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This fall, California voters will have the opportunity to decide the fate of the state’s Private Attorneys General Act (PAGA). After receiving more than the 700,000 signatures in support, the “California Employee Civil Action Law and PAGA Repeal Initiative” has qualified for the November 5, 2024 state ballot. If the initiative passes, PAGA will be repealed and replaced with the “Fair Pay and Employer Accountability Act,” which will double the statutory and civil penalties for willful state labor law violations, require 100% of monetary penalties be awarded to employees, and provide resources to employers to ensure compliance with wage and hour laws. The new law will preclude plaintiffs’ attorneys from recovering any fees in actions brought under the statute and impose other requirements to effectively “de-deputize” citizen attorneys general.

What Would the New Law Do?

In response to wide ranging criticism of PAGA, the ballot initiative seeks to repeal and replace PAGA with the Fair Pay and Employer Accountability Act. If passed, the initiative would:

  • Double statutory and civil penalties for willful violations;
  • Award 100% of monetary penalties to employees (instead of the current 25%);
  • Provide resources to employers to ensure labor compliance and allow employers opportunities to cure violations without penalties;
  • Require that the Division of Labor Standards Enforcement (DLSE) be a party to all labor complaints;
  • Prohibit award of attorneys’ fees (which are currently permitted under PAGA); and
  • Require that the state legislature fully fund the DLSE to meet the division’s requirements by law.
Continue Reading Is the End in Sight for PAGA Actions? Californians May Vote “YES” on November 5, 2024.
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The regulatory landscape for immigration compliance is constantly evolving. To protect and keep top talent and to avoid tangles with the law, US multinational employers must stay on top of the latest legal decisions and guidance.

In this blog series, our team of Global Immigration and Mobility experts will share significant legal updates and practical strategies for maintaining compliance. In our first post, we highlight the possible implications of the SEC v. Jarkesy case for immigration courts, and highlight the DOJ’s recently-released Fact Sheet addressing I-9 compliance when using electronic platforms.

1. Challenge to the Validity of Administrative Judges Could Have a Major Impact on the DOJ’s Ability to Investigate Employers for Immigration Misconduct

    A case currently pending in the US Supreme Court could have high stakes for administrative law judges in the immigration context–and, depending on the outcome, could theoretically open the door for challenging the ability of the DOJ to investigate employers for immigration-based discrimination.

    Background

    On November 29, 2023, the US Supreme Court held oral argument in SEC v. Jarkesy. Jarkesy, an investment advisor, had been found guilty by an ALJ of securities law violations. As a result, he was fined, barred from securities industry activities, and his firm was required to repay investors. Jarkesy challenged the SEC’s enforcement action at the 5th Circuit, which agreed with Jarkesy, and the case was appealed to the Supreme Court. Notably, a core question before the Court is whether Congress’ decision to allow ALJs to be removed only for “good cause” violates Article II of the Constitution (requiring the President to “take Care that the Laws be faithfully executed.”)

    Possible impact on ALJs responsible for deciding cases involving immigration-based discrimination by employers

    During oral arguments, conservative justices expressed doubts about the constitutionality of the SEC’s current process, where ALJs handle violations and defendants are not entitled to a jury trial.

    The arguments that could potentially weaken the authority of ALJs in the Jarkesy case–i.e., that defendants are unconstitutionally deprived of a jury trial when administrative judges address infractions–could also be extended to ALJs sitting within the Office of the Chief Administrative Hearing Officer (OCAHO), potentially depriving them of their ability to adjudicate cases. Defendants are already using this argument in ongoing cases in an effort to invalidate the DOJ’s immigration-related proceedings against them.

    If the Supreme Court’s decision leads to the removal of ALJs at the SEC, it is likely that the authority of ALJs at other agencies will face subsequent legal challenges, including enforcement actions brought against employers by the DOJ for allegations of: (i) citizenship-based discrimination; (ii) national-origin-based discrimination; (iii) document abuse (relating to I-9s); and (iv) retaliation.

    Continue Reading Beyond Borders: How US Multinational Employers Can Master Immigration Compliance
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    The FTC rule banning post-employment noncompetes was published in the Federal Register on May 7, which means the rule will take effect on September 4, 2024, unless pending lawsuits to void the rule are successful.

    Despite considerable uncertainty around when, or even whether, the rule will apply, employers should prepare now so as not to be caught flatfooted. The first step is to understand the rule’s parameters and potential impact on your business. Our FAQs guide you through the intricacies of the rule and the steps you should take while waiting for the lawsuits challenging the rule to be resolved.

    Application of the Rule to Workers

    1. Does the rule apply to B2B noncompetes?

    No, the FTC rule does not apply to business-to-business (B2B) noncompetes. Instead, existing federal antitrust laws should continue to be considered when evaluating B2B noncompetes.

