The usual suspects are on a roll. The federal government continues down the path of further workplace regulations and, not to be out done, Illinois put three more laws on the books restricting non-competes and mandating both sick and bereavement leave.
The U.S Chamber of Commerce is sharpening its arguments to enjoin the Labor Department's change in the rule affecting when workers must be paid overtime. The challenge is thought to be concerning indexing, as well arguing that the DOL violated the Administrative Procedure Act (APA) by implementing a regulation that is arbitrary and capricious. Stay tuned, but please be reminded that the December 1, 2016 effective date is fast approaching.
New Illinois laws will become effective on January 1, 2017 prohibiting employers from entering into covenants not to compete with low wage employees and requiring that employers providing sick leave benefits expand the reasons for which employees may use such leave. Employers should review their policies and procedures in light of these new laws and modify policies as necessary to ensure compliance.
The Illinois Freedom To Work Act.
The Illinois Freedom To Work Act, 820 ILCS 90, prohibits Illinois employers from entering into a covenant not to compete with low wage employees on or after January 1, 2017 and declares any such agreements void and illegal. The Act defines a low wage employee as any employee earning no more than the greater of $13.00/hr or the applicable federal, state or local minimum wage law (as Illinois and federal minimum wage rates are well below $13.00 an hour the $13.00 hourly rate is applicable).
The Act defines a covenant not to compete, for specified low wage employees, as an agreement that restricts a low wage employee from performing: "any work for another employer for a specified period of time; any work in a specified geographical area; or work for another employer that is similar to such low wage employee's work for the employer that is included as a party to the agreement." The Act does not apply to agreements entered into prior to January 1, 2017 or to employees earning more than an hourly rate of $13.00 per hour. Notably, while covenants not to compete are typically viewed as post-employment restrictions, the Act as written, could be read to prohibit policies and agreements restricting low wage employees from moonlighting, as there is no statutory exclusion for covenants not to compete applicable to an employee's current employment. Given that covenants not to compete are typically considered to be post-employment restrictions, we do not expect that courts would construe this Act to prohibit anti-moonlighting policies.
What Protections Remain Available to Employers? While it will take time to see how the courts interpret the breadth of the definition of a covenant not to compete, it appears that agreements prohibiting an employee from using or disclosing an employer's confidential information and that prohibit an employee from soliciting other employees to leave an employer remain valid and lawful. Somewhat more uncertain are the viability of customer / client non-solicitation agreements. While an employer can reasonably argue that a restriction on customer solicitations does not restrict an employee from working for another employer, employees may argue that the Act's reference to "performing any work" prohibits any limitation on the work a low wage employee may perform for another employer. Such an argument may carry more weight where an employee is working for a new employer that does business with the former employer's customers.
In light of the above, we recommend the following.
- Continue to protect employer confidential and proprietary information with confidential information agreements that prohibit the unauthorized use and disclosure of company confidential information and be proactive and diligent in preserving the confidential status of such information through password protection and limits on dissemination.
- Be Selective in Identifying Confidential Information and Avoid Overreaching. Draft confidentiality agreements and procedures to distinguish between what is truly confidential information that provides your company with a competitive advantage over others in the industry without access to such information on the one hand, and information that is publicly available or easily ascertainable in the industry on the other. For example, while the identity and contact information for a company's customers may be legitimate confidential information if it is truly secret, a company should not include the identity of customers as confidential information if it is posting that same information on its website. Confidentiality agreements should specifically describewhat information is protected and confidential so that employees are on notice of what information can and cannot be used or disclosed.
- Limit Non-Customer Solicitation Agreements to Protect Legitimate Protectable Interests.
In Illinois and other jurisdictions, a customer non-solicitation agreement is much more likely to be enforced where it prohibits an employee from using valuable and confidential information obtained from employment with your company and goes no further. Thus, non-solicitation agreements that restrict an employee from working with the customer contacts that employee developed and kept secret while on your company's payroll are much more likely to be enforced than are restrictions on customers with whom your client had no meaningful contact or customers with whom the employee had a relationship prior to working at your company.
The Illinois Employee Sick Leave Act.
The Illinois Employee Sick Leave Act also becomes effective January 1, 2017 and requires that employers who provide sick leave benefits to employees make those benefits available for employees to use for the illness or injury of a family member, defined as a spouse, domestic partner, child, grandchild, parent, parent in-law, grandparent or sibling. The Act does not require employers to provide any sick leave benefits and permits employers to limit the sick leave for which the expanded use applies to the amount of sick leave benefits an employee accrues over a six-month period. The Act also prohibits an employer from retaliation against an employee for exercising rights under the Act. Notably, this non-retaliation provision will now create a new protected activity which could result in an increase in litigation due to the frequency of employee use of sick leave.
The Child Bereavement Leave.
As of July 29, 2016, Illinois employers must provide up to ten (10) working days of leave for the death of a child. The employee must provide at least forty-eight hours advance notice to take bereavement leave, unless doing so would be unreasonable or impracticable. The Act applies to those employers covered by the Family and Medical Leave Act (“FMLA”). In other words, the Act applies to private-sector employers, with 50 or more employees in 20 or more workweeks in the current or preceding calendar year. As with the FMLA, leave under the Act is unpaid. However, under the Act, employees may elect to substitute paid leave they have accrued, such as sick or personal days, for the bereavement leave. Unlike the FMLA, employers may not require employees to do so.
Iowa continues to be the quiet state regarding labor and employment matters. Although the Courts continue to rule. On September 6, 2016, a favorable FMLA case was decided, wherein the employer was granted summary judgment on a truck driver's FMLA interference and retaliation claim, alleging he was discharged to prevent him from taking additional leave for his heart issues. The federal district court found that the employee was given 12 weeks of leave and had no additional entitlement, ruling further that the employee failed to establish with any evidence that the employer discharged him for planning to take leave rather than his poor non-statutorily protected attendance record Knutson v. Air-Land Transp. Serv., Inc., 2016 BL 289964, N.D. Iowa, C15-2076, 9/6/16). As Iowa state courts routinely rely upon the federal courts interpretation of similar statutes, we anticipate this case to be useful authority for employers going forward.
On the other hand, the Eighth Circuit held that an employer violated the FMLA when an employee lost his job due to missing work to care for his asthmatic child Hernandez v. Bridgestone Ams. Tire Operations, LLC, 2016 BL 252092, 8th Cir., No. 15-2042, 8/4/16). The Court’s decision stressed the importance of carefully counting both leave benefits and leave usage consistent with the FMLA and federal regulations.
The employer insisted that employees who signed up for overtime had to work the scheduled hours. The employee worked until his discharge under an attendance policy that treated an employee's failure to report for a regular or overtime shift as an “incident of absence.” The employer followed a progressive discipline program but allowed excused absences for approved leave periods, including leave under the FMLA. When the employee failed to show up for his overtime hours due to his need for family leave, his FMLA balance was properly charged. However, the Eighth Circuit ruled that the employee's mandatory overtime hours were improperly disregarded in calculating his leave entitlement, and the company therefore erred in firing him for unauthorized absenteeism.
To further discuss these issues and how these laws will affect your policies and procedures or to discuss in general your company's options to protect such information and relationships, please contact one of the firm's lawyers, all of whom are knowledgeable in this area.