Quick Hits

• The Supreme Court recently agreed to hear a case brought by a heterosexual woman who claimed discrimination based on her sexual orientation after she was demoted.
• The federal law banning sex discrimination also bars discrimination based on a person’s sexual orientation and gender identity.
• It is anticipated that the Supreme Court will resolve the circuit split on whether a heightened evidentiary burden, highlighted in the background circumstances rule, can be applied to reverse discrimination cases.

Background on the Case

On October 4, 2024, the Supreme Court agreed to hear a discrimination case brought by a heterosexual woman who was demoted at the Ohio Department of Youth Services. The department oversees the confinement of juvenile felony offenders.

A heterosexual woman served as the department’s administrator of the federal Prison Rape Elimination Act (PREA). She applied and interviewed to be the department’s bureau chief of quality. The department terminated her employment as PREA administrator and offered her another job that amounted to a demotion with less pay, which she took. The department later hired a gay man to serve as PREA administrator and a gay woman to be bureau chief of quality. The heterosexual woman filed a discrimination lawsuit, alleging discrimination in violation of Title VII of the Civil Rights Act of 1964.

The district court granted summary judgment to the Ohio Department of Youth Services, finding that the employee had failed to present any background information or data to demonstrate discrimination in the department’s hiring practices or policies. The employee appealed, and on December 4, 2023, the U.S. Court of Appeals for the Sixth Circuit found she did not produce sufficient evidence to prove discrimination.

The appeals court acknowledged that being heterosexual is a legally protected status under federal law, but stated that plaintiffs must show “‘background circumstances to support the suspicion that the defendant is that unusual employer who discriminates against the majority,’” meaning heterosexual people in this case. The Sixth Circuit thus concluded the plaintiff didn’t prove the department exhibited a pattern of discrimination against members of the majority group.

The plaintiff’s “only evidence of a pattern of discrimination against heterosexuals is her own demotion and the denial of the bureau chief position,” the court stated. “Under our caselaw, however, a plaintiff cannot point to her own experience to establish a pattern of discrimination.”

The Sixth Circuit further found that the plaintiff had not shown that the employer’s stated reason for the demotion was a pretext for discrimination. In this case, the plaintiff argued that the reasons for demoting her were not based on fact, but the appellate court noted her performance evaluation shortly before the demotion was “lukewarm” and sometimes “critical.” Therefore, the appeals court agreed the department had grounds to demote her based on lackluster performance. In ruling for the department, Judge Raymond Kethledge filed a concurring opinion, arguing that the Supreme Court may want to address the issue of whether Title VII’s anti-discrimination laws “impose different burdens on different plaintiffs based on their membership in different demographic groups.”

On October 4, 2024, the Supreme Court agreed to hear the case. A circuit split exists on the evidentiary burden that employees must meet in reverse discrimination cases. Four circuits, including the Sixth Circuit, have adopted the background circumstances rule. Two other circuits have rejected the background circumstances rule, and five other circuits do not apply it, treating discrimination claims from majority groups similarly to claims from plaintiffs in other groups.

Next Steps

The Supreme Court will hear this case during its current term, which will end in late June 2025. A date for oral arguments has not been set yet.

While it is possible that the Supreme Court may decide the case on more narrow grounds, many legal scholars expect the court will resolve the circuit split that exists in the appellate courts and overrule the “background circumstances” rule. Accordingly, the prevailing legal standard may be upended in many states. The Supreme Court’s ruling is likely to shed light on what evidence will be sufficient to prove discrimination against a majority group.

Employers may wish to consistently apply workplace policies and promotion standards to prevent discrimination lawsuits. Employers also may wish to review their workplace policies, practices, and training materials to ensure that they reflect how the law protects both straight and LGBTQ+ employees from discrimination and harassment.

Employers can review the most recent guidance regarding LGBTQ+ rights, which the U.S. Equal Employment Opportunity Commission (EEOC) released on April 29, 2024. The guidance states that Title VII of the Civil Rights Act of 1964 prohibits discrimination based on sexual orientation and gender identity as part of the law’s broader protections against sex-based discrimination. Heterosexual and gay are both legally protected classes.

Ogletree Deakins will continue to monitor developments and will provide updates on the Diversity, Equity, and Inclusion and Employment Law blogs as new information becomes available.

Alicia Roberts Johnson is counsel in Ogletree Deakins’ Richmond office.

Jessica H. Thomas is of counsel in Ogletree Deakins’ Atlanta office.

