Love is in the Air – But So Are Restrictive Covenants

Chocolates. Roses. Jewelry. A perfectly tailored non-solicitation clause. We all have our love languages (even lawyers), and in honor of Valentine’s Day, we are hopelessly devoting this week’s newsletter to confidentiality provisions, arbitration clauses, and restrictive covenants. While these common provisions have long been the norm in most employment contracts, severance packages, and independent contractor agreements, recent legislative proposals are looking to change that. Is it almost time to break up with our employment-related agreements as we know them? Or perhaps just fall in love with a new way of doing things?

Up this week: the employment takeaways from President Biden’s State of the Union speech; a quick reminder/primer on the use of non-disclosure provisions in settlement and severance agreements involving claims of sexual harassment or assault; New Jersey’s new Temporary Workers’ Bill of Rights; and a recent California case that questioned the validity of electronic signatures in arbitration agreements.

California Court Questions the Validity of Electronic Signatures for Arbitration Agreements

Without going into the details, trust us when we say this: employers love arbitration agreements. It’s generally a more streamlined, private, and potentially more cost-effective way to resolve a dispute. Employers (and pretty much everyone else these days) also love electronic signatures – think: DocuSign, Adobe Sign, etc.

Naturally, California feels otherwise. In a case that could have widespread impact, a California court recently believed an employee who claimed not to recall signing a mandatory arbitration agreement by highlighting the fact that it was electronically signed! What?! Sadly, this is not the first time we’ve heard of scenarios like this where an employee lies – sorry, claims – not to recall signing an arbitration agreement via e-signature, and it likely won’t be the last. Should you start gaining additional confirmation of an e-sig? Say the hell with our future robot overlords and get actual signatures? Who knows. But we’ll say this – good old-fashioned “wet-ink” signatures maybe are more valid than electronic signatures in certain circumstances. If you use electronic signatures for your arbitration agreements (or maybe even other types of agreements), tread carefully.

State of the Union – Country of (no) Non-Competes?

We watched for the awkwardly long applauses, but we stayed for the employment law nerd fest (and heckles?). In case you missed it, President Biden’s State of the Union speech earlier this month touched on various employment law issues, including a call for a ban on non-competes and for nation-wide paid family and medical leave. We’re watching this, but remember that some states (*cough* California *cough*) essentially ban non-competes for all employees (except for the limited circumstance involving the sale of a business) and other states (New Jersey) have introduced laws to severely limit the use of non-competes.

Indeed, as we previously warned in June 2022, New Jersey introduced a bill to limit the duration of non-competes to 1 year for both employees and independent contractors, and require mandatory “garden leave” in which the employer must pay the employee during the non-compete period. This is still pending before the Legislature, but it passed the New Jersey Assembly’s Labor Committee in early December 2022 so there’s definitely some momentum.

The Federal Trade Commission also recently proposed a rule seeking to ban non-competes altogether (and invalidate non-competes made part of transactions that closed prior to the rule going into effect), with the exception of a non-compete agreement entered into by a buyer with an individual who owns at least a 25% ownership stake in the seller’s business prior to the sale. If passed, employers will no longer be able to enforce any non-competes with their employees, and buyers would not be able to restrict the activities of key people in the seller’s company who may otherwise not have any ownership interest in the seller’s business. The proposed rule is open for public comment until March 10. Stay tuned.

A Reminder and Primer on the Speak Out Act

Speaking of restrictive covenants, as of December 7, 2022, the “Speak Out Act” is officially federal law. The Act invalidates non-disclosure agreements for sexual assault or sexual harassment claims agreed to “before the dispute arises” and applies to agreements with former and prospective employees (and independent contractors, suppliers, and consumers). It also voids all non-disclosure agreements for cases that have not yet been filed (i.e., “before the dispute arises”). Relatedly, under the Federal Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (“EFASASHA” – righteous law, horrible acronym), employees have the exclusive right to choose arbitration if they want it, but employers can’t require it.

Employers should take this time (if you haven’t already) to review your existing employment agreements, severance agreements, confidentiality agreements, and arbitration agreements, and make sure they don’t include unlawful non-disclosure provisions and comply with both the Speak Out Act and EFASASHA.

New Jersey Enacts New Temporary Workers’ Bill of Rights

 We’re not done with this love fest just yet! Last week, Governor Murphy signed the Temporary Workers’ Bill of Rights into law, which provides certain legal protections for temporary workers in New Jersey (we’re going to break out the thesaurus here because this section is really heavy on “temporary”). The Bill of Rights applies to non-permanent workers employed by interim help service firms, but not to professional employees or employees who are employed in a secretarial or administrative capacity. Employees most impacted are food preparation workers, construction workers, and building and grounds workers.

Some of the requirements imposed on temp agencies include: paying provisional workers the average pay and equivalent benefits as a permanent employee of the client performing the same or similar work; payment of a minimum of 4 hours of work if the short-term worker is not utilized; providing wage notices and disclosures; and paying impermanent workers biweekly. Further, stopgap agencies can’t deduct for meals and equipment if such deductions would reduce the transitory workers’ pay below minimum wage. Third-party clients must also submit to the hiring agency, no later than 7 days following the last day of the work week worked by the evanescent worker, the following information: the name and address of the momentary laborer; the specific location sent to work; the type of work performed; the number of hours worked; the hourly rate of pay; and the date sent.

Violations may result in civil penalties of $500 to $1,000 per violation. Stand-in workers also have a private right of action and a rebuttable presumption of retaliation if they’re fired within 90 days of exercising their rights under the law. If you’re an agency that utilizes such workers, or you’re a temporary (ran out of steam) worker yourself, make sure you’re up to speed on this law.

We don’t want to get mushy here, but you know it’s true, everything we do, we do for you. As always, if you’ve got questions, you know we’ve got answers.

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