The United States District Court for the Northern District of Texas issued a decision finding that the Federal Trade Commission (FTC) exceeded its statutory authority and that the employee noncompete rule was arbitrary and capricious. The United States District Court for the Western District of Pennsylvania awarded $35.8 million in back pay and liquidated damages 6,000 current and former employees of residential nursing, rehabilitation, and assisted living facilities. The National Labor Relations Board (NLRB) finalized a rule concerning the filing and processing of petitions for Board-conducted representation elections while unfair labor practice charges are pending and following an employer’s voluntary recognition of a union as the majority-supported collective bargaining representative of the employer’s employees. The Department of Labor issued a toolkit designed to provide strategies and best practices for recruiting, hiring, retaining, and advancing workers with disabilities.

Court Sets Aside FTC Noncompete Rule – The United States District Court for the Northern District of Texas issued a decision setting aside the employee noncompete rule issued by the Federal Trade Commission (FTC). As a result of the ruling in Ryan, LLC v. Federal Trade Commission, the noncompete rule will not take effect as scheduled on September 4^th. The District Court concluded that the FTC exceeded its statutory authority by issuing the noncompete rule and that the rule “is arbitrary and capricious because it is unreasonably overbroad without a reasonable explanation.”

The rule would have prohibited employers from entering into new noncompete agreements with workers as of the September 4^th effective date. The rule would have prevented employers from enforcing existing noncompete agreements with the exception of senior executives, which it defined as those working in a policy making position who earned at least $151,164/year. For senior executives, the rule would only have prohibited noncompete agreements entered into after September 4^th.

Ryan, LLC filed a lawsuit challenging the FTC’s employee noncompete rule. Several groups including the Chamber of Commerce of the United States, Business Roundtable, Texas Association of Business, and the Longview Chamber of Commerce intervened in the case on the side of the plaintiffs. The District Court earlier issued a preliminary injunction against the noncompete rule that was limited to the parties in the lawsuit. All of the parties sought summary judgment.

The District Court believed that the FTC “lacked the substantive rulemaking authority with respect to unfair methods of competition under Section 6(g)” of the Federal Trade Commission Act and therefore exceeded its statutory authority. In finding that the action of the FTC was arbitrary and capricious, the District Court stated the rule “imposes a one-size-fits-all approach with no end date, which fails to establish a rational connection between the facts found and the choice made.” The District Court also found that the FTC lacked evidence as to why they chose a broad prohibition against noncompete agreements rather than targeting specific noncompete agreements. 

There are two other lawsuits that have been filed challenging the employee noncompete rule. The United States District Court for the Middle District of Florida issued a preliminary injunction prohibiting enforcement of the noncompete rule against the plaintiff. The District Court limited its ruling in the Properties of the Villages v. Federal Trade Commission to the Properties of the Villages, the plaintiff in the case. By contrast, the United States District Court for the Eastern District of Pennsylvania ruled in the case of ATS Tree Services LLC v. Federal Trade Commission that the FTC had the statutory authority to issue the noncompete rule.

DOL Announces Large Wage Recovery – The Department of Labor (DOL) advised that the United States District Court for the Western District of Pennsylvania awarded $35.8 million in overtime back wages and liquidated damages to 6,000 current and former employees of 15 residential skilled nursing, rehabilitation, and assisted living facilities. Since the violations were found to be willful, the District Court awarded liquidated damages that doubled the amount awarded to $35.8 million. The District Court judge in the case of Julie Su, Secretary of Labor v. Comprehensive Health Management Services concluded that the defendants “created and intentionally maintained a system through which employees were consistently, systematically, and willfully subjected to payroll practices that did not remotely comply with the Fair Labor Standards Act.”

According to the District Court, the employers violated the Fair Labor Standards Act (FLSA) by:

• Failing to maintain accurate records of hours worked by employees or employee pay records resulting in willfully failing to pay employees for all hours worked, including work done during meal breaks.
• Failing to incorporate all promised compensation, including non-discretionary bonuses and shift differentials, when calculating overtime pay.
• Avoiding paying overtime by incorrectly misclassifying employees as exempt from the  overtime requirements.

NLRB Finalizes Fair Choice – Employee Voice Rule – The National Labor Relations Board (NLRB) finalized a rule that becomes effective on September 30^th and rescinds and replaces amendments the NLRB made in 2020 to its rules and regulations concerning the filing and processing of petitions for Board-conducted representation elections while unfair labor practice charges are pending and following an employer’s voluntary recognition of a union as the majority-supported collective bargaining representative of the employer’s employees. “Today’s rule restores the Board’s prior law, including longstanding principles that ensure a fair process for workers to choose whether they want representation, and provide a better foundation to allow collective bargaining relationships to thrive,” said Chairman Lauren McFerran. 

According to the NLRB, the final rule restores the authority of NLRB Regional Director’s to delay a union representation election if unfair labor practice conduct is sufficiently serious to interfere with the free choice of employees and is supported by an adequate offer of proof. According to the NLRB, ”The Board's policy of holding the petition in abeyance in the face of pending unfair labor practices is designed to preserve the laboratory conditions that the Board requires for all elections and to ensure that a free and fair election can be held in an atmosphere free of any type of coercive behavior.” The final rule also supports the ability of workers and employers to establish a bargaining relationship through voluntary recognition. The final rule rescinds a 2020 rule requiring that when an employer opts to recognize voluntarily a union representing a majority of its workers, there would be a mandatory 45 day period to allow the chance for a minority of workers to demand an election questioning that choice.

DOL Issues Toolkit for Helping Workers with Disabilities

This U.S. Department of Labor (DOL) toolkit is designed to provide strategies and best practices for recruiting, hiring, retaining, and advancing workers with disabilities in good jobs in construction, manufacturing, and clean energy. This toolkit is designed primarily for use by public and private employers. The toolkit includes the following sections: defining disability, planning to include disabled workers, recruiting, and hiring disabled workers, retaining, and supporting disabled workers, advancing disabled workers, and resources. 

Neil Reichenberg is the former executive director of the International Public Management Association for Human Resources. He is an attorney, a frequent writer and speaker on public policy and human resource issues and was an adjunct faculty member at George Mason University. For questions or additional information, contact Reichenberg at neilreichenberg@yahoo.com.