It is not uncommon for employers to present restrictive covenants, such as non-competition, non-solicitation, or confidentiality agreements, to new employees in a stack of orientation paperwork. A recent case from New York’s highest court reminds employers not only that it is important to narrowly tailor restrictive covenants, but also that it is worthwhile to take the time to explain the meaning of those agreements to new employees, and even provide new employees with some time to review them. In 2014, we posted a blog article on a New York Appellate Division (Fourth Department) case regarding the partial enforcement of an overbroad non-solicitation provision in an employment agreement. In Brown & Brown, Inc. v. Johnson, the appellate court deemed the non-solicitation provision overbroad and unenforceable because it prohibited the former employee from soliciting any client of the firm, not just those with whom she developed a relationship while employed by the firm. The firm sought to have the non-solicitation agreement partially enforced. In other words, the firm asked the court to modify or “blue pencil” the covenant to make it enforceable. Significantly, the appellate court refused to blue pencil the overbroad agreement, citing the unequal balance of power between the employee and employer at the time the agreement was signed. Thus, the entire non-solicitation provision was deemed unenforceable, allowing the former employee to solicit any former clients. Given this decision, we cautioned employers to be wary of overreaching in a restrictive covenant, as it could result in a court refusing to enforce even a pared down version of the agreement. In June 2015, the Court of Appeals reversed the Appellate Division on the partial enforcement issue and sent the case back to the trial court to review the circumstances of the case. According to the Court, the lower court should have taken a closer look at the facts and circumstances surrounding the signing of the non-solicitation agreement before deciding whether to simply strike the overbroad agreement. The Court noted that the fact that the agreement was not presented to the employee, Johnson, until after she left her prior employment “could have caused her to feel pressure to sign the agreement, rather than risk being unemployed.” Nevertheless, the mere fact that the agreement was a requirement of the job, and that the employee was not presented with the agreement until the first day of work was not enough alone to deny partial enforcement. The Court cited other factors that would be considered to determine the partial enforcement issue: whether the employee understood the agreement, whether it was discussed or explained to her, and whether she was coerced into signing it on the first day or could have sought advice from counsel or negotiated the terms. The latest lesson on restrictive covenants from New York’s highest court is clear: they must be presented to employees in a non-coercive fashion. If your restriction on an employee could be construed as overbroad, courts will consider the circumstances under which the agreement was provided to the employee when determining whether to modify or “blue pencil” it to make it enforceable. To convince a court to do so, there must be facts showing that the employer took steps to minimize the inherent inequality in bargaining power between the employer and the employee. While employers may be reluctant to negotiate the terms of these agreements, employers should consider sitting down to explain the meaning of a non-compete or non-solicitation agreement, leaving some time for the new employee to think over and review the agreement, and allowing the employee to seek counsel before signing it.
On July 22, 2015, the Fast Food Wage Board (which was empaneled at the direction of Governor Cuomo to investigate and make recommendations regarding an increase in the minimum wage for employees in the fast food industry) passed a resolution recommending that the minimum wage for employees in the fast food industry be raised to $15.00 per hour. The recommended increase will be phased in to take effect by December 31, 2018, in New York City, and by July 1, 2021, for the rest of the state. Governor Cuomo has publicly applauded the Wage Board's recommendation, which will almost certainly be accepted and adopted by the Commissioner of Labor.
Assuming the Commissioner of Labor issues an order accepting the Wage Board's recommendation, the fast food hourly minimum wage in New York City will increase to $10.50 on December 31, 2015, $12.00 on December 31, 2016, $13.50 on December 31, 2017, and $15.00 on December 31, 2018. The fast food hourly minimum wage in the rest of the state will increase to $9.75 on December 31, 2015, $10.75 on December 31, 2016, $11.75 on December 31, 2017, $12.75 on December 31, 2018, $13.75 on December 31, 2019, $14.50 on December 31, 2020, and $15.00 on July 1, 2021. At this point, the minimum wage for all employees is $8.75 per hour. On December 31, 2015, the minimum wage will go up to $9.00 per hour for all employees except fast food employees, who will be entitled to the higher minimum wage recommended by the Wage Board.
In the Wage Board's resolution, "fast food employee" is defined as any person employed or permitted to work at or for a fast food establishment where the person's job duties include at least one the following: customer service, cooking, food or drink preparation, delivery, security, stocking supplies or equipment, cleaning, or routine maintenance. The Wage Board's resolution does not contain any exemption for high school or college students, who often seek part-time jobs in the fast food industry and who generally are not trying to support themselves or their families on their income.