Amanda T. Quan is the office managing shareholder in Ogletree Deakins’ Cleveland office.

This article was co-authored by Leah J. Shepherd, who is a writer in Ogletree Deakins’ Washington, D.C., office.

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Construction contractors undergoing compliance reviews after October 1, 2024, will be required to comply with expanded initial data and document requests contained in the revised letter. Contractors on a recent Corporate Scheduling Announcement List (CSAL)—a courtesy notification from OFCCP listing contractors selected for compliance evaluation—that have not yet been scheduled for compliance reviews may want to ensure they can produce the information requested.

Quick Hits

• The letter imposes additional data collection and retention obligations for certified payrolls, such as tracking overtime hours and rates, bonuses, and “other” pay.
• The letter requests a new type of employee transaction data (layoffs) and seeks all employee transaction data for a new category of employee (non-trade employees who supervise, inspect, or provide other on-site functions).
• OFCCP added two new requests to the Executive Order 11246 section requiring contractors to verify compliance with the Uniform Guidelines on Employee Selection Procedures (UGESP) for test and selection procedures and other personnel procedures.

The new letter, applicable to federal construction contractors (including federally assisted construction contractors), comes on the heels of OFCCP’s earlier revisions to the Supply and Service Scheduling Letter and Itemized Listing, issued on August 25, 2023. As we previously reported, OFCCP proposed changes to the Construction Scheduling Letter and Itemized Listing in February 2024 that included expanded obligations for construction contractors under compliance review.

In its supporting statement for the proposed changes to the Construction Scheduling Letter, OFCCP gave a number of justifications for the changes, including, among other things, promoting efficiency, aiding OFCCP’s ability to conduct robust statistical analyses, improving OFCCP’s ability to schedule on-site reviews, clarifying the scope of existing requests, and adding the same level of detail as was recently added by the agency to the Supply and Service Scheduling Letter. The letter increases the volume of data and information contractors must produce; it requires that contractors submit employment activity data in a readable electronic database, such as a spreadsheet software program; it includes a preference that affirmative action program (AAP) and itemized listing information be provided to OFCCP electronically; and it clarifies that OFCCP may initiate an enforcement action if the requested information is not received within thirty days of the contractor receiving the letter.

Additional Data Requests

While many changes to the VEVRAA and Section 503 sections of the letter involve clarifications regarding what to include in utilization analysis, union notifications, and assessment of outreach and personnel processes, the letter imposes significant additional obligations on contractors for Executive Order 11246. Specifically, the letter now requests additional “certified payroll” data beyond base wage, including overtime hours worked and a breakdown of regular pay rates, total regular pay, overtime pay rates, total overtime pay, and bonus or “other” pay. The new letter seemingly expands the scope of the employee population subject to audit by specifically requesting certified payroll data for non-trade personnel in supervisory, inspection, or “onsite functions incidental to the actual construction.” OFCCP has not clarified the scope of individuals covered by “onsite functions incidental to the actual construction,” and it is unclear whether the agency will consider this request to cover all personnel performing work on construction sites, even non-construction work.

In another notable change to employment transaction data obligations, the letter now requires contractors to produce data regarding layoffs. The expansion to non-trade personnel continues here, as the letter requests employment transaction data for non-trade personnel. The letter also requires contractors to provide specific dates for employment activity, such as dates for applications, hires, layoffs, promotions, and terminations. The new request for specific dates carries over to construction projects, as the letter now requires contractors to identify the start and anticipated end dates of every project performed in the relevant geographic area during the preceding twelve months.

New Requests

Besides seeking additional data, the letter includes two new itemized listing requests.

• First, in the new Item No.16, the letter now requires construction contractors to “[i]dentify all tests and selection procedures used in the hiring process,” including those that are “technology-based tests and selection procedures (e.g., artificial intelligence, algorithms, automated systems), as well as any other non-technology-based tests and selection procedures (e.g., written tests, work simulations, structured interview questions).” In addition to identifying all such tests, if adverse impact is found, contractors must provide evidence that the tests were “validated” under the UGESP. OFCCP made clear in its updated Construction Compliance Frequently Asked Questions (FAQs) that it expects a contractor’s response to Item No. 16 to include “information and documentation” for any “third-party recruiting, screening, and/or hiring products and services” the contractor employs. This new request mimics earlier revisions to the Supply and Service Scheduling Letter, which requests information on “policies, practices, or systems used to recruit, screen, and hire, including the use of artificial intelligence, algorithms, automated systems or other technology-based selection procedures.”
• Second, in the new Item No. 17, contractors must provide evidence that they “monitored personnel and employment related activities” to “ensure that seniority practices, job classifications, work assignments and other personnel practices did not have a discriminatory effect” (also per the UGESP). The updated FAQs suggest that a contractor may provide evidence that the contractor “monitored personnel and employment-related activities” by providing meeting notes, reports or notes describing the contractor’s review, or an impact-ratio analysis of the personnel practices.

