Insights

On September 30, 2024, Chief Judge Laura Taylor Swain of the U.S. District Court for the Southern District of New York dismissed a putative class action in Mejia v. High Brew Coffee Inc., 1:22-cv-03667-LTS (S.D.N.Y. Sep. 30, 2024), holding that an online-only business’s website is not a place of public accommodation under Title III of the Americans with Disabilities Act (“ADA”). Chief Judge Swain’s opinion is the first of its kind for the Southern District and is the latest installment in an ongoing judicial debate about the reach of the ADA’s regulatory reach.  

Following a multi-million-dollar ruling against it by the National Labor Relations Board (“NLRB”), nursing home operator Care One, LLC, is now challenging the authority of NLRB-appointed Administrative Law Judges (“ALJs”) on constitutional grounds before the Second Circuit Court of Appeals. The Second Circuit’s line of questioning during the November 12, 2024, oral argument revealed the Court’s apparent skepticism towards Care One’s challenges, creating the prospect of a circuit court split on key issues that are likely to make their way to the Supreme Court. Care One’s arguments follow the trend over the past several years of employers increasingly questioning the authority of ALJs to adjudicate their labor and employment claims before administrative agencies.

Over the past several years, federal courts have increasingly questioned the authority of administrative law judges (ALJs) to adjudicate alleged violations of certain labor and employment statutes.  In the last several weeks, two U.S. district courts in Texas issued decisions halting unfair labor practice proceedings before the National Labor Relations Board (NLRB) on the grounds that NLRB ALJs lack the constitutional authority to preside over such actions due to unconstitutional protections against their removal.[1]  Similarly, the last year has seen several decisions by courts in the Fifth and Eleventh Circuits finding that ALJs, whose decisions are not reviewable by a Presidential appointee, lack constitutional authority under the Appointments Clause to adjudicate claims.[2]  The trend illustrated by these decisions, combined with the Supreme Court’s decision in June to abandon the Chevron doctrine of extending deference to federal agency rule-making proceedings, portend significant changes in the way employers interact with federal agencies that enforce labor and employment law. 

On Friday, June 28, 2024, the U.S. Supreme Court overruled Chevron U.S.A. v. Natural Resources Defense Council (“Chevron”)[1] in Loper Bright Enterprises v. Raimondo (No. 22-451) and Relentless v. Dep’t of Commerce (No. 22–1219)[2] (the two cases collectively referred to as “Loper Bright”), bringing an official end to the decades-old and eponymously named “Chevron deference” doctrine. Not content to stop there, the Court returned fresh to work Monday, July 1, to, in Corner Post, Inc. v. Board of Governors of the Federal Reserve System (No. 22-451)[3] (“Corner Post”), effectively extend the limitations period to challenge final agency actions under the Administrative Procedure Act (“APA”).

On June 13, 2024, The Supreme Court ruled in Starbucks v. McKinney that the National Labor Relations Board (“Board”) must meet the same four-part test that other litigants must satisfy in order to obtain a preliminary injunction. This holding resolves a split amongst the circuit courts, some of which have applied a “less exacting” two-factor test to preliminary injunctions under Section 10(j) of the National Labor Relations Act (“NLRA”).

On April 26, 2024, the Department of Labor (“DOL”) published the Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees Rule (“Final Rule”), which will increase the minimum salary thresholds for bona fide executive, administrative, and professional exemptions under the FLSA.  Effective July 1, 2024, the annual salary thresholds for these “white collar” exemptions will increase to $43,888 (from $35,568) and increase again on January 1, 2025 to $58,656 and the threshold for highly-compensated employees will also increase from $107,432 to $132,964.  Effective July 1, 2025, the methodology will change and these thresholds will increase again (to $58,656 and $151,164, respectively).

