Category: Uncategorized

Employers want to know: will 2022 mark the end of the employee non-compete agreement?

Federal Efforts

In July 2021, President Biden signed an executive order aimed at promoting competition in the U.S. economy. The executive order encourages the Federal Trade Commission (FTC) to ban or limit employee non-compete agreements. According to the Biden administration, this FTC-directed crackdown on non-competes is meant to “curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.” In his remarks last summer, President Biden noted that non-competes not only affect highly paid executives but also tend to unfairly target low-wage earners who should be free to take a better job if given the opportunity.

A non-compete agreement is essentially a contract wherein an employee agrees not to work for or otherwise engage with competing businesses, and/or not to use information learned during employment, when their current employment ends. The purpose of these types of agreements (also known as restrictive covenants) is to avoid competition for an agreed-upon period of time after an employee leaves.

Since the executive order in July 2021, the FTC has not initiated any action or rule regarding non-compete agreements. Part of this delay involves a vacancy on the FTC Committee, which is required to have five members. President Biden recently resubmitted a nomination for Georgetown University Law Professor Alvaro Bedoya, but until the vacancy is filled and a fifth Committee member confirmed, the FTC is unlikely to take concrete action on non-compete agreements.

Besides the Biden administration’s executive order, there have been other federal efforts to prohibit non-compete agreements. First introduced in January 2019, Congress’s Freedom to Compete Act amends the Fair Labor Standards Act of 1938 to prohibit an employer from enforcing or threatening to enforce any non-compete agreement in employment contracts with certain entry-level, lower wage workers. The Act is currently stalled in the Senate Health, Education, Labor and Pensions Committee. 

New York State Efforts

As the law currently stands in New York, non-compete agreements are generally permitted as long as they (1) are necessary to protect the employer’s legitimate business interests, (2) do not pose an undue hardship on the employee, (3) do not harm the public, and (4) are reasonable in time period and geographic scope.

Even if the federal rule change does not come to pass, the future of non-compete agreements in New York could soon change regardless. During her first State of the State address in January 2022, Governor Hochul pledged to ban non-compete agreements in New York State for workers making below the median wage in the state.

Several other states have already amended their own laws pertaining to non-compete agreements. Oregon and Illinois recently prohibited non-competes for certain employees earning less than a certain salary per year. The District of Columbia has completely banned employee non-compete agreements – a law that will go into effect on April 1, 2022.

While federal and state changes remain uncertain, it’s still important for employers to make sure that all agreements, including non-competes, are tailored to best meet their goals within the law’s limits. Please contact our labor and employment team for guidance.

As the end of the year is approaching, it is important to remind New York State employers and employees of the increased minimum wages that affect both hourly and salaried employees.

For hourly, non-exempt workers, please see the below chart for basic hourly minimum wage increases that go into effect as of December 31, 2021:

Minimum Wage Increase

To the extent you or your workforce are paying basic minimum wage, it is important to make sure that the increased wages are reflected as of December 31, 2021.

Tip Credit

New York State also allows employers in certain industries to satisfy the minimum wage by combining a cash wage paid by the employer plus a credit for tips the employee receives from customers. The minimum hourly rates New York employers must pay most tipped employees go into effect as of December 31, 2021:

Service Employees

Food Service Employees

The “tip credit” rules can be difficult to follow, so it is important to track this information to ensure that tipped employees are receiving at least basic minimum wage, inclusive of tips, when calculating wages.

Increased Salary Threshold for Overtime Exemption

Finally, there are increases in the minimum salary threshold that must be met for exempt employees. As of December 31, 2021, the following minimum salaries must be paid for exempt administrative and executive employees:

With the upcoming changes, it is important to update policies and pay practices to stay in compliance.  If you have questions about minimum wage, overtime, or wage and hour exemptions, please contact us here or call (631) 738-9100.

By Patrick McCormick

While the COVID-19 pandemic has not been kind to many business owners who had to comply with temporary closures and declining revenues, commercial tenants have nevertheless faced an uphill battle in Court trying to walk away from their rent payment obligations. While tenants seeking to be completely absolved from paying rent have not met much success in the court system, we have assisted many clients in successfully renegotiating their lease terms without resorting to litigation. Here, a look at the arguments that haven’t worked in Court, illustrating that negotiation is often a better strategy for landlords and tenants alike.

