EMPLOYMENT LAW UPDATE: What to Expect in 2024

With a new year comes new labor laws on the New York State and federal level. This article will touch upon the important changes in the labor laws that New York State employers will face in 2024, as well as anticipated legislation to consider when reviewing and revising your employment documents in the coming year.

Minimum Wage Increase: Beginning on January 1, 2024, the minimum wage will increase to $16.00 per hour in New York City, Westchester and Long Island, and $15.00 per hour in the rest of the state.

New Law Requiring Employers to Provide Notice of Eligibility for Unemployment Benefits: On September 14, 2023, Governor Hochul signed two bills into law that affect New York State employers. The first requires that employers provide employees with a Form IA 12.3 to notify employees of potential eligibility for unemployment benefits whenever there is a permanent or temporary separation, or a reduction in hours that may result in the employee qualifying for total or partial unemployment. (See S. 4878-A /A. 398-A) This law went into effect on November 11, 2023.

New Law Prohibiting Employers from Requiring Disclosure of Personal Account Information: The second law signed by Governor Hochul on September 14, 2023 prohibits employers from requiring that a current or prospective employee disclose personal account information, including usernames, login information and passwords for social media and other similar accounts, that are not used in conjunction with the employee’s job duties. (See S. 2518/A. 836) However, this new law does not protect personal accounts that are used for business purposes so long as the employer provides the employee with notice that it may request such information. This law goes into effect on March 12, 2024.

New Limitations on Use of Assignment of Inventions Clauses: On September 15, 2023, Governor Hochul signed a new law that added New York Labor Law §203-f to the books, which places limitations on an employer’s use of Assignment of Inventions Clauses. (See S5640/A5295) More specifically, it renders unenforceable an Assignment of Inventions Clause that attempts to assign all rights and interest over to an employer of an employee’s invention developed entirely on the employee’s own time without using the employer’s equipment, supplies, facilities or trade secret information, unless those inventions either relate to the employer’s practice or result from any work performed by the employee for the employer. This law went into effect immediately upon signing.

Status of Non-Competes in New York State and Nationally: As you may recall, on January 5, 2023, the Federal Trade Commission (“FTC”) issued a Proposed New Rule that would retroactively ban Non-Compete Agreements in most instances with only a few exceptions related to mergers and acquisitions and franchisee-franchisor agreements. While it was expected that this Proposed New Rule would be fast-tracked after the public comment period ended last Spring, the FTC received so much feedback that it delayed a vote and issuance of the final rule until April 2024. One of the greatest concerns with the FTC’s Proposed New Rule is the retroactive application as the same would not only unravel private settlement agreements, but would also void all prior judicial rulings enforcing such clauses. It is anticipated that the FTC’s Proposed New Rule will be voted upon and become law in April 2024. What is to be seen is whether there will be adjustments to the Proposed New Rule, such as placing salary caps on the application of this new law and/or eliminating its retroactive application.

The FTC is not the only federal administrative agency taking action to restrict the use of non-compete agreements in employment. Indeed, on May 30, 2023, the Office of the General Counsel for the National Labor Relations Board (“NLRB”) published Memorandum GC 23-08 wherein the General Counsel declared that the use of non-compete agreements in employment would be considered a violation of Section 8(a)(1) of the National Labor Relations Act (“NLRA”) except in very limited circumstances. The General Counsel’s office stated that the use of such clauses tends to chill an employee’s Section 7 rights as it would cut off an employee’s ability to pursue other employment opportunities and threaten resignation as a consequence of an employer’s refusal to collectively bargain for improved working conditions. The Office of the General Counsel stated that it would only permit the use of non-compete agreements that were “narrowly tailored to address special circumstances justifying the infringement on employee rights.”

Not to be outdone, New York State introduced its own ban on non-competes in January 2023 that passed the Senate and Assembly in June 2023. (See S3100A/A01278) The proposed new law would ban non-compete agreements prospectively, but did not contain the FTC carveout for mergers and acquisitions or for franchisee-franchisor agreements. Like the FTC’s Proposed New Rule, the Governor’s office received an overwhelming amount of feedback causing her to delay in having the bill called up for review until December 2023. In the interim, the Governor’s office and the Legislature engaged in heated negotiations in an attempt to place limitations on the reach of the proposed new law, specifically limiting its application to middle-class and low wage workers. After the Governor’s office and the Legislature could not agree upon the cap in wages to which this new law would apply, on December 23, 2023, Governor Hochul vetoed the bill. While this version of the proposed new law was vetoed, the proponents of the bill have stated that they will reintroduce a version of the same law to the floor next year, likely including a salary cap in the new legislation as well as provisions to exclude such things as mergers and acquisitions.

Garden Leave Provisions in Employment Contracts as a Non-Compete Workaround: While New York State employers have wrangled with how they will adjust to the new normal when the state and/or federal ban on non-compete agreements takes effect, many have turned to England for inspiration on how to best protect their legitimate business interests when high level executives leave the company. Indeed, many large companies are turning to Garden Leave Provisions in lieu of non-compete agreements, something previously seen only in the United Kingdom and parts of Europe. A Garden Leave Provision is a clause in an Employment Contract that requires a specified advanced notice period of an employee’s departure (“to tend to their gardens”) during which time the employee will generally be relieved of his or her duties. However, as the employee will continue to be employed by the company and receive a salary, the employee may not publicly announce his or her departure and may not commence work for a competitor. It should be noted that Garden Leave Provisions are typically shorter than traditional non-compete periods (often six months or less) and the employee continues to draw a salary during this period. As they are relatively new to the United States, Courts are still grappling with how to treat Garden Leave Provisions. While many New York State and federal courts have enforced Garden Leave Provisions when contained in an employment contract for a term of years, they are reluctant to do so where employment is “at will.” Ironically, those courts that have refused to enforce a Garden Leave Provision in an “at will” employment situation have, instead, often imposed a preliminary injunction prohibiting the employee from competing with the employer during the Garden Leave period.