On January 10, 2024, the U.S. Department of Labor (“DOL”) published its final rule on Employee or Independent Contractor Classification under the Fair Labor Standards Act (“FLSA”). Crowell & Moring previously reported on the proposed rule announced on October 11, 2022. The final rule rescinds the “core factors” independent contractor rule adopted by the Trump administration in 2021 and returns to a “totality of the circumstances” analysis for determining whether a worker is properly classified as an employee or independent contractor. According to the DOL, the new final rule institutes an analysis that better aligns with judicial precedent and the FLSA’s text and purpose. The final rule goes into effect on March 11, 2024.

On October 27, the National Labor Relations Board (“NLRB”) issued a long-awaited Final Rule (“Final Rule”) that will dramatically alter the test for joint-employer status. As proposed,  the Final Rule rescinds the NLRB’s 2020 Final Rule, with the NLRB claiming that the new rule “more faithfully grounds the joint-employer standard in established common-law agency principles.”   In effect, the Final Rule will make it easier for employees of franchises, staffing agencies, and potentially a broad swath of contractors to show that two entities are joint employers. If an entity is found to be a joint employer with the direct employer of unionized employees, “under common-law agency principles,” the entity can be liable for the unfair labor practices of the co-employer and can be required to negotiate with the union representing the workers under the National Labor Relations Act (“NLRA”).  The NLRB’s new rule will take effect on December 26, 2023 and is not retroactive.

On September 8, 2023, the Department of Labor (“DOL”) published a Notice of Proposed Rule Making (“NPRM”) proposing a number of changes that would, if enacted, substantially increase the number of workers who would be eligible for overtime pay under the federal Fair Labor Standards Act (“FLSA”).  Most critically, the NPRM would raise the annual salary threshold for the FLSA’s administrative, executive and professional exemptions -- the so-called “white collar” exemptions -- from $684 per week ($35,568/year) to $1,059 per week ($55,068/year).

The NLRB recently effected two significant, pro-union changes to the way in which future union organizing and representation cases proceed.  First, abandoning more than 50 years of settled law, the National Labor Relations Board’s recent decision in Cemex Construction Materials Pacific (372 NLRB No. 130), changed the way in which unions will likely organize private sector employers in the United States.  Pursuant to Cemex, if a union claims to have majority support and demands recognition, an employer must either (1) grant recognition without the benefit of an NLRB election, or (2) file its own NLRB petition seeking an election.  If the employer fails to take either step, the union can file an unfair labor practice charge, and the NLRB will find a violation and order mandatory union recognition unless the employer proves the union did not have majority support in an appropriate bargaining unit.  And even if the employer files a petition for election (an “RM petition”), the NLRB may cancel the election and issue a bargaining order if the employer commits virtually any unfair labor practice during the period preceding the election.

In Clark v. A&L Homecare and Training Center, LLC, Nos. 22-3101/3102, a split three-judge panel for the U.S. Court of Appeals for the Sixth Circuit held that notice to potential plaintiffs should only be issued if lead plaintiffs show a “strong likelihood” that such absent employees are “‘similarly situated’ to the plaintiffs themselves.” In so holding, the Sixth Circuit joined the Fifth Circuit in rejecting the long-standing “lenient” two-step collective action certification process.  The Sixth Circuit declined, however, to apply the Fifth Circuit’s approach and adopted a “strong likelihood” standard.  The Clark decision, issued on May 19, 2023, will significantly impact FLSA collective action litigation in favor of employers in federal district courts in Ohio, Michigan, Kentucky, and Tennessee.  The widening Circuit split ripens this issue for review by the Supreme Court of the United States.

On May 30, 2023, the General Counsel of the National Labor Relations Board, Jennifer Abruzzo, issued a memorandum stating broadly that the proffer, maintenance, and enforcement of non-compete agreements between employers and employees tend to infringe on employees’ exercise of rights under Section 7 of the National Labor Relations Act (the “Act”). General Counsel Abruzzo opines that non-competes are therefore unlawful under the Act (as to non-supervisory employees), unless “narrowly tailored” to a special circumstance justifying the infringement on employee rights. This memorandum comes on the heels of her prior memo, taking the position that confidentiality and non-disparagement provisions in employee severance agreements are invalid, as Crowell reported in late March.