    2. Does the rule apply to all workers?

    No, there are limited exceptions. First, the rule does not invalidate existing noncompete agreements (i.e. agreements entered into on or before the effective date of September 4, 2024) with “senior executives.” After that date, new noncompetes with all US employees will be prohibited.

    Senior executive” means a worker who received “total annual compensation” of at least $151,164 in the preceding year (or the equivalent amount when annualized if the worker was employed during only part of the year) and who is in a “policy-making position.”

    • “Total annual compensation” may include salary, commissions, nondiscretionary bonuses, and other nondiscretionary compensation earned during the preceding year, but does not include the cost of, or contributions to, fringe benefit programs.
    • Those in a “policy-making position” may include the President, CEO or equivalent, or others with “policy-making authority,” meaning “final authority to make policy decisions that control significant aspects of a business entity or common enterprise.” In the Supplementary Information to the rule (the FTC’s commentary on the rule), the Commission notes “many executives in what is often called the ‘C-suite’ will likely be senior executives if they are making decisions that have a significant impact on the business, such as important policies that affect most or all of the business. Partners in a business, such as physician partners of an independent physician practice, would also generally qualify as senior executives under the duties prong, assuming the partners have authority to make policy decisions about the business.”

    Second, the rule does not apply to workers outside of the United States. See FAQ 11 below.

    Continue Reading Thirteen Things You Didn’t Know About the FTC’s Noncompete Ban and Five Steps to Prepare Now in Case it Takes Effect
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    New York employers now have a big “to do” item for 2025. Starting January 1, 2025, New York employers will be required to provide employees with 20 hours of paid prenatal personal leave (PPPL) during any 52‑week calendar period in addition to paid sick and safe leave (PSSL). New York is the first state in the US to require employers to provide such leave.

    The new obligation results from Governor Hochul’s FY 2025 executive budget bill (A 8805), which passed April 20, 2024 and (among other things) amends New York Labor Law § 196-b (New York state’s paid sick and safe leave law). The new law does not change an employee’s entitlement to other leaves such as PSSL (which is 40 or 56 hours per year, depending on the size of the employer) and New York Paid Family Leave (which provides eligible employees job-protected, paid time off for reasons including to bond with a newborn, adopted or fostered child).

    Breaking down PPPL

    Who does this apply to?

    All employers in New York are required to provide PPPL to all pregnant employees.

    What type of leave is covered by PPPL?

    PPPL is leave taken for health care services received by an employee during their pregnancy or related to such pregnancy, including

    • Physical examinations
    • Medical procedures
    • Monitoring and testing, and
    • Discussions with a health care provider related to the pregnancy

    Does PPPL have to accrue before employees can take PPPL?

    No. Eligible employees can take all 20 hours of PPPL they are entitled to for the 52-week period starting the effective date of the new law–without waiting for PPPL to accrue.

    Are there certain increments for taking leave?

    Employees are permitted to take PPPL in hourly increments.

    How is PPPL paid?

    PPPL must be paid in hourly installments. Employers must pay employees for PPPL at the employee’s regular rate of pay, or the applicable minimum wage–whichever is greater.

    Continue Reading New York Employers’ New “To Do” Item for 2025: Provide Paid Prenatal Personal Leave Starting January 1
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    US legislators and regulators are unleashing new compliance requirements for global equity programs at a dizzying pace and many companies are struggling to keep up. Global equity programs remain essential to compete for and retain top talent, but are also quite complex to structure and manage due to rapidly shifting laws and regulations around the globe.

    While there’s no silver bullet to achieve one and forever done compliance with global equity plans, our “10 Best Practices for Global Equity Awards” paper and Best Practices Checklist share pragmatic advice to guide companies in creating and managing global equity award programs.

    We hope our complimentary resources help your team with some of the foundational issues and easiest ways to get tripped up. Since global equity offerings require continued care and attention, don’t hesitate to reach out to our award-winning global equity lawyers for further support.

    For more information on how to not just roll out a global equity program, but maintain compliance for the long haul, contact our Compensation team.

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    2023 was a landmark year for labor in the US, and 2024 is on track to keep up. Last year, the NLRB’s General Counsel was relentless in overturning precedential decisions and standards impacting both unionized and non-unionized employers. The result was an overall employee-friendly shift to labor laws encouraging both unionization and concerted employee actions impacting working conditions. Key developments included restricting confidentiality and non-disparagement clauses in employee severance agreements, and attacking certain restrictions in noncompete agreements.

    2024 is on pace to keep up the pressure on employers. For instance, since the Board’s August 2023 Stericycle, Inc. decision, administrative law judges have ruled that 26 employer rules or policies run afoul of the new legal test for work rules. In fact, ALJs have found fault with two-thirds of the rules that they’ve analyzed under the Stericycle framework.
     
    In this video, our Labor & Employment team break down the major developments in 2024 thus far, predict what’s next and share practical advice for guiding your company through the current employee-friendly labor landscape.

