Important Legal Updates for EmployersJune 29, 2023
In addition to the recent updates to New York State’s sexual harassment policy and training requirements (as discussed here), there are several other recently enacted or upcoming employment law requirements and developments for employers to keep in mind for the remainder of 2023 relating to automated employment decision tools, non-compete provisions both in New York and nationwide, protected characteristics, wage transparency, lactation and pregnancy, COVID-19 and new limits to confidentiality and non-disparagement provisions in severance agreements.
Automated Employment Decision Tools
Beginning July 5, 2023, employers in New York City will not be permitted to use automated employment decision tools (“AEDT”) to screen job candidates unless the technology has been subject to an annual “bias audit.” The required bias audit must: (i) be an impartial evaluation by an independent auditor; (ii) be able to evaluate the AEDT for its disparate impact on the basis of race, ethnicity, and sex; and (iii) be conducted no more than one (1) year prior to the use of the AEDT. Employers will also be required to publish a summary of the results of the audit, and the distribution date of the AEDT subject to the audit, on the employer’s public website before the AEDT can be used. Further, at least ten (10) business days before the AEDT’s use employers must: (i) disclose to candidates who reside in New York City whether an AEDT will be used in their assessment; (ii) allow the candidates to request an alternative selection process or accommodation; and (iii) notify candidates who reside in New York City about the job qualifications and characteristics that the AEDT will assess. Moreover, candidates who reside in New York City are entitled to, within thirty (30) days of written request and if not already disclosed on the employer’s or agency’s website, request information about the type of data collected for the AEDT, the source of such data and the employer retention policy, unless disclosure of this information would violate the law or interfere with a law enforcement investigation.
The New York City Department of Consumer and Worker Protection (“DCWP”) has clarified that in order for an AEDT to “substantially assist or replace” employers’ decisions, and thus fall within the purview of this new law and its requirements, the employer must be: (i) relying solely on a simplified output (e.g., a score, tag, classification, ranking) with no other factors considered; (ii) using the output as one set of criteria that is weighted more than any other; or (iii) using the output to overrule or modify conclusions derived from other factors like human decision-making. DCWP has also clarified that employers can comply with the law’s notice requirements by posting that they use an AEDT on their careers or jobs website, in a job posting, or by mail. DCWP’s final rules and regulations regarding this new and very novel law are available here.
New York Potential Ban on Non-Competes
Just last week, the New York State Legislature passed a bill that seeks to ban all non-compete agreements going forward (but not retroactively). If signed by the Governor, this would become effective thirty (30) days thereafter.
The bill arguably covers independent contractors and employees. In its current pending form, the bill does not contain an exception related to the worker’s seniority or level of compensation. There are some limited exceptions, however. The proposed law would not ban non-solicitation of client agreements (as long as the worker learned of those customers during his or her employment) or protections with respect to trade secrets or confidential information. Further, it will not apply to agreements that are for a “fixed term of service” (i.e., for a specific duration) although the contours of this exception remain unclear.
Not only would the bill render new non-competes going forward as void, but it also creates a private right of action that would allow recovery of lost compensation, attorneys’ fees and costs, and even liquidated damages up to $10,000.
Given the expansiveness of the bill as presently worded, we are not certain that the Governor will actually sign its current iteration, especially given her prior support for a more limited restriction (i.e., a restriction on non-competes only for employees below the state’s median earnings line). The current bill also leaves several important questions unanswered. For example, it raises significant issues with respect to sale-of-business non-competes (which are not expressly carved out in New York’s proposed ban), as well as non-solicitation of employees provisions, paid notice and/or garden leave periods, “forfeiture-for-competition” provisions, or non-competes related to post-employment severance agreements (none of which are expressly addressed in the ban).
Regardless of whether the ban is signed by the Governor in its current form, employers should still take note of the growing nationwide trend to restrict the use of non-competes. In addition to the FTC’s proposed ban (see below), Minnesota recently joined states such as California, North Dakota and Oklahoma in generally prohibiting non-compete agreements. And the General Counsel of the National Labor Relations Board recently asserted in a memo that, except in certain limited circumstances, non-compete agreements violate the National Labor Relations Act.
FTC’s Proposed Ban on Non-Competes
In addition to New York’s proposed ban on non-competes, employers should stay tuned regarding the Federal Trade Commission’s (“FTC”) proposed new rule to implement a near total ban on the use of non-compete agreements nationwide, although the FTC is now not expected to vote on this until April 2024. If the FTC’s ban is adopted, employers will have 180 days thereafter to comply. A more detailed alert on this issue previously was issued on January 10, 2023 (available here), with follow-up reporting on March 30, 2023 (available here).
Height and Weight Discrimination
On May 26, 2023, New York City Mayor Eric Adams signed a bill into law that amends the New York City Human Rights Law to prohibit discrimination on the basis of height and weight, adding it to the growing list of protected characteristics. A narrow exemption will exist, but only: (i) for those employers needing to consider height or weight requirements that are mandated by federal, state, or local laws or regulations; or (ii) where the Commission on Human Rights permits such considerations because height or weight may prevent a person from performing essential requirements of a job and no alternative is available or this criteria is reasonably necessary for the normal operation of the business. This law will go into effect on November 22, 2023.