The unprecedented pandemic led to many commercial landlords and tenants finding themselves in the position of landlord Bay Plaza Community Center and tenant Vistasite Eye Care.[1] This commercial landlord-tenant case stemmed from the tenant’s failure to pay rent from April 1, 2020 (the height of the pandemic) and after. Bay Plaza commenced a suit for back rent and moved for summary judgment. In opposition, Bronx Vistasite sought cover under the doctrines of impossibility and frustration of purpose to excuse its failure to pay rent. The tenant also argued that then-Governor Cuomo’s various orders relating to the pandemic devastated its business, and that the temporary closure of the business due to these orders constituted a “taking” under the lease.[2]

The Supreme Court, New York County (Bluth, J.) disagreed. In granting the landlord’s summary judgment motion, the Court found that Governor Cuomo’s executive orders did not constitute a taking since the case did not involve the government condemning the building or invoking the doctrine of eminent domain. Further, the Court found that the doctrines of frustration of purpose and impossibility “have no place in this case.” The Court contended that a temporary hardship like the one described by the defendant does not excuse a tenant’s obligation to pay rent and therefore ruled in favor of the landlord and plaintiff in the case: Bay Plaza Community Center.

A similar scenario played out between landlord 695 Fifth Owner and tenant Valentino U.S.A.[3]Here, luxury retail and fashion brand Valentino brought suit, contending that the lease of its four-story Valentino Fifth Avenue New York boutique should be terminated, and seeking a determination that Valentino should be entitled to an abatement of any rent claimed due.

The lease had clearly stated that Valentino would be able to operate as a boutique retail store for customers to view and sample their merchandise in a luxurious setting, in addition to experiencing high-quality service and amenities. The lease also provided that Valentino was required to be open for business and continuously operate under the Valentino brand. Because of the COVID-19 pandemic, including the restrictions, social-distancing measures, a lack of consumer confidence, and a prevailing fear of “non-essential” luxury retail boutiques, Valentino claimed that its business had been “substantially hindered, rendered impractical, unfeasible, and no longer workable.”

Given the continuing business restrictions even as the shutdown orders eased, Valentino argued that it would be impossible to operate its boutique as initially envisioned under the Lease. Thus, Valentino contended that their continued operation at that location was impracticable, infeasible, unworkable, and/or impossible. Valentino then gave notice to the defendant landlord that they would vacate and surrender the premises by December 31, 2020.

Despite Valentino’s complaint, the New York County Supreme Court (Borrok, J.) dismissed the case because pursuant to the lease, the parties expressly allocated the risk that Valentino would not be able to operate its business and that Valentino is therefore not forgiven from its performance, including its obligation to pay rent by virtue of a state law.

The fact that the COVID-19 pandemic was not specifically enumerated by the parties does not change the result because the lease was drafted broadly and did not provide that government regulations and events beyond the reasonable control of the party “delayed in performing work” shall excuse the payment of rent. Furthermore, Valentino’s general allegation that the landlord failed to maintain the premises lacks causation since it appears Valentino continued to operate in the store as of July 22, 2020.

The challenges faced by the tenants trying to get out of their obligations in these cases – as well as the challenges faced by the landlords spending time and money in Court – illustrate that commercial landlords and tenants are often better served by negotiating their disputes rather than litigating them. CMM has successfully negotiated countless commercial lease issues since the start of the pandemic.

Please contact us to discuss the path forward.

[1] Bay Plaza Community Ctr. v Bronx Vistasite Eyecare, Inc., 2021 NY Slip Op 31568(U) May 5, 2021 Supreme Court, New York County

[2] Under the COVID-19 Emergency Eviction and Foreclosure Act of 2020, a residential or commercial tenant has the option to submit a “hardship declaration” stating that due to COVID-19, they are unable to pay rent. In that case, a landlord would not be able to evict the tenant until the moratorium is lifted (former Governor Cuomo signed an extension of the act in May, extending the moratorium until August 31, 2021; however, in September, Governor Hochul signed into law a new moratorium which is in effect until January 15, 2022). In the Bay Plaza Community Ctr. v Bronx Vistasite Eyecare, Inc., no such declaration was filed.

[3] Valentino USA v. 693 Fifth Owner LLC, 70 Misc.3d 1218(A) (Sup. Ct. N.Y. Cnty. Jan 27, 2021)

Campolo, Middleton & McCormick, LLP, a premier law firm with offices across Long Island, is thrilled to announce that that Senior Partner Christine Malafi has been recognized by her peers for the fifth year in a row to be featured in The Best Lawyers in America® in the category of Employment Law – Management (2022 edition). With this distinction, Malafi ranks among the top five percent of private practice attorneys nationwide as determined by a rigorous peer-review process.

For over three decades, the legal profession and the public have turned to Best Lawyers® as one of the most credible measures of legal integrity and distinction in the nation. Inclusion in Best Lawyers is based on over a million confidential evaluations by top attorneys. The Best Lawyers’ founding principle forms the basis of this transparent methodology: the best lawyers know who the best lawyers are. No fee to participate is permitted.

