The Employer E-Letter: Labor and Employment Law News
from the Duluth, Minnesota law firm of
Hanft Fride, A Professional Association.
Co-Editors, Scott A. Witty, saw@hanftlaw.com and Richard R. Burns, rrb@hanftlaw.com, or 218.722.4766. Please feel free to forward this e-mail or share it with others. If there are other topics of interest to you or any other suggestions concerning this newsletter, please let us know.
- MOST NON-COMPETE AGREEMENTS BANNED IN MN
- NON-COMPETES UNDER CONTINUED ATTACK from feds
- MINNESOTA APPEALS COURT CLARIFIES WHEN CERTAIN EMPLOYER FINES APPLY
- NLRB TOUGHENS CONTRACTOR TEST FOR EMPLOYERS
- Tip Of The Month
MOST NON-COMPETE AGREEMENTS BANNED IN MN
Earlier this year we wrote an article advising employers that the Minnesota legislative bodies were each considering bills restricting the use of non-compete agreements. In late May, Governor Walz signed new legislation that bans non-compete agreements in most circumstances, leaving exceptions only for the sale or dissolution of a business. The law goes into effect July 1, 2023, but does not affect non-compete agreements entered into prior to that date. Notably, the new law bans only non-compete agreements, or those that restrict the employee from performing the same or similar work for another employer within a geographical area during a specified period of time. Non-disclosure agreements, restrictions on the use/sharing of trade secrets or confidential information, non-solicitation agreements (for customers or co-workers) or agreements restricting the use of client lists are not prohibited under the new legislation. The new law also does not apply when a person selling a business and the buyer of a business agree to temporary restrictions to offering similar services within a reasonable geographic area. The same is true where a group of owners agree to such restrictions when dissolving a business. This is a dramatic change in Minnesota employment law, and it is worth noting the legislature elected not to include an exception for highly paid positions. Employers will need to review and revise employment agreements that have historically contained non-compete provisions.
NON-COMPETES UNDER CONTINUED ATTACK FROM FEDS
In addition to the changes in Minnesota law, we have the National Labor Relations Board General Counsel Jennifer Abruzzo sending a memorandum to its District Offices stating that most non-competes are overbroad, and therefore have a tendency to chill employee’s rights under Section 7 of the National Labor Relations Act (NLRA). It is her view that maintaining and enforcing non-compete provisions is unlawful unless such provisions are “narrowly tailored to special circumstances justifying the infringement on employee rights.” She added that retaining employees or protecting employer investment in training workers “are unlikely to ever justify an overbroad non-compete provision because U.S. law generally protects employee mobility.” She even suggested that providing bonuses might be a good alternative for retention of employees. Her stance was not surprising in light of the fact that in March she found that employers violate Section 7 of NLRA when they have severance agreements that contain confidentiality or non-disparagement clauses, as well as other standard provisions, including non-compete, non-solicitation and no poaching clauses. One needs to keep in mind that there is a large segment (18.1% of employees according to a 2021 study) that have non-competes. It is hard to justify this for most low or middle wage workers. Of course, in Minnesota, new non-competes are banned after July 1, 2023, and Wisconsin has limited the circumstances where a non-compete is justified.
MINNESOTA APPEALS COURT CLARIFIES WHEN CERTAIN EMPLOYER FINES APPLY
An employee was terminated from his position at Dollar Tree on August 5, 2021. Between August 9 and August 25, the employee made multiple requests that his former employer provide him with a written reason for his termination within 10 days, as required under Minn. Stat. § 181.933. After Dollar Tree failed to comply, the employee sued them, demanding damages under Minn. Stat. § 181.935. Minn. Stat. § 181.935 establishes a civil penalty of $25 per day for employers who fail to provide a written reason for an employee’s termination in certain instances. The Minnesota court of Appeals dismissed the employee’s case, finding that the civil penalty provision unambiguously applies only where 1) an employee is inappropriately terminated for whistleblowing under Minn. Stat. 181.932; and 2) where the employer fails to notify them of this reason under Minn. Stat. § 181.933. Laliberte v. Dollar Tree, Inc., No. A22-1031, 2023 WL 2358832 (Minn. Ct. App. Mar. 6, 2023).
__________________
NLRB TOUGHENS CONTRACTOR TEST FOR EMPLOYERS
President Biden recently said he is the strongest pro-labor president in history, and the National Labor Relations Board (NLRB) is helping him meet this claim. In a case involving hairstylists and makeup artists at the Atlanta Opera, the NLRB found the Trump era view that the multi-contractor tests must be viewed “through the prism of entrepreneurial opportunity” is not consistent with case precedent. The result is that more workers will be considered employees, as opposed to independent contractors, and thus eligible to unionize and the protections of the NLRA. Entrepreneurship is not lacking in their decision, since in addition to the non-exhaustive common law factors to be considered, another factor is “whether a putative contractor is, in fact, rendering services as part of an independent business. “The NLRB stated that the entrepreneurial opportunity factor was considered a super factor, and this was not consistent with the common law version of “contractor vs. employee”. We are now left with the accepted common law nine factor non-exhaustive test, including the employer’s control over the worker, the worker’s skill, and whether their work is part of the employer’s regular business.
________________________________________________________________________________
Gender identity issues are frequently in the news and political campaigns. Employers are reminded that in 2019 the U.S. Supreme Court held that Section VII of the Civil Rights Act protected employees from discrimination based on gender identity. This would include enforcement of gender-based dress code provisions. Based on the Supreme Court’s ruling, employers should remove gender-based language, those that specify what men and women must wear, in their dress codes to avoid potential liability.
Hanft Fride’s business and trial lawyers are located at 1000 U.S. Bank Place, in Duluth, Minnesota. Visit our website at www.hanftlaw.com for general information on the firm and our attorneys. Our employment lawyers include Tom Torgerson, Rob Merritt and Scott Witty. Richard Burns is now of Counsel.
The information provided in this E-letter is general in nature and should not be used as a substitute for professional services and advice. The communication and receipt of this information is not intended to create an attorney-client relationship. Readers should consult with their legal counsel before taking any action on matters covered in this E‑letter.
To subscribe or unsubscribe to Employer E-Letter, e-mail your request to nrs@hanftlaw.com or call Scott Witty at 218.722.4766.
Copyright 2023 by Hanft Fride, P.A. All rights reserved. Hanft Fride, A Professional Association, 1000 U.S. Bank Place, 130 W. Superior Street, Duluth, MN 55802. Phone 218.722.4766; Fax 218.529.2401.