The term "fast food establishment" is defined as any establishment in New York serving food or drinks: (1) where customers order and pay for their items before eating, and the items may be consumed on the premises, taken out, or delivered; (2) which offers limited service; (3) which is part of a chain; and (4) which is one of 30 or more establishments nationally. The definition includes a franchisee who owns and operates only one fast food restaurant in New York State, if the franchisor and all other franchisees of the franchisor own and operate at least 30 such restaurants nationwide.
If the Commissioner of Labor adopts the Wage Board's recommendation as expected, the Commissioner's order could be subject to legal challenges based on its selective targeting of the fast food industry and potentially other grounds. It remains to be seen whether this minimum wage increase for employees in the fast food industry will withstand judicial scrutiny.
The New York State Department of Labor (“NYSDOL”) recently proposed new regulations governing the payment of employee wages via payroll debit cards – a growing practice among employers. These draft regulations, which are not yet final or effective, also set forth new requirements governing the payment of wages by direct deposit.
Regarding an employer’s use of these so-called “payroll cards,” NYSDOL has previously cautioned that paying employees in this manner raises a number of potential legal issues under the New York Labor Law. Even so, NYSDOL concurrently opined that employees may be paid lawfully through such payroll cards, so long as certain requirements are met. For example, according to NYSDOL, employers are required to first obtain written authorization from employees, and employees cannot be subjected to undue fees or encumbrances when accessing their wages through the payroll cards.
The proposed regulations track this prior guidance and, if enacted, will codify the specific requirements that must be met in order for employers to lawfully use such payroll cards. Among other things, employers will be required: (1) to provide specific, advanced disclosures to employees about the payroll card program in question; (2) to obtain the prior “informed consent” of employees; and (3) to ensure the payroll card program includes a long list of other mandatory terms and conditions (e.g., employees must be provided with access to at least one ATM network offering withdrawals at no cost).
With respect to direct deposit, the proposed regulations would require employers to maintain an employee's written consent to be paid through direct deposit during the entire duration of the employee's employment and for six years after the last deposit is made. In addition, employers would be required to provide a copy of the written consent to the employee and to make the direct deposits at a financial institution selected by the employee.
Notably, the proposed regulations would not apply to individuals working in executive, professional, or administrative positions who earn in excess of $900.00 per week.
The proposed regulations are currently open for public comment. We will continue to monitor this issue and report on any further developments.
Editor's Note: Our thanks to Stephanie Hoppe, one of Bond’s Summer Law Clerks, who helped prepare this article.
New York State's Acting Commissioner of Labor, Mario Musolino, issued an Order today, accepting most of the recommendations made by the Hospitality Industry Wage Board, including the recommendation to increase the minimum wage for all tipped employees in the Hospitality Industry to $7.50 per hour effective December 31, 2015. The one recommendation that the Acting Commissioner rejected was the one that would have provided certain employers with some relief from this significant increase in labor costs -- namely, the recommendation to allow employers to take $1.00 off the hourly minimum wage for tipped employees if the weekly average earnings of their employees (wages paid plus tips received) equals or exceeds 150% of the regular minimum wage in New York City or 120% of the regular minimum wage in the rest of the state. So, to summarize, the Acting Commissioner's Order will: (1) increase the minimum wage for all tipped employees in the Hospitality Industry (regardless of whether they are classified as food service workers, service employees, or resort hotel service employees) to $7.50 per hour effective December 31, 2015; and (2) implement a $1.00 increase in the minimum wage for tipped employees in the Hospitality Industry who work in New York City, which would take effect if and when the legislature enacts a higher minimum wage rate for New York City. The Acting Commissioner also accepted the Wage Board's recommendation to review whether the current system of cash wages and tip credits should be eliminated. The Acting Commissioner's Order will be effective 30 days after notice of its filing is published in at least 10 newspapers of general circulation in the state. Employers in the hospitality industry should begin to consider how this significant increase in labor costs attributable to the employment of food service workers and service employees will impact their businesses in 2016 and beyond.
On September 15, 2014, the New York State Commissioner of Labor assigned the three-member Hospitality Industry Wage Board ("Wage Board") with the task of reviewing and making recommendations regarding what changes, if any, should be made to the minimum wage rates and tip credits for food service workers and service employees in the hospitality industry. After conducting several meetings, the Wage Board voted on January 30, 2015, to recommend that the minimum wage rate for all tipped employees in the hospitality industry (regardless of whether they are classified as food service workers or service employees) be increased to $7.50 per hour effective December 31, 2015. The webcast of the Wage Board's January 30 meeting can be found here.