The updated Construction Compliance FAQs expand on the agency’s interpretation of construction contractors’ obligations for the new letter and provide subregulatory guidance as contractors wade into this uncharted territory. Contractors may want to note that late last year OFCCP updated these FAQs to emphasize that the agency believes contracts meeting applicable contract thresholds must comply with both construction and supply and service contractor obligations. According to OFCCP’s subregulatory guidance, when a company has both construction and supply and service contracts, it must meet construction regulations for workers “engaged in on-site construction and functions incidental to the actual construction” and adhere to supply and service obligations at “every establishment (or functional/business unit, as applicable) where non-construction workers are located.”

The new Construction Scheduling Letter and Itemized Listing imposes additional burdens on construction contractors and will increase contractors’ production of data and information to OFCCP. Contractors subject to the letter will likely want to give careful thought to the new requests to ensure they are tracking the data necessary to respond within thirty days in the event of a compliance review.

In related news, on September 30, 2024, the Office of Management and Budget (OMB) gave final approval to a monthly data collection form for construction contractors. Stay tuned for more on this in our next article.

Next Steps

• OFCCP releases a courtesy notification to contractors chosen for compliance evaluation, which construction contractors may want to monitor.

• Given the increased compliance burden, contractors may want to determine whether they are subject to these construction compliance obligations and/or supply and service compliance obligations.
• Contractors may want to take steps now to ensure that current data tracking and payroll systems are compliant, especially given the short deadline for producing responsive items.
• Construction contractors may want to proactively (potentially, under attorney-client privilege) analyze personnel transactions and employee compensation to ensure that no impediments to equal employment opportunity exist.

Ogletree Deakins’ OFCCP Compliance, Government Contracting, and Reporting Practice Group will continue to monitor developments and will provide updates on the Construction, Government Contractors, and OFCCP Compliance, Government Contracting, and Reporting blogs as additional information becomes available.

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Quick Hits

• Business groups recently filed letters of opposition to a Los Angeles City Council motion to expand the city’s fair workweek predictable scheduling ordinance to fast-food workers.
• The Los Angeles Fair Work Week Ordinance, which took effect in April 2023, applies to retailers with 300 or more employees globally that have employees who work in the City of Los Angeles at least two hours per workweek.
• On July 1, 2025, a Los Angeles County ordinance, which is almost a mirror image of the city’s proposed ordinance, will take effect.

The proposed ordinance would:

• apply to “fast food businesses,” defined as “all limited-service restaurants that are part of a national chain consisting of 50 or more locations nationally, including businesses that operate such restaurants pursuant to franchise agreements”; and
• include six hours of in-person training on workers’ rights provided by city-approved nonprofits or public organizations.

Key Takeaways

The motion has not yet been voted on, but an expansion of the ordinance to cover fast-food workers could be costly and burdensome to restaurants that operate in the city, the business groups noted in their opposition letter. Retailers in the City of Los Angeles are already operating pursuant to the Fair Work Week Ordinance, which significantly impacts operations.

Ogletree Deakins will continue to monitor developments and will provide updates on the firm’s California, Hospitality, Retail, and Wage and Hour blogs as additional information becomes available.

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Quick Hits

• Governor Newsom recently signed into law legislation directing Cal/OSHA to begin the rulemaking process to add naloxone hydrochloride or another opioid antagonist to first aid kits.
• The California Occupational Safety and Health Standards Board will have until December 1, 2028, to consider adopting the proposed standards.

The new law, Assembly Bill (AB) No. 1976, requires the California Occupational Safety and Health Standards Board to consider for adoption revised standards that provide guidance to employers on the proper storage of opioid overdose reversal compounds by December 1, 2028.

The California Health and Safety Code includes Good Samaritan protections for people who voluntarily provide emergency medical or nonmedical care, including to administer naloxone. Now that AB 1976 has been signed into law, Cal/OSHA will begin the rulemaking process with draft regulations and public comment.

