Major Changes to Non-Competes

Massachusetts passed a new law that will limit the enforceability of non-compete agreements entered into on or after October 1, 2018. Some highlights of the new law include: (1) the law applies to employees who live or work in Massachusetts, and to independent contractors; (2) non-competes are prohibited for employees classified as non-exempt under the Fair Labor Standards Act; (3) non-competes are not enforceable against employees who are terminated without cause or laid off; (4) employers must pay employees during the non-compete period either 50% of their salary (referred to as “garden leave” pay) or “other mutually agreed upon consideration”, which is not defined; (5) the non-compete cannot be for a period of longer than one year, with limited exceptions; and (6) non-competes signed after employment has commenced must be supported by “fair and reasonable consideration”, which is not defined. There are numerous other requirements. Please contact us should you require additional information.

Paid Family and Medical Leave

Starting January 1, 2021, eligible employees will be entitled to take up to 20 weeks of paid medical leave to attend to their own serious medical needs, up to 12 weeks of paid leave to care for a sick family member or a newborn, and up to 26 weeks of paid leave to care for a covered service member. The paid leave program will be administered by the state of Massachusetts and funded through a 0.63% payroll tax, which the employer and employee will split. Employees will be required to cover 100% of the contributions for family leave, and 40% of the contributions for personal medical leave. However, employers with over 25 employees must pay 60% of the contributions for personal medical leave. Employer and employee contributions will begin on July 1, 2019.

Before receiving payment during leave, the employee will have to take seven days of unpaid leave.  Thereafter, the employee will be eligible for a weekly paid leave equal to 80% of the employee’s wages (capped at 50% of the state average weekly wage) plus 50% of their wages beyond that amount (capped at $850 per week), which is adjusted annually to remain at 64% of the state average weekly wage.

There are a number of other administrative and notice requirements. Please contact us should you require additional information regarding these requirements.

Increased Minimum Wage

Beginning January 1, 2019 and gradually increasing over the following five years, the hourly minimum wage in Massachusetts will increase from $11.00 to $15.00 and the tipped hourly minimum wage will increase from $3.75 to $6.75.


New York

Sweeping Sexual Harassment Laws

The New York state budget that was enacted on April 12, 2018 includes numerous requirements concerning sexual harassment. The new requirements: (1) extend protection against sexual harassment to non-employees, including contractors, subcontractors, vendors and consultants; (2) prohibit employers from requiring employees to arbitrate sexual harassment claims; (3) prohibit employers from including non-disclosure provisions in settlement agreements for sexual harassment claims unless the employee prefers otherwise and certain other requirements are met; and (4) mandate all employers, effective October 9, 2018, to adopt a sexual harassment policy containing certain specific provisions, and to conduct annual interactive sexual harassment training for all employees covering certain specific topics.

Employers should be aware of two developments in federal wage and hour law.  The U.S. Supreme Court has issued an employer-friendly decision regarding the interpretation of the FLSA exemptions and the U.S. Department of Labor has launched a new program that will allow employers to self-audit and avoid fines for accidental violations of the federal wage and hour laws on overtime and minimum wages.

Supreme Court Decision Signals Broader View of FLSA Exemptions

On April 2, 2018, the U.S. Supreme Court issued an important decision which signals that it will take a broader view of FLSA exemptions.  In Encino Motorcars LLC, v. Navarro, the Court held that auto service advisors, who advise customers about repair work, are exempt under the FLSA exemption that excludes salesmen, partsmen, or mechanics “primarily engaged in selling or servicing automobiles.”

Although this case only involved auto service advisors, the decision is important because the Court abandoned the long-held principle that FLSA exemptions are to be “narrowly construed” against employers seeking to assert them.  In the past, if there was any “gray area” or uncertainty, the court would resolve that ambiguity in favor of employees and hold that they were not exempt.

Now, the Court will apply a “fair reading” of FLSA exemptions, meaning it will take a more holistic, rather than a narrow approach, when determining whether employees are exempt.  This new standard includes a critical examination of the statutory language, consideration of relevant industry practices, and the intent of the exemption.  In the Encino Motorcars, LLC case, the Court looked at the phrases “salesman, partsman, or mechanic” and “selling or servicing automobiles” and determined that the language could be combined such that a “salesman” who is primarily engaged in “servicing” vehicles falls within the exemption.  The Court held that service advisors were “obviously” a form of “salesmen of services” and, therefore, were exempt.

The decision may make it easier for employers to establish that employees are exempt under the FLSA.  But employers should be aware that this decision does not affect state laws and state laws on exemptions still apply.

DOL Announces Pilot Program to Self-Audit

Recently the U.S. Department of Labor announced the “Payroll Audit Independent Determination,” or PAID, program, which will allow employers to self-audit and to pay back wages for accidental overtime and minimum wage violations.  This program requires employers to carefully audit their pay practices and correct any violations going forward.

There are numerous unanswered questions, most notably the effect of voluntary compliance with the federal FLSA under the PAID program would have on potential state violations for the same issues. The program is currently in a six month “pilot” period and will be evaluated at the end of the period.

Before participating in what could be a beneficial and efficient way to resolve possible wage and hour violations, employers are advised to consult counsel to understand the full ramifications of the PAID program.