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New York City has joined a growing number of cities to ban discrimination based on height and weight.[1] In early May, the NYC Council passed Intro 209-A[2] (the “Bill”) in an effort to ban discrimination based on height and weight in employment, housing, and public accommodations. On May 26, 2023, Mayor Eric Adams signed the Bill into law, which will amend Section 8-101 of NYC’s Human Rights Law, adding height and weight to the list of characteristics the city has already protected against discrimination. The law will go into effect on November 22, 2023.

In the employment realm, the law bars employers from discriminating based on height or weight by (i) misrepresenting the availability of an employment opportunity, (ii) refusing to hire or employ an applicant, (iii) discharging a person, or (iv) discriminating against a person in compensation or in terms, conditions, or privileges of employment. Additionally, an employer may not circulate any application for employment which expresses any limitation based on height or weight, among other things.[3]

The law does carve out exceptions. Employers may consider the height or weight of an applicant when:[4]

• required by federal, state, or local law or regulations, or
• permitted by regulation adopted by the NYC Commission on Human Rights identifying particular jobs or categories of jobs for which (a) a person’s height or weight could prevent them from performing the essential duties of the job, and (b) the Commission has not found alternative action that an employer could reasonably take to allow persons who do not meet the height or weight requirement to perform the essential duties of the job or category of jobs, or
• permitted by regulation adopted by the Commission identifying particular jobs or categories of jobs for which consideration of height or weight requirements is reasonably necessary for the execution of the normal operations of the employer.

Furthermore, even when no exception applies, an employer may still assert an affirmative defense that:[5]

• a person’s height or weight prevents the person from performing the essential duties of the job, and there is no alternative action available that the employer could reasonably take that would allow the person to perform the essential duties of the job, or
• the employer’s decision based on height or weight requirements is reasonably necessary for the execution of the normal operations of the employer.

With the law’s effective date rapidly approaching, NYC employers should revisit their anti-discrimination policies, as well as train their hiring teams on compliance with the new law. Please contact us with any questions you may have.

Thank you to Keith O’Brien for his writing and research assistance.

[1] Other cities include Binghamton, San Francisco and Washington D.C.  Legislation to ban weight and height discrimination have also been introduced in states including New Jersey and Massachusetts.

[2] https://legistar.council.nyc.gov/LegislationDetail.aspx?ID=5570369&GUID=DF289A07-73A5-4AFE-8932-7EA5D1FA6577&Options=&Search=

[3] Other things include age, race, national origin status, marital status, gender, etc.  See note 2.

[4] See note 2.

[5] See note 2.

Non-compete agreements could soon be a thing of the past in New York. This month, the New York State Senate and then Assembly passed legislation banning provisions in employment contracts that restrict where the employee may work after their employment ends. The bill, A1278B/S3100A,[1] is now heading to Governor Hochul’s desk for signature. If signed into law, it would go into effect on the 30^th day after it becomes law and would prospectively apply to contracts entered into or modified on or after that date. However, if Governor Hochul does not sign the bill or proposes any amendments to it, it may not become law until next year when the New York Legislature reconvenes. 

What the Proposed Law Bans

Under the proposed law, a non-compete agreement is defined as “any agreement, or clause contained in any agreement, between an employer and a covered individual that prohibits or restricts such covered individual from obtaining employment, after the conclusion of employment with the employer included as a party to the agreement.”[2] The proposed legislation would prohibit employers from seeking, requiring, demanding, or accepting non-compete agreements with any “covered individual” regardless of their position and/or salary. The bill would not prohibit employment contracts that restrict “covered individuals” from disclosing trade secrets or confidential information, or from soliciting the employer’s clients, so long as the agreement “does not otherwise restrict competition in violation of this section.”[3] 

Moreover, a covered individual is defined as “any other person who, whether or not employed under a contract of employment, performs services for another person on such terms and conditions that they are, in relation to that other person, in a position of economic dependence on, and under an obligation to perform duties for, that other person.”[4] The language suggests that the restrictions could apply to both employees and independent contractors. 

The proposed law does raise some questions for business owners. While it does allow prohibitions on the non-solicitation of an employer’s clients that the covered individual learned about during employment, it is silent on whether agreements may contain prohibitions on the non-solicitation of employees. Additionally, there is no evidence that the bill is intended to restrict the use of non-compete provisions in a sale-of-business transaction.

Private Enforcement of Non-Competes

In addition to the ban on non-compete agreements with covered individuals, the bill also would provide a covered individual with a private cause of action[5] with a two-year statute of limitations that runs from the later of  “(i) when  the  prohibited  non-compete  agreement  was  signed; (ii) when the covered individual learns of the prohibited non-compete agreement; (iii) when the employment or  contractual  relationship  is  terminated;  or (iv) when the employer takes any step to enforce the non-compete agreement.”[6] 

Additionally, courts would be granted the jurisdiction to void any unlawful non-compete agreement, enjoin the conduct of any person/employer, award lost compensation damages and reasonable attorneys’ fees, and order the payment of liquidated damages (which would be required under the current language of the proposed law). However, such award of liquidated damages would be capped at $10,000.