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Quick Hits

• USCIS has built upon a prior policy update to clarify the types of evidence that may be used when USCIS determines EB-1A extraordinary ability eligibility.
• The EB-1A immigrant visa category is available to foreign nationals in the sciences, arts, education, business, or athletics who demonstrate extraordinary ability through sustained national or international acclaim.

The EB-1A immigrant visa category, which bypasses the PERM labor market test, is available to foreign nationals who demonstrate extraordinary ability in the sciences, arts, education, business, or athletics through sustained national or international acclaim. To qualify, a foreign national must meet at least three of ten regulatory criteria.

Highlights of the updates to the guidance include the following:

• USCIS may consider receipt of team awards under the criterion for “lesser nationally or internationally recognized prizes or awards for excellence in the field of endeavor.”
• USCIS will consider past memberships under the criterion for membership in associations in the field that demand outstanding achievement of their members.
• The guidance removes language suggesting that published material about the beneficiary in professional or major trade publications or other major media must demonstrate the value of the person’s work and contributions.
• The guidance explains that while the dictionary definition of “exhibition” includes public showings that are non-artistic, the relevant “regulation expressly modifies that term with ‘artistic,’ such that USCIS will only consider non-artistic exhibitions as part of a properly supported claim of comparable evidence.”

Key Takeaways

Overall, the policy changes broaden the types of evidence that may be considered in support of a petition for EB-1A extraordinary ability classification. Due to increased challenges with PERM labor market tests, employers may want to consider the extraordinary ability category and other categories that bypass PERM for their most talented employees.

Ogletree Deakins’ Immigration Practice Group will continue to monitor developments and will publish updates on the Immigration blog as additional information becomes available.

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Quick Hits

• The UK’s electronic travel authorisation (ETA) will soon apply to all nationals who do not currently require a visa to travel to the UK and who do not hold any other UK immigration status.
• From 27 November 2024, the scheme will initially be applicable to a number of non-European travellers, including those from the United States, Singapore, and Canada.
• On 5 March 2025, ETAs will be rolled out to a number of European countries and will be required for travel from 2 April 2025.

From 27 November 2024, the scheme will initially be applicable to a number of eligible non-European travellers, including those from the United States, Singapore, and Canada. These nationals will need to apply for an ETA for travel made after 8 January 2025.

On 5 March 2025, ETAs will be rolled out to a number of European countries, including France, Germany, and Spain, and will be required for travel from 2 April 2025. A full list of countries is available in guidance published on the government’s website.

An ETA enables the above nationals to:

• come to the UK for up to six months for tourism, visiting family and friends, business, or short-term study;
• come to the UK for up to three months on the Creative Worker visa concession;
• come to the UK for a permitted paid engagement; and
• transit through the UK.

The following are prohibited under an ETA:

• staying in the UK for longer than six months;
• performing paid or unpaid work for a UK company or as a self-employed person, unless the traveller is visiting the UK for a permitted paid engagement or event, or is working on the Creative Worker visa concession;
• claiming public funds (benefits);
• living in the UK through frequent or successive visits; and
• marrying or registering a civil partnership, or giving notice of marriage or civil partnership.

When the ETA scheme takes full effect, all passengers except British and Irish nationals will require a permit to enter the UK—even if they are switching airlines. Applications must be made in advance of travel. Applications cost £10 per person, and each traveller—including children—must apply separately. The ETA is valid for multiple entries to the UK for two years or until the traveller’s passport expires, whichever is sooner. Applications can be made via the UK government’s Home Office website or app—“UK ETA.” Decisions should be made within seventy-two hours.

Ogletree Deakins’ London office will continue to monitor developments and will provide updates on the Cross-Border and Immigration blogs as additional information becomes available.

Ruhul K. Ayazi is of counsel in the London office of Ogletree Deakins.

Beejal Nathwani-White is an immigration manager in the London office of Ogletree Deakins.

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Quick Hits

• Five critical areas HR may want to assess for potential risks related to data breaches include inadequate privacy frameworks, training for employees regarding their data privacy duties, data flowing out of the organization, internal data transfers, and key employee life cycle moments.
• Even organizations with established policies may struggle with their implementation and enforcement.
• Well-designed training programs, including refresher courses, can help clarify employees’ data privacy and security responsibilities.