Governor Cuomo has expressed his support for the Wage Board's recommendation, which will now be reviewed by the Commissioner of Labor. If the Commissioner of Labor accepts the Wage Board's recommendation, the Hospitality Industry Wage Order will be revised to reflect the increase.
Under the current Hospitality Industry Wage Order, employers are required to pay food service workers a minimum wage of at least $5.00 per hour, and may take a tip credit of no more than $3.75 per hour, provided that the total amount of tips received plus the wages paid equals or exceeds the current regular minimum wage of $8.75 per hour. The term "food service worker" is defined as any employee who is primarily engaged in serving food or beverages and who regularly receives tips. This includes "front of the house" employees such as wait staff, bartenders, captains, and bussing personnel, but excludes delivery workers. Employers are currently required to pay service employees (other employees in the hospitality industry who customarily receive tips but are not involved in serving food or beverages) a minimum wage of at least $5.65 per hour, and may take a tip credit of no more than $3.10 per hour, provided that the total amount of tips received plus the wages paid equals or exceeds $8.75 per hour. Service employees at resort hotels are subject to a special rule that allows them to be paid a minimum wage of at least $4.90 per hour. Non-service employees ("back of the house" employees such as cooks and dishwashers) must be paid the regular minimum wage of $8.75 per hour, and no tip credit may be taken for those employees.
So, the Wage Board's recommendation (if it is accepted by the Commissioner of Labor) would drastically increase the tipped employee minimum wage as of December 31, 2015, by $2.50 for food service workers, by $1.85 for most service employees, and by $2.60 for service employees at resort hotels. The Wage Board also voted to make two other recommendations to the Commissioner of Labor: (1) if the legislature enacts a higher regular minimum wage for New York City, then the minimum wage for tipped employees in the hospitality industry who work in New York City would increase by $1.00 effective on the date that the higher regular minimum wage goes into effect; and (2) if a hospitality industry employer can demonstrate that the weekly average earnings of an employee (wages paid plus tips received) equals or exceeds 120% of the regular minimum wage (or 150% of the regular minimum wage if the employee works in New York City), then the employer would be eligible to pay $1.00 less than the applicable tipped employee minimum wage.
Employers in the hospitality industry should begin to consider how this potentially significant increase in labor costs attributable to the employment of food service workers and service employees will impact their businesses, and should evaluate what adjustments may need to be made in the event that the Commissioner of Labor accepts and implements the Wage Board's recommendation. We will report on any further developments as they occur.
Happy New Year! On December 29, Governor Cuomo signed the bill eliminating the requirement under the Wage Theft Prevention Act that employers in New York provide annual wage notices to their employees. Although the bill currently provides that it will go into effect 60 days after it is signed (which would mean that it would take effect after the February 1 deadline to provide the wage notices for 2015), the Governor's approval memo accompanying the bill specifically notes that an agreed-upon chapter amendment will "accelerate the effective date of the notification rule changes in section 1 of the bill to remove the notice requirement on employers for the 2015 calendar year."
We will provide an update once the expected chapter amendment is enacted in January.
Effective December 22, 2014, employers in New York must grant leave to employees who also serve as volunteer emergency responders during times when the Governor has declared a state of emergency. Employees eligible for such leave include volunteer firefighters and volunteer ambulance service personnel who have given their employer prior written documentation regarding their volunteer status or whose duties as a volunteer firefighter or member of a volunteer ambulance service are related to the declared emergency. In general, the leave may be unpaid, but the employee may choose to use any form of paid leave to which he or she would be entitled under the employer's policies. The full text of the new law can be found here.
Following an employee’s return from such leave, an employer may request a notarized statement from the head of the volunteer fire department or volunteer ambulance service, certifying the period of time that the employee responded to an emergency.
An employer may be eligible for a waiver of the leave requirements if it can show that granting an employee leave would cause an undue hardship on the employer’s business. An undue hardship is defined as an accommodation requiring significant expense or difficulty, including a significant interference with the safe or efficient operation of the workplace or a violation of a bona fide seniority system. Factors to be considered in determining whether granting a leave constitutes an undue hardship include, but are not limited to:
the identifiable cost, including the costs of loss of productivity and of retaining or hiring employees or transferring employees from one facility to another, in relation to the size and operating cost of the employer;
the number of individuals who will need the leave; and
for an employer with multiple facilities, the degree to which the geographic separateness or administrative fiscal relationship of the facilities will make granting the leave more difficult or expensive.
It is believed that the latest version of the bill was signed into law because, unlike prior versions of the bill, it creates an exception for employers who can show that complying with the leave requirements would impose an undue hardship.
