Key Takeaways | 2023 Labor & Employment Strategic Focus

During this webinar on February 14, 2023, members of McDermott’s Labor & Employment team shared what should be top of mind for employers across the country as they plan for the year ahead. The speakers covered some of the most prominent updates that have carried over from 2022 as well as the latest legal changes expected to impact employers this year.

Below are key takeaways from the discussion.

1. On January 5, 2023, the Federal Trade Commission (FTC) published a proposed rule seeking to ban noncompete agreements with very limited exceptions. The proposed rule is both forward-looking and retroactive, as employers will be required to rescind any noncompete clauses entered into with workers prior to the compliance date. The proposed rule also extends to the sale of a business, as it proposes that noncompetes will only be permitted in connection with the sale of a business for those who own at least 25% of the business. While the FTC is seeking public comments until March 20, 2023, with a potential 60-day extension, employers should use this time to take an internal review of their policies and any existing covenants and ensure they’re compliant in all operational states.
2. Pay transparency laws currently apply to seven states across the United States and six cities and counties. New York will be the eighth state to apply pay transparency laws in the fall of 2023. However, employers with remote employees may be subject to pay transparency obligations if their employees live in some of the applicable jurisdictions. Through these laws, employers have an obligation to inform employees and applicants of the applicable salary or hourly wage rate that applies to that position, either as part of the job posting, hyperlinked to another website or upon request.
3. California employers will now face significantly greater exposure for noncompliant wage and hour practices following three noteworthy 2022 court rulings:
   1. Naranjo v. Spectrum Security Services, Inc. The California Supreme Court held that unpaid meal and rest break premiums are wages that can be the basis of derivative claims for waiting time penalties and wage statement penalties.
   2. Camp v. Home Depot. The California Courts of Appeal reversed summary judgment for an employer that had a facially neutral quarter-hour rounding policy, where the employer was able to track and did track the exact time in minutes that an employee worked each shift.
   3. Cadena v. Customer Connexx. The US Court of Appeals for the Ninth Circuit held that time spent turning the computers on and booting them up was compensable work time under the Fair Labor Standards Act (FLSA).
4. While the cost of collective actions and class actions can be astronomical, if you have a large percentage of hourly workers, the use of arbitration agreements and class action waivers can help mitigate these costs.
5. The Worker Adjustment and Retraining Notification (WARN) Act, which imposes certain obligations upon companies in connection with employee terminations, is expanding in New Jersey. In 2020, the state passed a law that would dramatically expand its WARN Act. More recently, Governor Phil Murphy signed a bill permitting those expanded changes to take effect in April 2023. This revision will impact employers with 100 or more employees and will no longer distinguish between full-time and part-time employees, triggering WARN as soon as a company terminates 50 or more employees located in the state within a 30-day period. The expansion of the Act also requires New Jersey to provide 90 days’ notice to affected employees and covered employees with severance pay.
6. New York City proposed changes to the city’s “at will” employment rule, introducing a bill that would make the termination of employees illegal unless the termination is for “just cause or a bona fide economic reason.” There are exceptions to whom this rule covers, but as part of the proposed bill, employers will need to terminate the employee in accordance with a written progressive discipline policy. The law also imposes a ban on using data for discipline or discharge if it is gathered through certain technologies or applications.
7. In 2022, there was a notable increase in labor-related activity that coincided with heightened media attention on organizing efforts and unfair labor practice charges against large US employers. Heading into the new year, employers can anticipate similarly high levels of labor-related activity. A few key anticipated developments include changes to the National Labor Relations Board’s (NLRB) independent contractor standard, joint employment test, rules on handbook policies and interpretation of what constitutes protected concerted activity.