1. Inadequate Privacy Framework

One significant risk for organizations is the lack of a comprehensive privacy framework for managing employee data. Alternatively, organizations with established policies may struggle with their implementation and enforcement. A clear framework is crucial for data management. Consider the policies regarding employee data access, storage, and the individuals permitted to access sensitive information. HR representatives often handle confidential data, so familiarity with the organization’s expectations is essential. If there is no policy in place, there is a risk that employees may not follow good guidelines, which can substantially increase the likelihood of an incident.

2. Employees Not Trained in Data Privacy Duties

The effectiveness of a privacy framework hinges on employees understanding their roles within it. When employees are unclear about their responsibilities, the organization becomes more susceptible to cyberthreats. Training programs that emphasize the importance of data privacy and security are vital. Such programs highlight employees’ duties to protect sensitive information and outline the risks of mishandling data. Regular refresher courses can help ensure that employees remain aware of evolving privacy practices and legal obligations, reducing the risk of human error during a data incident.

3. Data Flowing Out of the Organization

Understanding how employee data flows in and out of the organization is critical for risk assessment. Many HR functions rely on third-party software for payroll, scheduling, and other management tasks, often involving the sharing of sensitive data. HR personnel may want to consider the implications of using these tools, especially regarding biometric data, employee monitoring, and the use of artificial intelligence (AI) for recruitment or evaluations. Identifying potential risks and compliance obligations related to external data transfers can help mitigate liability in the event of a breach. Understanding where data flows in and out can also assist the organization’s privacy officer in determining what contracts are necessary to ensure that data is protected between organizations. The risk of data breaches rises sharply without solid safeguards in place, especially if third parties are careless with data.

4. Internal Data Transfers

Data flow within the organization also presents risks, particularly when transferring employee data across jurisdictional boundaries. An HR function in data security is remaining vigilant about compliance with local laws, as some regions impose strict data residency requirements. For example, transferring employee data from Québec to other Canadian provinces may necessitate explicit consent, contractual agreements, and risk assessments. Familiarity with jurisdiction-specific requirements can help prevent costly penalties and foster transparency, especially during a data breach. Additionally, understanding the security standards of the jurisdictions involved when data is transferred can help mitigate the risk of penalties in the event of a breach. A way HR can provide assistance to an organization’s data security is by considering the privacy compliance obligations of those jurisdictions as a factor for reducing overall risk for the organization.

5. Key Life Cycle Moments

Data security and privacy risk management include key moments in the employee and applicant life cycle, such as onboarding and offboarding. The onboarding process typically includes informing new hires about their privacy obligations and the security protocols in place. Providing training on data protection from the outset can significantly reduce risk. Similarly, during offboarding, HR can collaborate with IT and other relevant departments to ensure that departing employees return all company property and that access to sensitive systems is promptly revoked. Similarly, HR can involve IT early, by collaborating to ensure that any applicant data is appropriately stored and retained, and that access is limited to those on a need-to-know basis. Establishing a structured communication process between departments can mitigate risks associated with employee departures.

Conclusion

Navigating employee data privacy and risk management is a vital function of HR. By assessing these key areas—developing a solid framework, ensuring employee understanding, monitoring data flows, comprehending internal requirements, and addressing critical employee life cycle moments—HR professionals can better safeguard both employee data and the organization as a whole. Fostering a culture of privacy and accountability can help maintain employee trust and the integrity of the organization.

Ogletree Deakins’ Cybersecurity and Privacy Practice Group will publish additional articles on the Cybersecurity and Privacy blog as an ongoing part of this series. The next article in our series delves deeper into HR’s role during a data incident.

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Supreme Court Begins 2024/2025 Term. The Supreme Court of the United States kicked off its new term this week. Some of the cases the Buzz will be tracking include the following:

• In E.M.D. Sales Inc. v. Carrera, the Court will attempt to resolve a circuit split over the burden of proof that employers must satisfy to demonstrate the applicability of exemptions from the Fair Labor Standards Act’s minimum-wage and overtime requirements.
• Stanley v. City of Sanford will address whether the Americans with Disabilities Act allows former employees—as opposed to applicants or employees—to sue for discrimination with regard to fringe benefits.
• In Ames v. Ohio Department of Youth Services, the Court will determine whether a plaintiff pursuing a so-called “reverse discrimination” claim (in this case, an employee claiming she was fired because she is heterosexual) must meet a higher standard of demonstrating “background circumstances” in order to prevail.

The Buzz will be watching these cases closely and will be monitoring the Court’s docket as it adds cases for the current term.

