September 26, 2024

Employer Considerations Following Wave of 401(k) Forfeiture Lawsuits

Alex Smith

Over the past year, numerous employers and their 401(k) plan fiduciaries have faced lawsuits regarding how forfeited employer contributions to their 401(k) plan are utilized. This wave of lawsuits began approximately a year ago when a plaintiff’s law firm filed putative class action lawsuits raising this novel claim against multiple large employers, including Intuit, Clorox, and Thermo Fisher Scientific in California federal courts. Since then, this claim has been included in numerous 401(k) plan lawsuits even though none of these lawsuits have reached a final judgment on the merits and only four have had decisions on motions to dismiss.

These lawsuits allege that the employer and its 401(k) plan fiduciaries breached their fiduciary duties under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), by using forfeited employer contributions to the 401(k) plan to offset future employer contributions instead of using the forfeited amounts to offset 401(k) plan expenses that were charged to participant accounts. The plaintiff’s counsel alleges that the employer and 401(k) plan fiduciaries are violating ERISA’s fiduciary requirements to make decisions for the benefit of plan participant because the employer benefits from a reduction in its future employer contributions at the expense of plan participants who have to pay for certain expenses that are charged to their 401(k) accounts. Read more >>

September 25, 2024

Demystifying Qualifications for PWFA

Dana Dobbins

By Dana Dobbins

Question: Do employees have to be employed for 12 months or work 1,250 hours to qualify for the Pregnant Workers Fairness Act (PWFA), or do they qualify as soon as they begin employment?

Answer: No, employees do not need to be employed for 12 months or work a minimum threshold of hours before they can qualify for protections and accommodations under the federal Pregnant Workers Fairness Act (PWFA) or the Colorado PWFA. Employees qualify immediately (provided that the employer is a covered entity). In fact, by its terms, the PWFA applies even to job applicants. This is also true for Colorado’s PWFA.¹

Under the PWFA, employers must make reasonable accommodations for the known limitations of an employee or applicant, unless the accommodation would cause an “undue hardship”—i.e., significant difficulty or expense. Read more >>

August 26, 2024

Preventing Double-Dipping: Ensure that Paid Parental Leave Runs Concurrently with FAMLI Leave and FMLA

Dana Dobbins

By Dana Dobbins

In Colorado, beginning on January 1, 2024, eligible employees can take paid leave for a variety of circumstances under Colorado’s Family and Medical Leave Insurance (FAMLI) program. Given that the FAMLI program is still in its infancy, there are several ambiguities and issues that still need to be resolved, and employers are still adjusting their policies.

One of the pitfalls facing employers is that they have not updated employment handbooks or policies to clarify that any paid parental leave otherwise offered under company policy runs concurrently with FAMLI leave (in addition to running concurrently with FMLA leave), not in addition to those leaves. Failing to update those policies may leave the employer in a situation where an employee can take 24 or more weeks of leave, and there is little the employer can do to prevent it without running afoul of the law. For most employers, this extended duration of leave is simply not feasible. Thus, updating relevant handbook or policy provisions is key. Read more >>

August 22, 2024

Algorithmic Accountability: The Next Frontier in Employment Law?

Little V. West

By Little V. West

Artificial intelligence (or AI) technology is rapidly transforming industry norms and creating new possibilities along with moral, ethical, and legal implications. The Society for Human Resource Management has recently observed that “[a] workplace run by AI is not a futuristic concept,” noting that a 2022 “report found that 85 percent of employers using automation or AI said it saves time or increases efficiency.”[1]

Regulators and legislators have kept pace with the daily news of breakthroughs in AI capabilities. The result is a virtual kaleidoscope of developing requirements in various jurisdictions, some of which are already in effect, some of which are yet become effective, and some of which may yet be enacted bearing on the use of AI in the workplace. Read more >>

August 21, 2024

The FTC’s Noncompete Ban Is Dead—For Now

Steven Eheart

By Steven Eheart and Mark Wiletsky

Employers finally have the answer they’ve been waiting for: they don’t need to comply with the Federal Trade Commission’s (“FTC”) Rule banning noncompete agreements—for now.

The FTC’s Rule was set to go into effect on September 4, 2024. But, on August 20, 2024, a federal judge from the Northern District of Texas set aside the Rule and barred the FTC from enforcing it. The same judge previously put the Rule on hold as to only the parties who brought the lawsuit, but this new decision applies to all employers.

Mark Wiletsky

The Court rejected the Rule for two reasons: 1) the Rule exceeded the FTC’s statutory authority, and 2) the Rule is arbitrary and capricious.

The Court found that the plain language of the Federal Trade Commission Act (FTCA) does not expressly give the FTC authority to create substantive rules regarding unfair methods of competition. Additionally, the Court found that even if the FTCA empowers the FTC to create some rules, it only empowers rulemaking related to unfair or deceptive acts or practices—and noncompete agreements are not unfair or deceptive practices. In the end, the Court stated that the “role of an administrative agency is to do as told by Congress, not to do what the agency thinks it should do.” Read more >>

August 20, 2024

Responding to Employee Requests for Personnel Records

Dana Dobbins

By Dana Dobbins

Question: What are the guidelines for when employees, current or former, request a copy of their personnel file, and what files are required to be provided upon request?