Distinctions from the Proposed Ban on Non-Competes Published by the Federal Trade Commission

New York is following the trend of other states, as well as the Federal Trade Commission (the “FTC”), in adopting restrictions on non-compete agreements. However, there are a few noteworthy distinctions between this bill and the proposed ban on non-competes published by the FTC earlier this year. Unlike the FTC’s proposed rule, the potential New York law:

• has no sale-of-business exception, which generally applies to mergers and acquisitions,
• would not require rescission of existing non-competes, and
• would not require employers to provide covered individuals with notice that their non-compete agreements have been voided.

Please contact us with any questions.

Thank you to Keith O’Brien for his research and writing assistance.

[1] https://www.nysenate.gov/legislation/bills/2023/A1278/amendment/B

[2] New York Senate Bill S3100A § 191-d(1)(a).

[3] New York Senate Bill S3100A § 191-d(5).

[4] New York Senate Bill S3100A § 191-d(1)(b).

[5] In this case, a private cause of action allows a private plaintiff to bring a legal action based directly on a statute in order to recover damages.

[6] New York Senate Bill S3100A § 191-d(4).

Since the 1996 decision In re Caremark International, the duty of oversight has been applied only to the directors of a corporation. The duty of oversight requires directors to make a good faith effort to ensure that an adequate internal corporate information and reporting system exists. This system is required so directors can “reach informed judgments concerning both the corporation’s compliance with law and its business performance.”[1]

Recently, the Delaware Court of Chancery (the “Court”) held for the first time that the concept of the “duty of oversight” applies not only to corporate directors, but to corporate officers as well. Additionally, the Court broadened a corporate officer’s “duty of loyalty” when it ruled that a corporate officer’s engagement in sexual harassment of employees itself violates the duty of loyalty. The holding raises issues that should prompt Delaware corporations to reconsider their reporting systems in place and protections available to their corporate officers.

In the case of In re McDonald’s Corp., the Court denied the motion of David Fairhurst, former McDonald’s executive vice president and global chief people officer, to dismiss a derivative[2] lawsuit against him brought by McDonald’s shareholders. The shareholders alleged that the former vice president violated his fiduciary duties by allowing a corporate culture to develop that condoned sexual harassment and misconduct. In his executive role, Fairhurst was accused of failing to put a stop to workplace harassment. The plaintiffs filed a long list of “red flags” that Fairhurst allegedly ignored or was responsible for, including an atmosphere that condoned male employees engaging in inappropriate behavior toward their female co-workers.  He was also directly accused of sexually harassing female employees.

When analyzing a corporate officer’s duties to the corporation in this context, the Court held that the duty of oversight owed by officers is scrutinized under the same two-prong test used in Caremark that applies to directors. Specifically, officers “must make a good faith effort to ensure that information systems are in place so that officers receive relevant and timely information that they can provide to the directors.”[3] Further, officers “have a duty to address [red flags they identify] or report upward.”[4]

Applying the Caremark test, the Court held that the plaintiffs had a valid claim against Fairhurst because he breached his duty of oversight “by consciously ignoring red flags” of a culture congested with sexual harassment and misconduct.[5] The Court reasoned that officers are best situated to identify and address red flags or report them to the board of directors since their role as officers requires them to be involved with the day-to-day operations of the corporation. For “red flags” claims to be successfully pleaded against officers, the Court noted that a plaintiff must plead sufficient facts to support an inference that the officer not only knew of evidence of corporate misconduct, but also that the officer consciously failed to take action in response to such misconduct.[6]

Moreover, the Court held that an officer also violates the separate duty of loyalty when they engage in sexual harassment of employees. The Court explained that sexual harassment by a corporate officer is in furtherance of a private interest rather than “advancing the best interests of the company.[7] Sexual harassment is bad faith conduct, and thus disloyal conduct, with respect to their responsibilities as an officer of the corporation.Because harassment is per se not in the corporation’s best interests and disloyal conduct subjects the corporation to liability, it is a violation of the duty of loyalty and is actionable under the law.[8]

This decision demonstrates that Delaware courts continue to align the duties that are owed by corporate officers with those of directors. However, it also raises some questions about the scope of the additional duties imposed on officers of Delaware corporations. For instance, what if the corporation has a sufficient reporting and information system in place, but it failed to detect an officer embezzling money. Would the other officers be found to have violated their duty of oversight? 

Although the trajectory of the case’s impact is unclear, Delaware corporations should consider how they assess risk monitoring, reporting, and compliance systems currently in place, as well as protections available to corporate officers, such as directors’ and officers’ liability insurance.

Please contact us with any questions.

Thank you to Keith O’Brien for his research and writing assistance.

[1] In re Caremark International Inc., 698 A.2d 959, 970 (Del. Ch. 1996).

[2] A derivative lawsuit refers to one or more shareholders bringing an action on behalf of the corporation against a third party, generally the officers or directors of the corporation, to remedy harm done to the corporation.

[3] In re McDonald’s Corp., No. 2021-0324 at 11* (Del. Ch. Jan. 26, 2023).

[4] Id. at *12.

