If you’re an employment attorney, you’re likely following the litigation around the Federal Trade Commission’s final rule of April 23, 2024 that attempts to eliminate almost all post-employment covenants not to compete. Whether the rule will be implemented in September and will withstand legal challenge remains to be seen.
The ongoing litigation around the FTC’s rule is one of three significant employment law trends; here’s a closer look at what Missouri employment attorneys and corporate counsel should keep in mind when representing clients and companies.
What’s the Future of Non-Competes?
As the litigation challenging the FTC’s rule against non-competes spools out, it’s impossible to predict whether the rule will be implemented in September as planned. It’s possible that one of the federal district court cases challenging the rule will reach the Supreme Court. If the latter happens, the Supreme Court may rule and establish a precedent about whether federal law can regulate non-competes, and state laws will likely follow suit.
One of the FTC cases that has garnered significant attention is Ryan, LLC v. Federal Trade Commission, which is pending in the federal District Court for the Northern District of Texas. In that case, the judge granted the plaintiff’s motion for a preliminary injunction blocking the implementation of the rule on the basis that the FTC does not have authority to ban non-competes. However, the judge in that case limited the scope of its ruling to the plaintiffs.
Another case, ATS Tree Services v. FTC, is pending in the District Court of the Eastern District of Pennsylvania. In that case, the court sided with the FTC, and refused to grant a preliminary injunction preventing the rule from taking effect. The court found that the plaintiff didn’t demonstrate a strong likelihood of proving that FTC lacked authority to issue the rule; that the plaintiff’s claimed harms were speculative in nature; and that the public’s interest in eliminating non-competes outweighed those speculative harms.
While the litigation shakes out, keep your clients apprised of what’s happening and prepare for the likely changes in enforcing (or not enforcing) non-competes. Consider other ways that businesses can protect confidential information and intellectual property, such as having employees sign contracts that include language protecting trade secrets, suggests Kim L. Kirn, an employment law mediator and arbitrator at United States Arbitration & Mediation.
This type of protection has been upheld by the courts.
Potential Increase in Wrongful Termination Claims
Whether you’re on Tik Tok, Instagram, or LinkedIn (or none of the above), there’s no doubt that social media has a huge influence on our lives. Millions of people watch TikToks, including “Get Ready with Me” videos, and earlier this year a new trend developed — “Get Laid off with Me” videos. Employees who were terminated by their employers surreptitiously recorded those in-person or Zoom meetings, and then shared them on TikTok.
One recent survey of corporate counsel found that three in ten expect to see more wrongful termination claims, in part due to this trend. Kirn feels that this may not be the case. “I do not anticipate a significant uptick in claims because the steps to initiate and follow through with a legitimate claim are high: retaining an attorney; pursuing the EEOC process; and filing suit,” says Kirn. She suggests offering mediation early in the dispute to help prevent claims from becoming more serious.
“Consider offering it with a limited time frame and setting expectations early. For less serious claims, perhaps use your human resources (HR) department to listen to claims and triage the serious from the less serious,” she says. “Then offer mediation on the serious claims. I mediate plenty of pre-suit claims and find room for lots of creative problem-solving.”
Also, advice your clients of the possibility that termination meetings may be recorded and broadcasted to a wider audience, and to handle those meetings with that in mind. Your client’s HR department may need additional training about how to address termination meetings, including showing empathy for the person who is losing his/her job and being transparent about why the person is being let go. That may help reduce the risk of wrongful termination claims.
Using Artificial Intelligence for Hiring Decisions
Another issue is the use of artificial intelligence (AI) for hiring decisions without running afoul of employment laws. Plenty of companies are using AI in their hiring processes, and one in four corporate counsel expect to see increases in these kinds of claims. The EEOC has been monitoring employer’s use of AI and in 2021, launched the Artificial Intelligence and Algorithmic Fairness Initiative to “ensure that the use of software, including artificial intelligence (AI), machine learning, and other emerging technologies used in hiring and other employment decisions comply with the federal civil rights laws that the EEOC enforces.”
In May 2022, the EEOC brought its first lawsuit involving the use of AI, suing iTutorGroup and alleging that the company’s AI recruitment software was automatically rejecting older applicants due to their age. The EEOC’s complaint alleged that company software automatically rejected men who were age 60 or older, and women who were age 55 or older. The EEOC and iTutorGroup settled the case in September 2023, but it’s likely that we’ll see more litigation around these issues.
While this is a relatively new issue, make sure your clients understand that the use of AI can subject them to discrimination claims if used improperly. Employers should, “ask good questions of any AI provider/service to ensure it is not using any illegal factors,” says Kirn. “Also, consider adding a notice that AI is being used. This is not required but might be a good idea.”
Mediation as an Option
One aspect all these three areas of employment law have in common is that mediation is a good fit for addressing them. “First, the process is confidential, allowing parties to discuss issues openly without fear of public scrutiny. Employment disputes often involve ongoing relationships and mediation fosters collaboration and can help preserve professional ties,” says Rob Litz, a mediator, arbitrator, and president of USA&M. “Parties have more control over the outcome in mediation and can craft creative solutions that a court may not provide. Mediation expense is a fraction of the cost of litigation, saving resources for the parties involved. Mediation can resolve disputes more quickly than traditional court processes, allowing for faster resolution and less disruption … Overall, mediation can provide a more amicable and efficient way to resolve employment disputes while addressing the unique dynamics of workplace relationships.”
“There is often added value to the plaintiff in having the opportunity to engage with their employer directly and informally (even if they are in separate breakout rooms),” adds C.J. Larkin, an employment attorney and mediator at USA&M. “For both sides, questions can be answered, comments of personal concern can be exchanged, and acknowledgements and apologies can be shared that are unlikely to find a place in litigation or even in party negotiation.
“Mediation can offer a relatively safe crucible to grind down to the essence of the case,” she says. “Often, parties leave mediation (with or without settlement) understanding their case better than when they went in.”
Corporate counsel and employment attorneys know that employment law is an ever-evolving field. Keeping up on what’s happening, and keeping your clients apprised of these changes, can help them reduce their risk of exposure as the law evolves.
