On May 10, 2022, the Colorado legislature passed HB22-1317 which further restricts non-compete agreements. While the law still permits a non-compete pursuant to the sale of a business, non-competes will now must narrowly tailored to protect trade secrets, and whether the employee meets the “highly compensated” test (i.e., annual income in the six figures – at least $101,250 — and will be adjusted annually by the Colorado Department of Labor). The law still permits non-solicitation provisions for employees making 60% of the highly compensated employee standard. The statute also requires cases involving Colorado employees to be litigated in Colorado using Colorado as a choice of law, has notice requirements, and provides for damages, attorney fees, and a $5,000 per employee penalty for violations.
CA Confirms Missed Meal Breaks Are Wages
On May 23, 2022, the Supreme Court of California in Naranjo v. Spectrum Security Services, Inc. found that missed meal breaks must be reported on statutorily required wage statements under California Labor Code section 226. Spectrum had failed to report the premium pay for missed meal breaks on employees’ wage statements and failed to timely provide the pay upon employees’ discharge or resignation. In CA, cmployers may be held liable for the failure to properly report and timely pay out such wages.
Employers Must Now Cash Out Vacation in Maine
Governor Janet Mills of Maine signed into law “An Act Regarding the Treatment of Vacation Time Upon the Cessation of Employment”. The law requires the payout of unused, accrued vacation time upon separation of employment and goes into effect on July 19, 2022; however employers have until January 1, 2023 to comply with the requirements.
- It applies to all private employers with 10 or more employees. The amended Act does not state whether the 10 or more employees threshold counts only those employees within the state of Maine or all employees nationwide.
- There is no definition of “vacation” time in the law so, it is unclear if it applies to all forms of paid time off.
- The Act may conflict with the Maine Earned Paid Leave Law (“MEPLL”). The MEPLL rules provide that if an employer has a policy of paying out unused, earned paid leave time upon separation of employment, then they must similarly pay out MEPL at separation as well. The MEPLL FAQs state “If you currently have a vacation policy that states the unused balance of vacation time will be paid at the time of separation (and you don’t have a separate Earned Paid Leave policy) then you will be required to pay the unused vacation and Earned Paid Leave balances. If you have a vacation policy that states the unused vacation balance is not paid at the time of separation, then the Earned Paid Leave balance will not need to be paid.” Therefore, it appears the amended Act conflicts with current MEPL requirements regarding treatment of earned, unused time off at separation. It is quite possible the amended Act will change the way employers must handle pay out of MEPL under their current policies. We are hopeful the Maine DOL will provide guidance on the relationship between the amended Act and the MEPLL prior to January 1, 2023.
Arbitration Waivers Aren’t Based on Prejudice
In Robyn Morgan v. Sundance Inc., case number 21-328, the Supreme Court of the United States (SCOTUS) ruled that a party’s right to try to send a case to arbitration after first litigating doesn’t hinge on whether the delay prejudiced the other party, a decision that means workers don’t have to show prejudice when fighting to arbitrate after the employer’s delay in moving to arbitrate.
Morgan, a former Sundance employee, filed suit in Iowa federal court alleging that the company failed to pay for overtime, in violation of the Fair Labor Standards Act, and that it recorded her time across multiple weeks to keep the weekly amount below 40 hours.
After a mediation attempt, Sundance filed a motion to compel arbitration in 2019. The lower court denied the motion on the grounds that the company waived its arbitration right by spending time litigating first.
At the Eighth Circuit, the panel majority held that for Sundance to have waived its arbitration rights, Morgan would have had to show the delay unfairly prejudiced her. But because the parties had spent the time discussing whether the court could hear the case, not litigating the merits, there was no prejudice, the majority held.
SCOTUS agreed to review the Eighth Circuit panel majority’s March 2021 holding that Sundance didn’t give up its right to ask a lower court to toss the claims to arbitration, even though the company spent months litigating first, because the delay hadn’t prejudiced Morgan. The justices said courts should weigh arbitration agreements “on an equal footing with other contracts”. A prejudice inquiry is not part of the analysis of other contract cases.
NJ and CO Non-Competes
The NJ and CO legislatures have passed bills that would further restrict the use of non-compete agreements. Both bills are awaiting signatures by the respective governors. I will continue to monitor any developments and will update you accordingly.
Firm Client Alert on CA Employment Law
Two of my partners prepared a Client Alert (also available on our website here: https://www.fisherbroyles.com/news/california-employers-are-you-prepared-for-upcoming-data-privacy-changes regarding the expiration on January 1, 2023 of the “B2B and HR” exemption to the California Consumer Privacy Act’s applicability. While that exemption may be extended (bills pending), it is not guaranteed, and employers in California should be prepared for new compliance obligations. CCPA’s requirements are substantial and are particularly thorny in the employment context.
Written by: Gordon M. Berger, Partner