justly be determined by applying the formula. When this occurs, the statute provides that the administrator for the Bureau of Workers' Compensation "shall use such method as will enable the administrator to do substantial justice to the claimants." Id.

To no avail, FedEx argued that the inclusion of wages from other, concurrent jobs would create a disincentive for claimants to return to work. FedEx also argued that secondary wages should be excluded entirely, or in the alternative that they be limited to situations where the two jobs are similar in character. In response to FedEx's first argument, the Court noted that R.C. 4123.56(A) expressly prohibits temporary total disability payments when the employer makes work available to the employee in a manner that is within his or her physical capabilities, or when another employer does so. The court, in dispensing with the second argument, noted that R.C. 4123.61 "refers to wages earned in the year prior to injury without qualification or exclusion." The court also noted that similar jobs can also have disparate earnings. Thus, limiting AWW awards to jobs which are similar in nature would not necessarily eliminate the wage differential which could potentially exist.

FedEx also challenged the amount of the FWW the Commission awarded to Roper. The Court also upheld this amount, giving broad deference to the Commission's calculation relying on Joint Resolution No. R80-7-48, issued by the Industrial Commission and Bureau of Workers' Compensation. The resolution states that the full weekly wage equals "the gross wages (including overtime pay) earned over the aforementioned six week period divided by six" or "the employee's gross wages earned for the seven days prior to the date of injury, excluding overtime pay," whichever is higher. The Court found that the Commission did not abuse its discretion in using the first formula to calculate Roper's FWW amount.

As a result of this case, employers need to understand that AWW and FWW awards must include all of an injured worker's income from the year prior to the injury from all employers. In addition, employers need to offer employment within the physical capabilities of the injured worker as soon as possible so as to minimize temporary total compensation payments.

*Scott Coghlan, the chair of the firms' Workers' Compensation Group, has extensive experience in all aspects of workers' compensation law. For more information about workers' compensation compliance, please contact Scott at 216.696.4441 or sc@zrlaw.com.

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Unions Winning a Higher Percentage of Representation Elections, but the Numbers Don't Tell the Full Story

By Jon M. Dileno*

According to National Labor Relations Board ("NLRB") data, unions won 68.5 percent of representation elections conducted by the NLRB in 2009. This is up from the prior year's 66.9 percent and represents the highest win rate since 1955 when unions won 67.6 percent of the elections in which they participated. The 2009 union election win-rate represents more than a ten percent increase since 2004, although unions have won more representation elections than they have lost in each of the past 13 years.

While the union win-rate increased in 2009, the number of voters eligible to participate in the elections decreased from 2008.  Additionally, the NLRB conducted 1,293 elections in 2009 as compared to 1,612 in 2008, with the number of elections in 2009 (1,293) being nearly half the number of elections conducted in 1996 (3,300). Thus, while unions are winning at a greater percentage, the dramatic decrease in elections has resulted in a corresponding decrease in the actual number of elections they are winning.

Notably, these NLRB statistics do not reflect the full extent of organizing by labor unions.  Many unions organize through check-card recognition, neutrality agreements, and methods other than NLRB-run, secret ballot elections.  These statistics should encourage all non-union employers to review and revise workplace policies related to union organizing and monitor their workplaces for potential union organizing efforts.

*Jon M. Dileno practices in all areas of labor and employment law, with a focus on private and public sector labor law. For more information on NLRB statistics or any other labor or employment issue, contact Jon at 216.696.4441 or jmd@zrlaw.com.

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Taking It All Off: Are employers required to pay employees for changing clothes?

By Patrick M. Watts

Recently, the Department of Labor ("DOL") issued yet another opinion letter regarding whether changing clothes at the beginning or end of the workday is compensable time under the Fair Labor Standards Act ("FLSA"). The DOL also addressed whether changing clothes could be considered a "principal activity" under the Portal to Portal Act making compensable all employee activities that occur after the changing of clothes at the beginning of the workday.