Although there have not been many reported instances in which employers in New York have terminated employees for missing work to respond to emergencies, supporters of the new law claim that volunteer emergency responders are sometimes reluctant to request leave to respond to an emergency. This law is intended to allow volunteer emergency responders to request leave during a declared state of emergency without fear of repercussions at work.
The minimum wage for employees in New York will increase from $8.00 per hour to $8.75 per hour effective December 31, 2014. The minimum wage for New York employees will increase again to $9.00 per hour effective December 31, 2015.
Employers in New York should also keep in mind that the minimum salary under state law for employees to qualify for the executive and administrative exemptions will increase from $600.00 per week to $656.25 per week effective December 31, 2014. The minimum salary under state law to qualify for the executive and administrative exemptions will increase again to $675.00 effective December 31, 2015.
New York employers who have already begun preparing to send out annual wage notices to their employees under the Wage Theft Prevention Act can safely stop their preparations. The bill eliminating the annual wage notice requirement was delivered to the Governor yesterday and it is expected that the Governor will sign it. The bill, as currently drafted, provides that the legislation will go into effect 60 days after it is signed into law, which would mean that it would take effect after the February 1 deadline to provide the wage notices for 2015. However, Bond's Government Relations lawyers brought this concern to the attention of the Governor's office in early December, while the Governor's office and the Legislature were discussing potential chapter amendments to the bill, and it is our understanding that one of the agreed-upon chapter amendments that will be enacted early in the next legislative session will eliminate the annual wage notice requirement immediately. So, we expect that employers will not have to issue the notices in 2015.
We will provide an update as soon as the Governor signs the bill, and another update once the expected chapter amendments are enacted in January. This is certainly great news for employers in New York, who will no longer have to engage in the costly and time-consuming process of issuing wage notices to all employees between January 1 and February 1 of each year.
Nearly six months ago, we reported that the New York Legislature passed a bill eliminating the requirement under the Wage Theft Prevention Act that employers provide an annual wage notice to their employees between January 1 and February 1. We monitored the bill regularly, hoping that we would be able to report that the Governor had signed the bill and that employers would be relieved of this onerous requirement in 2015. Unfortunately, the bill has not yet been delivered to the Governor, so at least as of now, the annual wage notice requirement remains in effect.
Based on the information we have been able to obtain, it appears that the Governor's office and the Legislature are currently discussing potential revisions to the bill that are unrelated to the elimination of the annual wage notice requirement. Aside from the elimination of the annual wage notice requirement, the bill that was passed on June 19 also increased the penalties for an employer’s failure to provide a wage notice upon hiring a new employee and for an employer’s failure to provide appropriate wage statements to employees, imposed significant consequences on employers who are found to be repeat offenders, and added provisions to the Limited Liability Company Law and the Construction Industry Fair Play Act. It is our understanding that amendments to some of those other provisions are being contemplated.
It is still possible that the bill will be signed by the Governor before the end of the legislative term. However, if the legislation goes into effect 60 days after it is signed into law (which is how the bill is currently drafted), it is already too late for the law to go into effect in time to relieve employers of the obligation to distribute the annual notice by February 1, 2015. Our firm has brought this issue to the attention of the Governor's office.
At this point, employers in New York should prepare to send the annual wage notice to their employees between January 1 and February 1, 2015. If the Legislature and the Governor give a nice holiday gift to New York employers by finding a way to eliminate this requirement for 2015, we will certainly let you know.
On July 5, 2014, Governor Cuomo signed the Compassionate Care Act, making New York the twenty-third state to legalize medical marijuana. This new law creates a medical marijuana program for individuals suffering from certain severe, debilitating, or life-threatening conditions (e.g., cancer, ALS, Parkinson’s disease, epilepsy, etc.). The goal of the program is to ensure that medical marijuana is available for certified patients with “serious conditions” and is administered in a manner that protects the public health and safety. To that end, the law will be regulated by the New York State Department of Health, which will certify physicians to administer the drug, register organizations to provide the drug, issue identification cards to qualifying individuals, establish the list of “serious conditions,” and regulate the price of the drug. This program is expected to be up and running within the next 18 months. In the meantime, employers should become familiar with the ways in which this law may impact the workplace.
Notably, the law creates certain protections for employees who legally use medical marijuana. In this regard, employers are prohibited from taking disciplinary action against employees because of their lawful use of the drug. In addition, employees lawfully using medical marijuana are deemed to have a “disability” under the New York Human Rights Law. As a result, employers who discipline or terminate an employee for lawfully using medical marijuana may open themselves up to a disability discrimination claim. Furthermore, employers will be required to consider making workplace accommodations for individuals who utilize medical marijuana.
