The Equal Employment Opportunity Commission (EEOC) reported on the lawsuits it filed during the recently completed federal fiscal year. A U.S. District Court issued a stay blocking implementation of a fiduciary rule finalized by the Department of Labor. The general counsel of the National Labor Relations Board (NLRB) issued a memo concerning noncompete provisions and stay or pay provisions that violate the National Labor Relations Act. The NLRB also reported that it received an increased number of union petitions during the previous federal fiscal year.

EEOC Issues Litigation Update – The Equal Employment Opportunity Commission (EEOC) reported that it filed 110 lawsuits alleging unlawful employment discrimination during fiscal year 2024 that ended on September 30^th.  This is a decrease from the 143 lawsuits that were filed in the previous fiscal year. “Litigation is only one tool in the EEOC’s toolbox for achieving its mission of preventing and remedying employment discrimination, but it is a tool we will continue to deploy strategically to maximize our impact,” said EEOC General Counsel Karla Gilbride.

The filed cases included 48 under the Americans with Disabilities Act (ADA), over 40 cases claiming retaliation under the different statutes that EEOC enforces, 13 systemic cases alleging a pattern, practice or policy of discrimination, the first 5 cases brought under the Pregnant Workers Fairness Act (PWFA), 7 cases under the Age Discrimination in Employment Act (ADEA), and 7 Title VII cases alleging either sex discrimination based on sexual orientation or gender identity. The EEOC also filed 18 lawsuits for non-compliance with mandatory federal reporting requirements under the EEO-1 workforce demographic report and one case contending a breach of a conciliation agreement. 

District Court Blocks Fiduciary Rule – The United States District Court for the Eastern District of Texas issued a stay blocking the effective date of the fiduciary rule issued by the U.S. Department of Labor (DOL). The District Court in the case of Federation of Americans for Consumer Choice v. U.S. Department of Labor concluded that the “Plaintiffs are likely to succeed on the merits of their claim because the 2024 Fiduciary Rule conflicts with ERISA in several ways, including by treating as fiduciaries those who engage in one-time recommendations to roll over assets from an ERISA plan to an IRA.” The District Court noted that the United States Court of Appeals for the Fifth Circuit ruled against a similar DOL rule in 2018. 

The Employee Retirement Income Security Act (ERISA), which is administered by DOL was passed in 1974 to “promote the interests of employees and their beneficiaries in employee benefit plans.” Title I require the appointment of fiduciaries to control and manage the administration of retirement plans and they must act with loyalty and prudence. DOL issued a rule concerning fiduciaries in 2024 that was challenged by an organization whose members are marketing groups, insurance agencies and agencies who allege that the  rule is inconsistent with the intent of Congress when it passed ERISA and that the DOL exceeded its authority and acted arbitrarily and capriciously.

The District Court believed that the fiduciary rule conflicted with ERISA in three primary ways. First, it removed the regular basis and primary basis criteria that the District Court believed were essential to the meaning of fiduciary in the statute. Second, the District Court found that the rule will “capture transactions that do not satisfy the established relationship of trust and confidence contemplated by ERISA.” To be considered a fiduciary, ERISA requires that the person provides investment advice for a fee or other compensation. The District Court drew a distinction between investment advisers who are fiduciaries and stockbrokers and insurance agents who sell products to their clients. The District Court stated that ERISA “requires that the professional be paid for advice – not for a sale – to be a fiduciary.” Finally, the District Court noted that the fiduciary rule ignored the difference between Title I and Title II of ERISA regulatory authority granted to DOL. While under Title I, DOL has expansive authority, it is much more limited under Title II, which gives DOL no authority to regulate Individual Retirement Account (IRA) fiduciaries. The District Court concluded that “the 2024 Fiduciary  Rule  expands  the  definition  of  investment  advice  fiduciary  to  include  nearly any insurance agent or stockbroker who interacts with an IRA investor. “ 

NLRB General Counsel Issues Memo on Non-Compete Agreements & Stay or Pay Provisions – On October 7^th, National Labor Relations Board (NLRB) General Counsel Jenniffer Abruzzo issued General Counsel Memo 25-01 that addresses non-compete agreements and stay or pay provisions that violate the National Labor Relations Act (NLRA). According to the NLRB, “overbroad non-compete agreements are unlawful because they chill employees from exercising their rights under Section 7 of the National Labor Relations Act, which protects employees’ rights to take collective action to improve their working conditions.” Additionally, the General Counsel stated that “certain stay-or-pay provisions, under which an employee must pay their employer if they separate from employment, infringe on employees’ Section 7 rights in many of the same ways that non-compete agreements do and that such provisions therefore also violate Section 8(a)(1) of the Act unless narrowly tailored to minimize that infringement.”

The General Counsel believes that non-compete agreements may result in restricting the ability of employees to change jobs or use outside opportunities to obtain a raise leading to harmful financial impacts on employees. For employees to prevail, they would need to show that there was a vacancy for a position with higher compensation, they were qualified for the position, and they were discouraged from applying for or accepting the job due to the non-compete provision. Where this occurs, the General Counsel recommends that Regional Offices seek compensation from the employer for the difference between what they would have received and what they were paid.

The memo details stay-or-pay provisions such as training repayment agreement provisions, educational repayment contracts, quit fees, damages clauses, sign-on bonuses or other types of cash payments tied to a mandatory stay period and noted that these provisions need to be narrowly tailored since they “both restrict employee mobility, by making resigning from employment financially difficult or untenable, and increase employee fear of termination for engaging in activity protected by the Act.” The memo provides that to show that these provisions enhance a legitimate business interest, employers need to show that it is voluntarily entered into in exchange for a benefit, has a reasonable and specific repayment amount and stay period, and does not require repayment if the employee is terminated without cause.

NLRB Reports Increased Union Petitions – The National Labor Relations Board (NLRB) indicated that during the fiscal year that ended on September 30^th, there were 3,286 union petitions filed in NLRB field offices which was an increase of 27% increase over the previous fiscal year. Since fiscal year 2021, the number of union petitions has more than doubled. The NLRB also reported that the number of unfair labor practice charges received by field offices increased by 7% from 19,869 cases to 21,292 cases.  According to NLRB General Counsel Jennifer Abruzzo, “The surge in cases we’ve received in the last few years is a testament to workers knowing and exercising their rights under the National Labor Relations Act…”

The NLRB advised that the increase in cases filed in the field offices resulted in an increase in cases for the adjudicative part of the agency. The Board received 393 unfair labor practice and representation cases, up 22% or 321 from the prior fiscal year. While the Board issued 5% more decisions, the increase in the number of cases filed resulted in a growing backlog with 288 pending cases, which is 46% more than the number of pending cases at the end of fiscal year 2023. NLRB Chairman Lauren McFerran stated that “Additional resources are necessary to enable the Board to expand staffing capacity and ensure that the workers, employers, and unions that rely on our agency benefit from timely resolution of their labor disputes.”

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.