What are clothes?
The FLSA provides that when determining hours worked by an employee, the employer shall exclude "time spent in changing clothes or washing at the beginning or end of each workday which was excluded from measured working time during the week involved by the express terms of or by custom or practice under a bona fide collective-bargaining agreement…" 29 U.S.C. §203(o). The DOL has issued five (5) opinion letters over the past fifteen (15) years regarding the meaning of this provision and the meaning of "clothes." In one opinion letter, the DOL concluded that "clothes" did not include protective equipment such as: mesh aprons, plastic belly guards, mesh sleeves, plastic arm guards, wrist wraps, mesh gloves, runner gloves, polar sleeves, rubber boots, shin guards and weight belts. See Wage and Hour Opinion Letter, December 3, 1997. Later, the DOL revised its view of "clothes" and determined that "clothes" included protective gear. See Wage and Hour Opinion Letter, FLSA 2002-2.

In its most recent opinion letter, the DOL retreated to its previous position and now advises that "clothes" do not include protective gear. In support, the DOL cited to the legislative history of the law and also to current court cases which conclude that protective gear are not clothes. In citing the legislative history, the DOL noted that during Congressional debate on this provision an example of bakery employees was utilized to explain the purpose of this provision. The DOL concluded that the example of bakery employees changing "clothes" was incompatible with meatpackers or employees changing protective gear. Moreover, the DOL cited to three cases which concluded that, among other things, helmets, smocks, plastic aprons, arm guards, gloves, hooks, knife holders, sanitary and safety equipment, and protective equipment did not constitute "clothes." As a result, the DOL advises that time spent changing protective gear or equipment is not exempt from compensable time based on the express terms of or by custom or practice of a collective bargaining agreement as provided by 29 U.S.C. §203(o). The DOL disavowed any previous opinion letter which is inconsistent with this most recent opinion.

Can the workday start when the employee is changing clothes?

In the second part of its recent opinion letter, the DOL addressed whether changing clothes could still constitute a "principal activity," even if the act of changing clothes itself was not compensable. If changing clothes is a principal activity, then walking time and waiting time after changing clothes at the beginning of the day (and walking and waiting time before changing clothes at the end of the day) would constitute compensable time.

The DOL determined that changing clothes may be a principal activity. The DOL first noted that the language of §203 assumes that changing clothes can be a principal activity because that section states that "time spent in changing clothes or washing at the beginning or end of each workday…" The DOL concluded that the language itself assumes that the changing of clothes, while exempt from compensability in some cases, remains part of the workday. The DOL also cited to several court cases which addressed this issue. Many of these courts concluded that simply because the activity was not compensable did not also mean that the activity could not be considered the start of the workday. One court noted that although changing clothes may not be compensable under the FLSA, "it does not affect the fact that these activities could be the first 'integral and indispensable' act that triggers the start of the continuous workday…" As a result, the DOL concluded that changing clothes, even when not compensable, may still be a principal activity which effectively starts the workday.

Notably, the DOL did not opine that changing clothes will always be non-compensable or that changing clothes will always be a principal activity. Employers must consider a variety of factors to answer these questions, including whether there is a custom or practice or express language within a collective bargaining agreement and also whether changing clothes is an integral and indispensable act to an employees job. If you need assistance analyzing these or any FLSA compliance issues, please contact us.

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Child's Play: U.S. Department of Labor issues final child labor regulations

By Michele L. Jakubs*

The United States Department of Labor (DOL) final regulations concerning child labor took effect on July 19, 2010. The regulations govern the employment of children for non-agricultural jobs. The final regulations incorporate statutory amendments to the Fair Labor Standards Act (FLSA) and specific recommendations made by the National Institute for Occupational Safety and Health and give employers clear notice of jobs that children may not perform.