Malafi chairs the Corporate Department at CMM, which was recognized by Forbes as a Top Corporate Law Firm in America. Her practice focuses on mergers and acquisitions, corporate governance, routine and complex transactions, drafting and negotiating a wide range of agreements, and helping businesses navigate all types of human resources matters. She routinely represents buyers and sellers in multimillion-dollar transactions and serves in a general counsel role for many of the firm’s corporate clients. In addition to her legal work, Malafi serves on the Executive Board of Directors of Family Service League, among others. She also sits on the Board of Governors of Touro Law School and the New York State Pro Bono Scholars Task Force.

By Christine Malafi

As of this writing, more than 300 million COVID-19 vaccines have been administered in the United States, vaccinating about half of the population according to the CDC. 52.4% of people are fully vaccinated and 61.7% have received at least one dose. As vaccination efforts continue, more businesses are reopening, and more employers are returning to an in-person model of working. When the first vaccines were administered in December 2020, the U.S. Equal Employment Opportunity Commission (EEOC) issued guidance regarding employers’ obligations for mandatory COVID-19 vaccines. On May 28, 2021, the EEOC issued new guidance.

Here, we provide a refresher course on the earlier guidance, and a look at the new guidance.

Vaccine Mandates

The December EEOC guidance provided that employers can require that employees get vaccinated as a condition of returning to work if their vaccination policies comply with the Americans with Disabilities Act (“ADA”), Genetic Information Nondiscrimination Act (“GINA”), Title VII of the Civil Rights Act of 1964, and other workplace laws. This information still holds true.

The May 28 EEOC guidance now expressly allows employers to require all employees physically entering the workplace to be vaccinated. However, employers are still required to provide reasonable accommodations to employees due to medical disability or religious beliefs as long as the accommodations do not pose an “undue hardship” on the employer. Examples of reasonable accommodations include wearing a face mask at work, social distancing from other employees, or working from home. Read more about reasonable accommodation and the definition of “undue hardship” in our earlier article here.

On August 23, the Pfizer/BioNTech COVID-19 vaccine was granted full approval by the Food and Drug Administration for individuals 16 years of age and over (while for individuals 12-15 years of age the Pfizer vaccine is still under emergency use authorization). Following the full FDA approval, many employers and entities are now mandating the COVID-19 vaccine for their personnel. For instance, the Pentagon has mandated that the U.S. military receive the vaccine, and many universities, the State University of New York (SUNY) system among them, are mandating the same for their students.

These recent COVID-19 vaccine mandates demonstrates that the FDA’s full approval of the Pfizer vaccine for individuals 16 and over could (and is already) influencing employers, employees, and vaccine mandates. With the FDA’s review of the Moderna and Johnson & Johnson COVID-19 vaccines on the horizon (as Moderna has applied for full approval already), new guidelines on mandatory vaccines will start to come out as the vaccines move from emergency authorization to full approval by the FDA.

Vaccine Reporting

The updated May EEOC guidance clarifies that employers are legally allowed to request documentation of an employee’s vaccination status; however, this documentation is considered medical information, so it must be kept confidential. And, while an employer asking about vaccine status is not covered under the Health Insurance Portability and Accountability Act, it is a violation for employers to ask employees to disclose additional health information such as specific medical reasons or religious beliefs that prohibit their vaccination.

Vaccine Incentives

Under the new May EEOC guidance, employers may offer incentives to employees for receiving the COVID-19 vaccine and showing documentation. Employers should be careful when considering incentives so that their actions are not viewed as coercive and that incentives do not pressure employees to reveal protected medical information.

As new developments related to vaccination mandates occur, the EEOC will provide additional updates, which we will continue to report on as such guidance comes out.

If you are an employer or employee with any questions regarding a mandate of the COVID-19 vaccine, reporting, and incentives based on the new EEOC guidance, please contact us.

By Christine Malafi

Around the country, states have proposed legislation that would require insurers who provide property insurance to cover business interruption during the coronavirus pandemic. These pending laws have not seen much movement since being introduced; however, as the pandemic continues, state legislatures have focused more on this issue. These states are considering mandatory business interruption coverage laws and applying them retroactively: California, Louisiana, Massachusetts, Michigan, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, South Carolina and the District of Columbia introduced legislation that generally requires carriers insuring against loss or damage to property to cover business interruption during a declared state of emergency due to COVID-19, even if an exclusion applies, or declaring that the presence of a virus is a physical loss.