NLRB Issues Latest Memo on Noncompetes and Other Contractual Provisions. On October 7, 2024, National Labor Relations Board (NLRB) General Counsel Jennifer Abruzzo issued a memorandum, entitled, “Remedying the Harmful Effects of Non-Compete and ‘Stay-or-Pay’ Provisions that Violate the National Labor Relations Act.” The memo, which expands on General Counsel Abruzzo’s 2023 memo outlining her legal theory as to why noncompete agreements are unlawful, is divided into two main parts.

• The first part of the memo sets forth the general counsel’s theory of how “make-whole relief” should be awarded in the context of unlawful noncompete provisions. In such a situation, the employee must demonstrate that the provision deprived the employee of a better job opportunity; the employer must then “compensate the employee for the difference (in terms of pay or benefits) between what they would have received and what they did receive during the same period.” The same remedial theory applies to former employees who demonstrate that they were out of work longer, took lower paying jobs, or paid for retraining in order to comply with the terms of the noncompete provisions.
• The second part of the memo lays out General Counsel Abruzzo’s theory that so-called “stay or pay” contractual provisions—such as training and educational repayment agreements or sign-on bonuses—unlawfully restrict employee mobility “unless they are narrowly tailored to minimize any interference with Section 7 rights.” The memo maintains that these agreements: (1) chill employees from engaging in protected concerted activity “for fear that termination would trigger the payment obligation”; and (2) “tend to discourage employees from seeking to improve their lot through job mobility by erecting a financial barrier to quitting.” Nevertheless, such provisions may be lawful if they advance a legitimate business interest and are narrowly tailored to minimize any infringement on Section 7 rights.

Although the Board has not ruled on the matter, in June 2024, an NLRB administrative law judge ruled that noncompete and nonsolicitation provisions contained in an employment agreement were unlawful.

Warehouse Protection Bill Reintroduced. Democratic senators have reintroduced the Warehouse Worker Protection Act—this time, with the support of a new Republican cosponsor, Senator Josh Hawley of Missouri. The revised bill grants enforcement authority to the Federal Trade Commission and adds an ineffective and unrealistic small business exemption. Despite the bipartisan support, the bill is unlikely to gain much traction during the remaining weeks of the 118th Congress. However, the employer community should be concerned that a Republican senator supports legislation that would revise the Occupational Safety and Health Administration’s (OSHA) rejected ergonomics standard and create a new unfair labor practice if an employer implements a productivity quota. Accordingly, this bill bears watching if it is reintroduced in 2025.

EEOC Releases 2024 Litigation Stats. This week, the U.S. Equal Employment Opportunity Commission (EEOC) announced statistics related to its litigation and enforcement program for fiscal year (FY) 2024 (October 2023 through September 2024). According to the announcement, the EEOC filed 110 lawsuits in FY 2024, including the following:

• 13 new systemic cases involving a pattern, practice, or policy of discrimination
• 48 cases under the Americans with Disabilities Act (ADA)
• Over 40 cases alleging retaliation under various statutes enforced by the EEOC
• 7 cases under the Age Discrimination in Employment Act (ADEA)
• 5 cases under the Pregnant Workers Fairness Act (PWFA)
• 5 sexual harassment cases on behalf of teenage workers under Title VII of the Civil Rights Act of 1964 (Title VII)
• 4 cases under Title VII alleging sex discrimination based on sexual orientation
• 3 cases under Title VII alleging sex discrimination based on gender identity

The PWFA, which became effective on June 27, 2023, can present new challenges for employees. The EEOC’s announcement notes that “[t]he agency focused on enforcing the PWFA as an emerging issue” and that “the Commission’s lawsuits allege[d] employers failed to provide reasonable accommodations to workers who were entitled to them and often discharged employees as a result.”

Hughes Oughta Know. On October 10, 1910, Charles Evans Hughes was sworn in as an associate justice of the Supreme Court of the United States. A prominent New York attorney and law professor, Hughes’s political career began in 1906 when he defeated William Randolph Hearst to be governor of New York. After completing his second term as governor, Hughes was appointed to the Supreme Court by President William Howard Taft. Hughes served for six years on the Court before resigning to run for president in the 1916 election, which he lost to Woodrow Wilson. Hughes then returned to the private practice of law before he was appointed secretary of state by President Warren G. Harding. In 1930, President Hoover appointed Hughes chief justice of the Supreme Court. As chief justice, Hughes played a significant role in the development of jurisprudence during the New Deal era of the Court. For the Buzz, we remember Hughes for drafting the majority opinion in NLRB v. Jones & Laughlin Steel Corp., which upheld the constitutionality of the National Labor Relations Act or Wagner Act.