Answer: When it comes to an employee’s or former employee’s request for their own personnel files, employers must be cognizant of applicable state and local law when responding to such requests. Some states, including Idaho, Montana, New Mexico, Utah, and Wyoming do not have any state or regulatory provisions that apply to private-sector employment (though there may be specific regulations related to public-sector employers). Employers should be mindful of any company policies or procedures governing access to personnel files, which should comply with any applicable laws, and must apply those policies and procedures consistently.

Other states have specific rules governing current and former employee access to the employee’s personnel file. For example, under Colorado law, an employer must allow a current employee to inspect and obtain a copy of his or her personnel file at least annually, upon the employee’s request. However, the employer can require that the review occur at the employer’s office at a time that is convenient for both the current employee and the employer. Read more >>

August 16, 2024

Tenth Circuit Court of Appeals Upholds Workplace Policies Against Secret Recordings

Karina Sargsian

by Karina Sargsian

In recent years, the issue of secret recordings by employees has sparked considerable controversy. You may recall the recent incident involving an employee at CloudFlare, who filmed herself for nine minutes while questioning HR about her termination from the IT company. She posted the video on TikTok, where it quickly went viral. If you have not seen the video, you can view it here.

Such incidents have left many employers wondering how they can protect themselves from covert recordings by employees.

Employees often resort to secretly recording conversations following workplace disputes. And while it may be nearly impossible to prevent employees from secretly recording work-related conversations, employers can implement a no-recording policy that includes termination for violating such policy. One concern for employers, however, is that an employee fired for violating the no-recording policy might claim that the termination was in retaliation for previous complaints, rather than for the policy violation itself. Read more >>

August 7, 2024

A Path Towards Legal Permanent Residency: Applications Open on August 19, 2024 for New DHS Family Unity Program

By Sarah Bileti, Ann Lee, and Chris Thomas

The U.S. Department of Homeland Security (DHS) and the White House recently unveiled a new initiative that promises to transform the lives of undocumented noncitizen spouses of U.S. citizens. Scheduled to start taking applications on August 19, 2024, this groundbreaking program will provide a legal pathway to permanent residence (e.g., Green Card) for eligible individuals residing in the U.S. for over a decade without formal admission or parole. Initial reports estimate that approximately 500,000 noncitizen spouses of U.S. citizens and 50,000 noncitizen children of these spouses could benefit, marking this initiative as a major step forward in the U.S.’ commitment to family unity and fairness in its immigration policies. Read more >>

July 31, 2024

Second Decision on FTC’s Noncompete Ban Is In

Annie Stuller

By Annie Stuller

On July 23, 2024, a federal judge from the Eastern District of Pennsylvania declined to issue a preliminary injunction that would block the Federal Trade Commission’s (“FTC”) rule banning most noncompete agreements, current and future, that is set to take effect on September 4 (“Rule”).

In reaching this decision, the judge concluded that the plaintiff failed to demonstrate a substantial likelihood of success on the merits. First, the judge rejected the plaintiff’s argument that Section 6(g) of the Federal Trade Commission Act (“FTC Act” or “Act”) only authorizes procedural rulemaking, explaining it “is inherently inconsistent and therefore untenable” to read the word “procedural” but not “substantive” into the FTC Act when neither word appears within the Act. She explained, “it [is] clear that the FTC is empowered to make both procedural and substantive rules as is necessary to prevent unfair methods of competition.” Second, unpersuaded by the plaintiff’s supporting reasons, the judge rejected the plaintiff’s alternative argument that—even if the FTC Act empowers the FTC with authority to make substantive rules—the FTC exceeded its authority by banning all noncompete agreements. Read more >>

July 10, 2024

FTC’s Noncompete Ban On Hold…For Parties Involved in Lawsuit

Mark Wiletsky

By Mark Wiletsky and Annie Stuller

On July 3, 2024, a federal judge from the Northern District of Texas barred the Federal Trade Commission (“FTC”) from enforcing its Rule banning noncompete agreements and paused the Rule’s effective date of September 4, 2024. However, the judge limited the scope of her preliminary order to the plaintiff (Ryan LLC) and plaintiff-intervenors (the U.S. Chamber of Commerce and other business associations), declining to pause the Rule nationwide. As a result, for all other employers, this Rule is still set to take effect on September 4, absent further action by this court or another court in which a challenge to the Rule is pending.

Annie Stuller

The challenged Rule broadly bars employers from entering noncompete agreements with employees, invalidates existing agreements except for highly compensated individuals in a policymaking position, and requires employers to provide notice to current and former employees bound by existing agreements that the agreement will not be enforceable once the Rule takes effect.

In siding with the plaintiff and plaintiff-intervenors, the judge reasoned that the FTC lacked statutory authority under Section 6(g) of the Federal Trade Commission Act (“FTC Act”) because it is a “housekeeping statute” that only authorizes procedural—not substantive—rulemaking. She reached this conclusion by looking to “the text, structure, and history of the FTC Act.” The judge further concluded that the Rule violates the Administrative Procedure Act’s prohibition against arbitrary and capricious rules “because it is unreasonably overbroad without a reasonable explanation.” Employers should keep in mind that these conclusions were based on a “substantial likelihood” of success on the merits, signaling the judge will likely (but not certainly) rule in favor of the plaintiff and plaintiff-intervenors. Read more >>