    Click here to view the video.

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    Millions of additional employees will soon be eligible for federal overtime because of the Department of Labor’s April 23 Final Rule. Under the Fair Labor Standards Act (FLSA), certain salaried employees are exempt from federal minimum wage and overtime requirements if they are employed in a bona fide executive, administrative, or professional (EAP) capacity. This is sometimes called the “white collar” exemption. The Final Rule:

    • Increases the minimum salary requirement for the EAP exemption from $684 per week ($35,568 annualized) to $844 per week ($43,888 annualized) effective July 1, 2024 and to $1,128 per week ($58,656 annualized) effective January 1, 2025; and
    • Increases the minimum total annual compensation level for exemption as a “highly compensated employee”—e.g., one who customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee—from $107,432 to $132,964 effective July 1, 2024 and to $151,164 effective January 1, 2025.
    Continue Reading DOL Raises the Federal Overtime Salary Threshold | Next Steps for US Employers
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    On Tuesday this week, the Federal Trade Commission (FTC) issued its highly anticipated final rule on noncompetes, imposing a near-total ban on worker noncompetes in the United States. Barring injunctive relief from legal challenges (which have already started), the rule will take effect 120 days from publication in the federal register.

    Interestingly, the rule exempts noncompete covenants entered into pursuant to a bona fide sale of a business. While “bona fide” is not defined in the final rule, the Supplementary Information for the rule explains that the FTC considered but rejected percentage and dollar minimum thresholds for the sale of business exception to weed out “exploitative and coercive” noncompetes and clarified that excepted noncompetes must be given “pursuant to a bona fide sale.” The Supplementary Information further explains that the FTC considers a bona fide sale to be one that is made between two independent parties at arm’s length, and in which the seller has a reasonable opportunity to negotiate the terms of the sale. In contrast, the FTC specifically calls out as problematic “springing noncompetes,” which apply to employees in the event of a sale and mandatory stock redemption or repurchase programs because the employee has no goodwill to exchange in the sale for the noncompete and no meaningful opportunity to negotiate at the time of contracting.

    Nevertheless, the bona fide sale exception is broad and preserves the status quo by allowing buyers in M&A transactions to obtain noncompetes from individual sellers in circumstances where such noncompetes are otherwise permitted currently. While the pending and anticipated legal challenges to the rule are significant and place the entire rule in jeopardy, the sale of business exception is not likely to be narrowed because of these challenges.

    So, what does this new regime mean for M&A?

    What Type of Noncompetes Are Impacted?

    The Supplementary Information confirms that the new rule does not apply to B2B noncompetes or nonsolicits. Instead, the focus of the rule is noncompetes with workers that limit their ability to work for others. So the rule does not impact current B2B agreements.

    Second, the FTC repeatedly makes the point that noncompetes must meet existing state and federal law restrictions (e.g., reasonable in scope and duration; limited to the goodwill to be acquired, etc.) to be enforceable, even if they otherwise fall within the sale of business exception in the new rule. This is the case because the FTC rule creates a new floor for noncompetes by preempting more lax state rules, but it does not preempt more stringent state laws or federal antitrust restrictions.

    Continue Reading Still Going Strong: M&A Noncompetes and the FTC’s Final Rule on Noncompetes
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    Employers have been eagerly awaiting the EEOC’s Final Rule to implement the Pregnant Worker Fairness Act, and it’s (finally!) here. On April 15, the EEOC issued the Final Rule, which largely follows the proposed rule (we blogged about the proposed rule here, and about the PWFA here). The Final Rule was published in the Federal Register on April 19, 2024 and will take effect on June 18, 2024. There are no major surprises for employers, but the Final Rule has arrived with a bit of controversy.

    Continue Reading Special Delivery: The PWFA Final Rule Has Arrived
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    On April 23, the Federal Trade Commission voted 3-2 to issue its final rule on noncompetes, imposing a near-total ban on all employer-employee noncompetes in the US. Barring challenges (the first lawsuits have already been filed), the rule would become effective 120 days from publication.

    The rule will be a game-changer for companies operating in the US if it takes effect as issued.

    Breaking it Down

    What does the rule do?

    With only a few exceptions, the FTC’s now-final rule declares employer-employee noncompete clauses an “unfair method of competition,” and a violation of Section 5 of the FTC Act. The rule targets both formal noncompete clauses and “functional noncompete” clauses that have the effect of prohibiting the worker from seeking or accepting employment with a person or operating a business after the conclusion of the worker’s employment with the employer. This can include broad nondisclosure agreements that have the effect of precluding workers from seeking employment opportunities in the same field.

    Continue Reading Breaking News: The FTC Bans Nearly All Employer-Employee Noncompetes Except Those Given as Part of a ‘Bona Fide’ Sale of Business