Quick Hits

• The NLRB issued a memo announcing the GC’s position that employment provisions requiring employees to remain at an employer for a specific period or repay certain costs may be unlawful.
• The memo further warns employers that the NLRB will seek expanded remedies for unlawful, overly broad noncompete and stay-or-pay provisions.
• In an unusual step, the GC announced that employers will have a sixty-day window to cure, consistent with standards announced in the memo, any preexisting stay-or-pay provisions that advance legitimate business interests.

Memorandum GC 25-01 has two key components: (1) it addresses the GC’s view of a proper remedial framework for overly broad noncompete provisions; and (2) it sets forth a framework for assessing the lawfulness of “stay-or-pay” provisions, which are defined by the GC as any contracts that require employees to pay their employer if they separate from employment within a certain time period. Importantly, the GC’s memo relates only to nonsupervisory employees, as the Act does not extend to supervisory or management personnel with noncompete or stay-or-pay provisions.

Direction on Potential Remedies for Unlawful Noncompete Provisions

Following up on a separate GC memo from May 2023, the latest memo begins by expanding on the GC’s view of appropriate remedies for noncompete provisions viewed as unlawfully overly broad under the National Labor Relations Act (NLRA) in agreements with nonsupervisory/nonmanagerial employees covered by Section 7 of the NLRA.

The GC instructs the NLRB regional offices to seek monetary make-whole remedies when employees “demonstrate that they were deprived of a better job opportunity as a result of [an unlawful] non-compete provision.” To warrant such relief, an employee must show that: “(1) there was a vacancy available for a job with a better compensation package; (2) they were qualified for the job; and (3) they were discouraged from applying for or accepting the job because of the non-compete provision.”

According to the memo, employees who have separated from the employer “may also be entitled to make-whole relief for additional harms or costs associated with complying with the unlawful non-compete provision.” These harms can include lost pay for being without a job, the difference in pay from a job with lesser compensation, moving costs to relocate outside a geographic region covered by the noncompete provision, or retraining costs to obtain a job in another industry, according to the memo.

In addition to these remedial positions, the GC also recommended that the NLRB regional offices update the standard NLRB notice postings in noncompete cases. The GC recommended that the notices be updated to include various notifications to current and former employees about the availability of potential compensation if they were harmed by a noncompete during the NLRA’s statutory limitations period. The GC also recommended that the notices include language directing current and former employees to contact regional offices if they have evidence meeting the standards the GC created for “unenforceable” noncompetes. If adopted and implemented, such NLRB notices will begin to look like notices commonly mailed to potential members of class action cases.

The NLRB GC Proposes a New Framework for ‘Stay-or-Pay’ Provisions

While the employer community was already aware of the GC’s effort to mount NLRA challenges to noncompete provisions, most of the recent memo addresses a new area of expansion. It articulates the GC’s view that many common stay-or-pay provisions are potentially unlawful. The GC defines stay-or-pay provisions as agreements with payments tied to a mandatory stay period under which employees must repay their employer certain bonuses/benefits if they voluntarily or involuntarily separate from employment before the expiration of the stay period. Examples of stay-or-pay provisions include educational repayment contracts and sign-on or relocation bonuses tied to a mandatory period of employment.

The memo states the GC’s position that stay-or-pay provisions violate Section 8(a)(1) of the NLRA unless “they are narrowly tailored to minimize any interference with Section 7 rights” and employers can meet a specific test for whether the provision “advances a legitimate business interest.” The GC announced that she will urge the NLRB to adopt a test requiring the employer to show that challenged language:

1. “is voluntarily entered into in exchange for a benefit”—“meaning that employees must be permitted to freely choose whether to [agree to the provision] and may not suffer an undue financial loss or adverse employment consequence if they decline”;
2. “has a reasonable and specific repayment amount”—meaning the repayment amount is “no more than the cost to the employer of the benefit bestowed, and the debt amount [is] specified up front”;
3. “has a reasonable ‘stay’ period”—a “fact-specific” inquiry “based on factors such as the cost of the benefit bestowed, its value to the employee, whether the repayment amount decreases over the course of the stay period, and the employee’s income”; and
4. “does not require repayment if the employee is terminated without cause”—meaning it “must effectively state that the debt will not come due if the employee is terminated without cause.”