[5] Id. at *27.

[6] Id. at *32.

[7] Id. at *28.

[8] Id. at *30.

As CMM’s legal blog has explored, New York State enacted the New York Pay Transparency Law (the “Law”), which requires most New York employers to provide salary ranges for all advertised jobs and promotions in New York State, effective as of September 17, 2023. However, Governor Kathy Hochul recently signed an amendment to the Law (the “Amendment”)[1] that changes it in three major ways:

1. What constitutes a job “performed” in New York

Previously, the Law simply stated that the advertisement requirements would apply to any position that “can or will be performed in the state of New York.” Now, the Amendment explains that the Law does not apply to jobs solely because they “can” hypothetically be performed in New York. Instead, covered advertisements for jobs, promotions, or transfer opportunities will be those that:

• “will physically be performed, at least in part, in the state of New York”; and
• “will physically be performed outside of New York but reports to a supervisor, office, or other work site in New York.”

Essentially, the Law will apply to jobs where the employee will be physically located in New York in some capacity (whether full-time or as part of hybrid work), as well as to those who would be out-of-state employees, but report to a supervising contact of the covered employer who is physically located within the jurisdiction of New York State, similar to the New York City Pay Transparency Law.

2. Elimination of Recordkeeping Obligations

Furthermore, the Amendment wholly eliminates the Law’s recordkeeping requirement regarding the “history of compensation ranges for each job, promotion, or transfer opportunity and the job descriptions for such positions,” if they exist. While the Amendment has abolished this obligation, covered employers should consider maintaining such compensation records to ensure best practices.

3. Defining the Term “Advertise”

Lastly, the Amendment clarifies the previous ambiguity in the Law to provide a more concrete statutory definition of the term “advertise,” which is now defined as “mak[ing] available to a pool of potential applicants for internal or public viewing, including electronically, a written description of an employment opportunity.” Therefore, the Amendment confirms that the Law’s salary disclosure requirement applies to both internal and external written job postings and is thus silent on word-of-mouth/verbal communications.

Please contact us for guidance or with any questions.

[1] Senate Bill S1326; https://www.nysenate.gov/legislation/bills/2023/s1326.

Update: For the most recent information on the Pay Transparency Law, follow this link:
New York State Amends Pay Transparency Law

By now, you may have heard that starting later this year, job postings in New York State must include a salary range. What does this mean for your business? Read on for what employers need to know concerning this new law.

What is the new Pay Transparency Law?

On December 22, 2022, New York Governor Kathy Hochul signed into law the New York Pay Transparency Law[1] (the “Law”), which takes effect September 18, 2023. The Law amends New York Labor Law[2] to require most private sector New York employers to provide salary ranges for all advertised jobs and promotions in New York State. Similar requirements enacted in 2022 already apply to employers who operate in New York City. Nevertheless, the Law includes some significant differences from the New York City law and others that employers should be aware of.

Essentially, the Law requires employers of four or more employees[3] advertising a job, promotion, or transfer opportunity to disclose the “compensation or a range of compensation for such job, promotion, or transfer opportunity” in the job posting. The “range of compensation” is defined as “the minimum and maximum annual salary or hourly range of compensation for a job, promotion, or transfer opportunity that the employer in good faith believes to be accurate at the time of the posting.”

The Law applies to jobs that can or will be performed, at least in part, in the state of New York. Therefore, depending on forthcoming guidance from the New York Department of Labor, the Law could be construed broadly enough to apply to out-of-state employers that have employees performing work in New York State.  (Note that the Law does not apply to temporary help firms that assign employees to other employers for short-term projects or seasonal work, since such firms are already required to provide wage range information in compliance with the New York State Wage Theft Prevention Act.)

How is the Pay Transparency Law different from similar laws already enacted throughout New York State?

The first notable difference from the New York City law is that the Law requires employers to keep and maintain records of the posted salary ranges for at least six years, beginning on the effective date (September 18, 2023). Such records must demonstrate “the history of compensation range for each job, promotion, or transfer opportunity and the job descriptions for such positions, if such descriptions exist.”

The other prominent feature of the Law is that in addition to the salary range, it requires employers to include a “job description for [a] job, promotion, or transfer opportunity, if such description exists” in any advertisement for a job, promotion, or transfer opportunity in New York State. There are currently no parameters that define “job description,” but employers should ensure that covered postings include and disclose any pre-existing job descriptions relating to the job being posted if they do indeed exist.

Unlike the limited private right of action under the New York City law, there is no right to file a private cause of action for alleged violations of the state law. Instead, aggrieved individuals may file a complaint with the New York State Commissioner of Labor. Failure to comply with the Law can result in civil penalties of up to $1,000 for a first violation, $2,000 for a second violation, and $3,000.00 for a third or subsequent violation. We will continue to monitor any additional rules and regulations promulgated by the New York Department of Labor.

Please contact us for guidance or with any questions.

For additional information, please visit:

https://www.nysenate.gov/legislation/bills/2021/S9427

[1] S.9427/A.10477

[2] §194-b

[3] The Law also applies to employment agencies and the employees and agents of employers and employment agencies.