In New York,  A1937/S4711 are  currently pending bills, originally introduced as A10226/S8211 in late March 2020. These are the highlights of that proposed legislation:

1. Proposal requires certain perils to be covered under Business Interruption insurance coverage during the COVID pandemic.
2. This bill would apply to those business which had business interruption insurance in effect on March 7, 2020, the date of the Governor’s Executive Order 202, the declaration of a State of Emergency related to COVID-19.
3. It is limited to businesses with less than 250 full time employees.
4. It provides for automatic renewal of insurance, at the current rate, during the pandemic.
5. It provides that any policy of insurance with a virus exclusion permitting the insurer to deny coverage shall be deemed to have that exclusion deemed null and void.
6. Insurers would pay/indemnify their insureds who have filed business interruption claims and then the insurers would apply to the Superintendent of the Department of Financial Services for “relief and reimbursement from funds collected and made available for this purpose and pursuant to a special purpose assessment (to recover the expenses from insurance companies, other than life & health insurers).
7. Superintendent is to establish submission of procedures, qualification, and eligibility for reimbursement.

Other New York bills are pending on the issues, including A10327, which relates to providing such coverage to “insureds with coverage who operate programs and services including a mental health outpatient provider . . .  substance use disorder treatment provider . . . community-based program funded under the office of mental health . . .” and A5396/S4333 which establishes the temporary hospitality and business relief fund and creates a credit for certain hospitality businesses affected by the COVID-19 pandemic.

Pending bills, at both the State and Federal levels, attempt to mandate insurance coverage for risks that were, arguably, never intended to be assumed by the insurers, for which premiums were never collected.

If passed, this could pose serious solvency concerns for insurers, who have not set reserves for these losses. All policyholders would have claims at the same time. This could arguably end the existence of business interruption insurance in its entirety and could endanger other, clearly covered claims.

The Federal bill, the Business Interruption Coverage Act of 2020 is more expansive than the state proposals, as it mandates coverage for COVID, acts of terrorism, and extreme events be made available to insureds, but permits exclusion of such coverage if the insureds do not pay for the additional coverages This bill would preempt state law pursuant to the McCarran-Ferguson Act (1945).

This pending legislation, if passed, would be challenged, and legal challenges could hold up payments for years in any event, which would result in no payments to assist small businesses in their viability now. The bills will most likely be challenged under the contracts clause, the due process clauses, and the takings clause of the U.S. Constitution.

This article was co-written by Rosa M. Feeney of Lewis Johs Avallone Aviles, LLP.

By Christine Malafi

Ten months ago, in March 2020, NYS enacted legislation authorizing sick leave for employees subject to a mandatory or precautionary order of quarantine due to COVID-19. In January 2021, NYS recently issued updated guidance on the use of COVID-19 sick leave. Before diving into the updated guidance, here is a review of the initial legislation.

March 2020 NY COVID-19 Paid Sick Leave Legislation

January 2021 NY COVID-19 Paid Sick Leave Updated Guidance

On January 20, 2021, NYS updated its guidance on the use of COVID-19 sick leave. This guidance supplements the prior guidance on the application of COVID-19 sick leave; all prior guidance still remains in effect. The new guidance significantly expands on employers’ obligations set forth in the prior legislation.

If an employee tests positive for COVID-19 following a period of mandatory quarantine, the employee (1) cannot report to work, (2) is automatically deemed subject to a subsequent mandatory order of isolation from the NY Department of Health; and (3) is entitled to paid sick leave under the NY COVID-19 sick leave law (even if the employee already received NY COVID-19 sick leave for the first period of mandatory quarantine). However, to receive NY COVID-19 sick leave for a subsequent time, the employee is required to submit documentation of a positive COVID-19 test result from a licensed medical provider. Employees can qualify for COVID-19 sick leave for up to three orders of quarantine.

Additionally, the guidance appears to require employers to provide employees with paid leave if the employer mandates that the employee does not report to work due to potential exposure to COVID-19. If this happens, the guidance states that the employee must be paid at their regular rate of pay until the employer allows the employee to return to work or the employee becomes subject to an order of quarantine. If the employee is subject to an order of quarantine, then the employee would receive NY COVID-19 sick leave for the duration of that order.

The COVID-19 sick leave legislation passed in 2020 provided that leave was only available in the event an employee was subject to an order of quarantine. This new guidance seems to go beyond that statute. Consequently, this updated guidance may be subject to legal challenges because the NY Department of Labor cannot create obligations that go beyond statutory requirements; the DOL can only promote regulations that interpret a statute.

If you have any questions regarding the new COVID-19 paid sick leave guidance, please contact us.

UPDATE:

March 2021 NY COVID-19 Vaccination Leave

Beginning March 12, 2021, New York employees will receive paid time off to be vaccinated against COVID-19. Both public and private employees will receive up to four hours of paid leave per injection without having to use benefit time, including New York’s mandated sick leave. Employers must pay employees their regular rate of pay for the time off. Additionally, employers cannot discriminate or retaliate against employees who request to take a leave of absence to receive a vaccination. Learn more here.