On Friday, April 28, 2023, the Fifth Circuit in Rest. Law Center v. United States Department of Labor, No. 22-50145, 2023 WL 3139900 (5th Cir. Apr. 28, 2023), reversed a decision from the Northern District of Texas (the “District Court”) that refused to enjoin the Department of Labor’s tip credit regulations amendment in effect since December 28, 2021. The amendment requires employers to pay tipped employees the full minimum wage for nontipped work directly supporting tipped work if it: 1) amounts to more than 20% of the employee’s total weekly time paid at the tipped minimum wage rate, or 2) exceeds 30 continuous minutes. The Fifth Circuit concluded in a 2-1 panel decision that the plaintiffs demonstrated that the ongoing management costs imposed on employers by the new “continuous 30-minute rule” in the form of additional timekeeping requirements results in irreparable harm.

On May 1, 2023, the National Labor Relations Board issued a decision in Lion Elastomers LLC II, which overruled the Board’s earlier decision in General Motors LLC, 369 NLRB No. 127 (2020), and rejected Trump-era precedent that had made it easier for employers to discipline workers who make profane, harassing or discriminatory comments in the course of a workplace dispute.  In its statement, the NLRB described its decision as “returning to the long-established ‘setting-specific’ standards applicable to cases where employees are disciplined or discharged for misconduct that occurs during activity otherwise protected by the National Labor Relations Act” (the “NLRA” or the “Act”).  

On May 1, 2023, the Biden Administration announced its plan to issue an Executive Order in the coming days to rescind the existing executive order that imposes COVID vaccine requirements and safety protocols on federal contractors.  Specifically, Executive Order 14042 on Ensuring Adequate COVID Safety Protocols for Federal Contractors will be rescinded effective May 12, 2023, and agencies have been instructed not to require compliance with the COVID-related requirements from covered contractors and subcontractors nor to enforce the implementing clause. 

On Friday, March 10, 2023, regulators shut down Silicon Valley Bank (“SVB”) and seized its deposits, resulting in the second largest U.S. banking failure since the 2008 financial crisis. Specifically, SVB was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (the “FDIC”) was named receiver. Since the FDIC insures deposits of up to $250,000, that amount was immediately available; however, the fact that deposits above and beyond the $250,000 limit were not immediately available alarmed many. After a weekend of chaos as many businesses scrambled for a solution to the illiquid funds, on Sunday, March 12, 2023, in a joint release among the Department of Treasury, Board of Governors of the Federal Reserve System and the FDIC, Treasury Secretary Janet Yellen instructed the FDIC to guarantee SVB customers access to all deposits, including the uninsured funds. The release further stated that New York-based Signature Bank was closed by its chartering authority and that its customers would also receive access to all deposits, including the uninsured funds. While this may have provided relief to many, it is important to keep in mind the lesson and best practices in the event of such a liquidity crunch.

On February 21, 2023, the National Labor Relations Board (“NLRB” or the “Board”) issued a decision, McLaren Macomb, 372 NLRB No. 58 (2023), holding that employers may not offer employees severance agreements that contain what might otherwise be considered standard confidentiality or non-disparagement provisions because they arguably impinge upon rights provided under the National Labor Relations Act (“NLRA”). This decision reverses the previous Board’s decisions issued in 2020, holding that offering severance agreements with such provisions was not, standing alone, unlawful.

On October 11, 2022, the United States Department of Labor (“DOL”) announced that it is seeking public comment on a proposed rule, which modifies the legal framework for determining whether a worker is an employee or independent contractor under the Fair Labor Standards Act (“FLSA”).  The proposed rule would rescind the current independent contractor rule (adopted by the Trump Administration in 2021), which simplified the multi-factor test, and heavily weighted two “core” factors—workers’ control over their work and opportunity for profit or loss—in determining the status of workers.  The new rule returns to a “totality-of-the-circumstances” analysis, which balances all factors equally.  While the current rule is perceived as more favorable to respecting a worker’s independent contractor status, this shift in legal framework is expected to lead to more determinations that workers are employees, most particularly, gig workers.