Employment Law Update

By: Megan J. Muoio

Here are some employment law issues that we are monitoring in 2024. We will continue to post employment law updates on a regular basis.

New York City Creates a Private Right of Action for Violations of its Paid Leave Law

On January 20, 2024, New York City Council amended the City’s Earned Safe and Sick Time Act (“ESSTA”) to create a private right of action for employees to sue their employers for violations of ESSTA without first having to file a complaint with the Department of Consumer and Worker Protection. (“DCWP”). ESSTA provides covered employees with the right to use safe and sick time for the care and treatment of themselves and family members, as well as the right to use safe and sick time to seek legal and social services if they or a family member is a victim of domestic violence. In addition, under ESSTA’s penalties provision, employees who bring suit may be able to recover compensatory damages, injunctive and declaratory relief, attorneys’ fees, and costs. Notably, if an employee files both a complaint with the DCWP and a civil action against their employer for violation of ESSTA, the DCWP may still assess a violation if it determines that the civil action did not resolve the issue, either by judgment or settlement. Employers should be cautious to ensure they are in compliance with all provisions of ESSTA in order to avoid both penalties from DCWP and civil liability. The amendment will go into effect on March 20, 2024.

Appellate Court to Consider Marital Status Discrimination Protections

An action is pending in the Second Circuit Court of Appeals that will test the meaning of New York City’s Human Rights Law (“NYCHRL”), which prohibits discrimination on the basis of a number of protected characteristics, including marital status. Employee Kelvin Hunter sued his employer, the company that syndicated “The Wendy Williams Show,” after he was terminated, alleged because of his impending divorce from host Wendy Williams. Hunter argued that his termination was on the basis of marital status to a particular individual, rather than on the basis of his single or married status. The United States District Court for the Southern District of New York dismissed his claim in September 2023. Hunter appealed to the Second Circuit Court of Appeals, which has recently asked the New York State Court of Appeals to rule on the issue of whether the NYCHRL defines marital status as plainly defined or also in relation to another person. Industry groups have filed amicus briefs, urging the Court of Appeals to maintain the ordinary meaning of marital status and not expand the definition in a way that could affect employers’ anti-nepotism and conflict of interest policies. A decision from the Court of Appeals is expected later this spring.

Department of Labor Rule Narrows Scope of Independent Contractor Classification

In January 2024, the Department of Labor finalized a new rule regarding the classification of workers as independent contractors. The new rule restores an earlier standard that required employers to weigh a variety of factors in order to determine whether a worker was properly classified as an independent contractor, or should have been classified as an employee and provided with all of the benefits associated with that classification. As a result of the new rule, it is expected that the courts will see more lawsuits over the misclassification of workers. Employers and industry groups criticize the return to the old rule, arguing that the result will be the classification of most workers as employees and a decrease in flexibility for workers and employers.

To determine whether a worker is properly classified as an independent contractor, an employer will have to weigh the following factors: (1) the degree to which the employer controls how the work is done; (2) the worker’s opportunity for profit or loss; (3) the amount of skill and initiative required for the work; (4) the degree of permanence of the working relationship; (5) the worker’s investment in equipment or materials required for the task; and (6) the extent to which the service rendered is an integral part of the employer’s business. Employers, when faced with the prospect of a “totality of the circumstances” test, may face confusion and uncertainty in their worker classifications going forward. Employers should take an inventory of their workers and evaluate whether, under the factors set forth above, workers are properly classified.

FTC to Finalize a Ban on Non-Compete Agreements

In January 2023, the Federal Trade Commission proposed a ban on noncompete agreements that restrict employees’ mobility among employers. The FTC’s proposed rule stated that noncompete agreements are a method of unfair competition that violates the Federal Trade Commission Act and concluded that noncompete agreements suppress wages, stifle innovation, and make it harder for entrepreneurs to start new businesses. Although some states have already banned noncompete agreements, New York Governor Kathy Hochul recently vetoed an attempt to ban noncompete agreements. If the FTC’s proposed rule is enacted, the ban would apply nationwide. Employers, however, argue that noncompete agreements allow them to protect their valuable intellectual property and ability to retain key employees. Industry groups have argued that the proposed FTC rule is overbroad. Instead, they have proposed revisions that would either allow noncompete agreements to be enforced against employees who earn more than a certain compensation threshold, or to would limit noncompete agreements to managerial employees, executive-level employees, or employees with access to competitively-sensitive information and prohibit the use of noncompete agreements in specific industries in which such agreements are against public policy. It is expected that the FTC could finalize the rule as soon as April 2024.