The FLSA requires workers be at least 16 years old to work in non-agricultural occupations. However, the DOL deems certain occupations suitable for workers between 14 and 15 years old. For example, prior to the regulations, 14- and 15-year olds could work in retail, food service, and gasoline service establishments. With the new regulations, permissible occupations for workers ages 14-15 now include: office and clerical work, computer programming, writing software, tutoring, serving as a peer counselor or teacher's assistant, singing, playing a musical instrument, cashiering, modeling, price marking, assembling orders, packing and shelving, bagging and carrying out customer orders, kitchen work, and other food, beverage prep and service work. Fifteen year olds can also work as lifeguards.

The new regulations make clear that any job not specifically permitted for 14- and 15-year olds is prohibited. The regulations also include a non-exhaustive list of prohibited occupations including: manufacturing, mining, processing, working with a hoisting apparatus, working with power-driven machinery such as lawn mowers and golf carts, all work requiring the use of ladders or scaffolds, and occupations in warehousing, storage, communications, public utilities or public messenger services. Fourteen and 15-year olds also are prohibited from door-to-door "street" sales. However, charitable or fundraising efforts, such as selling cookies for the Girl Scouts or school fundraisers, are exempt from this provision.

The new regulations also clarify times and maximum number of hours 14- and 15-year olds may work. From June 1st through Labor Day, 14- and 15-year olds may work between the hours of 7 a.m. and 9 p.m. They may work a maximum of 8 hours per day and no more than 40 hours in one week. When school is in session, 14- and 15-year olds may work between 7 a.m. and 7 p.m. Additionally, during the school year they may not work more than 3 hours per day or 18 hours per week.

The new regulations also expand prohibitions for workers between the ages of 16 and 18. The prohibited occupations for workers between ages 16 and 18 now include: working with, tending, riding upon, repairing, servicing or disassembling an elevator, crane, manlift, hoist or high-lift truck; and working with chain saws, reciprocating saws, wood chippers and abrasive cutting discs.
The regulations also increase the penalties for child labor violations. Violators can be subject to a civil penalty between $11,000 and $50,000 for each violation and $100,000 for repeated or willful violations. The regulations also add a new penalty for causing death or serious injury to an employee under the age of 18. "Serious injury" is defined as:

• Permanent loss or substantial impartment of one of the senses (sight, hearing, taste, smell, tactile sensation);
• Permanent paralysis or substantial impairment of the function of a bodily member, organ, or mental faculty, including the loss of all or part of an arm, leg, foot, hand, or other body party; or
• Permanent paralysis of substantial impairment that causes loss of movement or mobility of an arm, leg, foot, hand or other body part.

In addition to the above, the regulations also include new work-study programs for workers aged 14-15. As a result of these new regulations, this may be a good time for employers to revisit their child labor policies and make any necessary changes.

*Michele L. Jakubs, an OSBA Certified Specialist in Labor and Employment Law, practices in all areas of employment litigation and FLSA compliance. For more information about complying with child labor laws, please contact Michele at 216.696.4441 or mlj@zrlaw.com.

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Z&R Shorts

Welcome Stefanie L. Baker
Zashin & Rich Co., L.P.A. is pleased to announce the addition of Stefanie L. Baker to its Employment and Labor Group.

Stefanie's practice encompasses all areas of public and private labor and employment issues.
Stefanie earned a B.A. with honors from Miami University.  She earned her law degree (J.D.) with honors from Cleveland-Marshall College of Law.  During law school, Stefanie served as Editor-in-Chief of the Journal of Law and Health.  She was also a member of Moot Court and completed an externship with the Honorable Christopher A. Boyko of the Northern District of Ohio.  Stefanie is admitted to practice law in the State of Ohio.  She is a member of the Ohio State Bar Association, the Cleveland Metropolitan Bar Association, and the Cleveland-Marshall Law Alumni Association.

Please join us in welcoming Stefanie to Z&R!

Congratulations to Patrick J. Hoban
Zashin & Rich Co., L.P.A. would like to congratulate Patrick J. Hoban on his recent certification by the Ohio State Bar Association as a Specialist in Labor and Employment law. Pat fulfilled several requirements to earn this specialty certification, including demonstrating a substantial and continuing involvement in Labor and Employment law. Congratulations Pat!