As many employers likely already are aware, wage transparency in job postings has been the law in New York City since November 1, 2022. Recently, however, Governor Hochul signed similar legislation, which will expand wage transparency statewide, effective September 17, 2023. This will require employers across New York State to list the compensation range and job description (if one exists, which is one of several distinctions from the City law), in job advertisements and postings regarding promotion and transfer opportunities, for positions that can or will be performed, at least in part, in New York State. The new State version of the law requires that postings include a general statement that compensation is based on commissions, if applicable, which is another distinction from the City law. In addition, employers must maintain records documenting the history of compensation ranges for each job, promotion, or transfer opportunity, as well as the associated job descriptions. These aspects relating to job descriptions, commissions, and recordkeeping are unique to the new State law. With respect to enforcement, any person alleging a violation of the new State law will be able to file a complaint with the New York State Commissioner of Labor, and an employer found to be in violation shall pay a civil penalty of $1,000 for a first-time violation, $2,000 for a second, or $3,000 for a third or subsequent violation. We anticipate that the New York State Department of Labor will issue further guidelines and clarifications in advance of the September 17th effective date.
Lactation and Pregnancy
Employers in New York State are now subject to workplace lactation requirements that previously only City employers were required to follow. Effective as of June 7, 2023, New York State law requires employers across the state to designate a workplace lactation area, which includes several requirements:
- Being in close proximity to the work area, well lit, shielded from view, and free from intrusion.
- It must have, at a minimum, a chair, a working surface, nearby access to clean running water and, if the workplace has electricity, an electrical outlet.
- The location cannot be a restroom or toilet stall, and if the location is not solely dedicated to nursing, it cannot be used for any other purpose while being used for nursing.
- If the workplace offers refrigeration, access must be provided for the purpose of storing expressed milk.
Employers must provide reasonable unpaid time for employees to nurse for up to three (3) years following childbirth, along with updating written policies to address these changes, which must then be provided to employees upon hiring, on an annual basis, and to employees returning to work following childbirth.
Federal law has also seen recent updates in this same area. The Pregnant Workers Fairness Act (PWFA) states that, effective as of June 27, 2023, all private employers with 15 or more employees must provide reasonable accommodations to an employee’s or applicant’s known limitations (physical or mental) related to pregnancy, childbirth, or related medical conditions, unless the accommodation will cause the employer an undue hardship. Additionally, since the end of last year, the PUMP for Nursing Mothers Act requires employers to provide reasonable break time to express milk for 1 year after birth of child, and to provide a sanitary place shielded from view and free from intrusion in which to do so.
Congress recently ended the “national emergency” related to COVID-19, and the executive branch ended the separate “public health emergency” related to COVID-19 on May 11, 2023. While there is no direct effect on employers’ COVID-related policies as a result of these actions, either individually or together they might open the door to more judicial challenges to any remaining vaccine and/or masking requirements that employers might choose to maintain. In the meantime, however, employers in New York may continue to keep current COVID-19 vaccine and/or masking requirements in place, subject to employers’ continuing obligations to engage in a cooperative dialogue or interactive process if any applicants or employees request an accommodation based on disability or sincerely held religious belief.
Also, New York paid vaccination leave related to COVID-19 will stay in place until December 31, 2023, while there is as of yet no expiration date for COVID-19 paid sick leave (separate from regular paid sick leave under New York State and City law). As a reminder, employers must provide a sufficient period of time, not to exceed four (4) hours, of paid leave per COVID-19 vaccination and booster dose at the employee’s regular rate of pay, which must be in addition to regular leave accrual. Employers in New York are also still required to provide at least five (5) or fourteen (14) days, depending on the size of the employer, of paid job-protected COVID-19 sick leave to employees who need to take said leave because they are under a mandatory or precautionary order of quarantine or isolation due to COVID-19. Further, New York State employers must provide paid leave to employees who need to care for a minor dependent child under a mandatory or precautionary order of quarantine or isolation due to COVID-19 for the duration of that period. These employees must be unable to work via remote access or other means and must provide documentation of the mandatory or precautionary order of quarantine or isolation.
NLRB’s Ruling on Confidentiality and Non-Disparagement Provisions in Severance Agreements
Lastly, the National Labor Relations Board (“NLRB” or the “Board”) ruled earlier this year that certain overly broad confidentiality and non-disparagement clauses in severance agreements were unlawful. In doing so, the NLRB left some doubt as to the extent that employers could continue to include such provisions in exit agreements, even when they were in exchange for monetary consideration, and whether the Board’s decision could be applied retroactively. As a threshold matter, employers should be reminded that the jurisdiction of the NLRB, and thus the scope of this decision, does not apply to agreements with executives, managers, supervisors, or independent contractors. Additionally, the statute of limitations for unfair labor practice charges is only six (6) months.
For employees within the Board’s jurisdiction, however, the decision can have retroactive application, which would mean that previously executed confidentiality and non-disparagement provisions that are too broad could be deemed invalid by the NLRB, if the execution of the exit agreement or an employer’s attempt to enforce these provisions occurred within six (6) months of the filing of the unfair labor practice charge.
For exit agreements going forward, the NLRB has provided guidance to employers wishing to properly draft confidentiality and non-disparagement provisions. In both cases, they must be narrowly-tailored. For confidentiality, this means that the provision must: (i) be justifiable to keep proprietary trade information secret for a limited period of time based on legitimate business reasons; and (ii) not prevent the employee from assisting others (i.e., coworkers, union, media, or the Board). For non-disparagement, this should be limited to statements relating back to the period of employment that would fit the legal definition of defamation; in other words, that unless the statements at issue are purposefully and maliciously untrue, they cannot be subject to a non-disparagement clause.
Notably, the NLRB has stated that agreements with violative provisions would not be invalidated entirely, and only the unlawful portions would be voided out. Thus, the general release and other consideration within exit agreements will survive, particularly if the agreement includes proper savings and severability clauses.
For more information on this issue or other employment matters, please contact:
© 2023 Herrick, Feinstein LLP. This alert is provided by Herrick, Feinstein LLP to keep its clients and other interested parties informed of current legal developments that may affect or otherwise be of interest to them. The information is not intended as legal advice or legal opinion and should not be construed as such.