While this aspect of the law will likely present new challenges for employers, there are certain things employers should be mindful of that will assist them in managing these situations:
The law does not prevent employers from enforcing policies and procedures prohibiting employees from performing their job duties while impaired by a controlled substance. Accordingly, employers can lawfully prohibit all employees, including those that utilize medical marijuana, from working while impaired. As a practical matter, an employer who is on notice that an employee is certified to use medical marijuana may find it helpful to request information from the employee’s doctor to determine if and to what extent the employee may be impaired in the performance of his/her job duties. The employer may need to consider whether accommodations can be provided to allow the employee to work unimpaired (such as modifying the employee’s hours of work based on his/her medical use regime).
The law does not require employers to allow employees to utilize or carry medical marijuana if it would violate federal law or put their business in jeopardy of losing a federal contract or federal funding.
An individual must obtain a registration identification card and must carry the registration card whenever the individual has marijuana in his or her possession. This registration card will make it easier for employers to verify whether employees are lawfully in possession of marijuana in the workplace. If an employee has marijuana in his or her possession and is not able to produce the registration card upon demand, the employee is not lawfully utilizing the drug and is not entitled to the employment protections detailed above.
In addition to a registration card, an individual must also have a valid prescription from a certified physician in order to lawfully use medical marijuana. Employers should be aware of this in the event an individual tests positive for marijuana use. That is, a positive result for marijuana may not necessarily be a test result that justifies adverse employment action.
Certified individuals are strictly prohibited from smoking medical marijuana. Therefore, if an employee smokes marijuana in the workplace or if the employer reasonably concludes based on other evidence that the employee is smoking marijuana recreationally (e.g., smelling of marijuana smoke), the employee will be outside the scope of employment protection.
Certified individuals are prohibited from consuming marijuana (in any form) in a public place. Public place is not currently defined; however, the Commissioner of Health was granted the authority to issue regulations defining “public place.” If the Commissioner defines “public place” to include the workplace, employers will not be required to accommodate employees by allowing them to consume the drug in the workplace (and, of course, if ingestion at work would result in impairment, this would not be required in any event).
Any final guidance to employers must await the regulations issued by the Commissioner of Health. However, it is not too early for employers to begin to consider how this new law will affect their workplaces. The most obvious change that will likely be necessary is to misconduct policies that address the use of drugs. Employers will need to ensure that their policies appropriately carve out an exception for (or otherwise do not subject to discipline) lawful medical use of marijuana.
On July 22, 2014, Governor Cuomo signed a bill that amends the New York Human Rights Law by adding a new Section 296-c entitled, “Unlawful discriminatory practices relating to interns.” The amendment prohibits employers from discriminating against unpaid interns and prospective interns on the basis of age, race, creed, color, national origin, sexual orientation, military status, sex, disability, predisposing genetic characteristics, marital status, or domestic violence victim status, with respect to hiring, discharge, and other terms and conditions of employment. The amendment further prohibits employers from retaliating against unpaid interns who oppose practices forbidden under the Human Rights Law or who file a complaint, testify, or assist in a proceeding brought under the Human Rights Law. The amendment also makes it unlawful for employers to compel an intern who is pregnant to take a leave of absence, unless the pregnancy prevents the intern from performing the functions of the internship in a reasonable manner. The amendment also prohibits employers from subjecting interns to sexual harassment or any other type of harassment based on a protected category. This legislation was introduced following a 2013 case in which the United States District Court for the Southern District of New York dismissed a sexual harassment claim asserted by an unpaid intern who alleged that her boss had groped her and tried to kiss her. In that decision, the Court was bound by the language of the statute that existed at that time and the court decisions interpreting that language, which provided that the Human Rights Law only applied to paid employees and did not apply to unpaid interns. The purpose of the legislation is to give unpaid interns the same right to be free from workplace discrimination and harassment as paid employees. Employers who have unpaid interns or expect to have unpaid interns in the future should consider revising their anti-discrimination and anti-harassment policies to explicitly provide that discrimination and harassment against interns will not be tolerated, and that complaints made by interns regarding alleged unlawful harassment will be investigated in the same manner as complaints made by employees. In addition, as we noted in a 2010 blog post, employers should also make sure that unpaid interns truly qualify as unpaid interns, and would not be considered "employees" who are entitled to the minimum wage and overtime protections of the Fair Labor Standards Act and New York wage and hour laws.