The GC asserts that the NLRB should order the rescission and replacement of unlawful stay-or-pay provisions even if the employee voluntarily entered into them. According to the GC, employers may be liable for other remedies, including make-whole remedies for missed employment opportunities similar to the GC’s position regarding noncompete provisions. The GC also has recommended that, in stay-or-pay cases, the standard NLRB notice postings be modified as discussed above in the context of noncompete matters.

In recognition of the new framework with its specific requirements, the GC announced that she would “grant employers a sixty-day window from the date of issuance of this memorandum to cure and preexisting stay-or-pay provisions that advance a legitimate business interest.” That sixty-day window runs through December 6, 2024. But note that the GC indicated the NLRB regional offices will be directed to issue complaints, absent settlement over any new stay-or-pay arrangement entered into after the date of the memo, without any sixty-day reprieve.

Next Steps

The GC’s memo is not law because the GC does not have the authority to “make” law. But the GC’s memo articulates the GC’s view of the NLRB’s enforcement position and the GC’s skepticism of the lawfulness of restrictive covenants—and now stay-or-pay provisions. Over the past year, cases regarding noncompete provisions, training repayment provisions, and other restrictive covenants have been gaining traction in the NLRB.

For example, in June 2024, an NLRB administrative law judge ruled that broad noncompete and nonsolicitation provisions in an employment agreement violated the NLRA. That ruling came after the NLRB regional director for Region 9-Cincinnati, in February 2024, obtained a settlement in a case alleging the employer maintained employment agreements with unlawful noncompete and training repayment provisions that restricted employees’ mobility.

The GC’s aggressive expansion of the NLRB’s focus on noncompetes and stay-or-pay provisions comes at an interesting time. Federal courts in Texas ruled that the NLRB does not have the power to adjudicate traditional unfair labor practice claims (these cases are on appeal). The effort of the Federal Trade Commission (FTC), another federal administrative agency, to ban noncompetes also recently suffered a dramatic setback when a Texas federal court ruled that the FTC lacked authority to regulate noncompetes. If the FTC lacks that power, it is reasonable to question the GC’s authority on the similar subject matter.

It is expected that the GC (and the NLRB) will continue to pursue the GC’s agenda and that the GC’s position will likely be tested in federal courts. In the meantime, employers may want to take note of the GC’s position and evaluate whether taking any actions consistent with the latest GC memo may pose potential business harm or competitive damage to an organization, and if such harms outweigh the penalties that the NLRB may assess by not complying with the GC’s memo.

Employers may wish to seriously consider their risk tolerance and balance what is more important to them if they cannot have both protection and compliance. As always, employers may want to consider whether their restrictive covenants are narrowly tailored to advance legitimate business interests.

Ogletree Deakins will continue to monitor developments and will provide updates on the Traditional Labor Relations and Unfair Competition and Trade Secrets blogs.

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Quick Hits

• USCIS announced a new edition of Form I-131, Application for Travel Document, renamed “Application for Travel Documents, Parole Documents, and Arrival/Departure Records.”
• USCIS released a preview version of the revised form.
• USCIS will not accept the 04/01/24 (i.e., April 1, 2024) edition of Form I-131 on mailed applications postmarked on or after October 11, 2024.

USCIS will publish a new edition of Form I-131, Application for Travel Document, on October 11, 2024, effective immediately at the time of publishing. The new Form I-131 will be called “Application for Travel Documents, Parole Documents, and Arrival/Departure Records,” and it will have the date 06/17/24 (i.e., June 17, 2024) printed at the bottom of each page of the application and instructions.

USCIS will not accept applications made on the 04/01/24 edition of Form I-131 that are postmarked on or after October 11, 2024. (USCIS will, however, accept 04/01/24 editions of Form I-131 that were postmarked before October 11, 2024.)

USCIS has significantly changed Form I-131 and altered its [USCIS’s] internal intake process. The new 06/17/24 edition of the form, effective on or after October 11, 2024, requests additional substantive biographical information about the applicant and is almost three times as long as previous editions.

USCIS has released a preview version of the new form and instructions on its website.

Next Steps

Starting October 11, 2024, applicants must use the new edition of Form I-131; USCIS will reject applications made on the previous edition of the form that are postmarked on or after that date.

Accordingly, applicants will want to ensure they file the new edition of Form I-131 (06/17/24 edition), renamed “Application for Travel Documents, Parole Documents, and Arrival/Departure Records,” on or after October 11, 2024.

Ogletree Deakins’ Immigration Practice Group will continue to monitor developments and will provide updates on the Immigration blog as additional information becomes available.

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