COVID-19 created unprecedented situations in every type of job, industry, and profession, including the legal field. Change, evolution, and adaptation became commonplace as everyone learned how to navigate the process of operating from both work and home. Essentially, the COVID-19 pandemic turned our working lives upside down for the better part of two years.
As more people become fully vaccinated, many are eagerly anticipating a return to “normalcy.” For most, that includes returning to the office (whether full-time, part-time, or by remote or virtual means). But more than 100 million Americans have worked remotely (at least part-time) since the beginning of the pandemic. And many of these employees hope to work remotely permanently. However, for employers intending for their employees to return to the office, potential pitfalls await.
Employees who have learned to enjoy the work-from-home model see a variety of benefits, including:
- Not having to commute to work;
- No required dress code (unless you are on a video conferencing call, such as with a Court);
- The ability to take care of work/projects at home while on breaks from office work;
- The ability to stay home with a sick family member;
- The ability to more easily schedule personal appointments around work.
But there are pitfalls to working from home, which include:
- Potentially having to purchase additional office equipment to effectively do work (e.g., printer/scanners, computer monitor);
- Taking extra precautions to keep client information safe and confidential;
- Blurring the lines between being present at work and being present at home;
- Losing some collaboration, communication, and visibility with your colleagues/team/management;
- More distractions at home to sidetrack you from getting your “office” work done.
Recent studies indicate that some categories of employees are less eager than others to return to the office. One such survey [Who Wants To Return To The Office? | FiveThirtyEight] indicates that women and minorities are less eager to return to in-person work, while white men are the group most eager to return to the office. In many families, women bear the load of being both the primary caregiver, as well as a full-time employee, and providing options to work from home provides potentially more time to devote to both. Another factor that may be at play is an office culture in some workplaces that has given white men a higher comfort level than other groups. Whether it’s “water cooler talk,” “the good ol’ boys club,” or the standing Friday afternoon round of golf, certain employees can feel excluded and alienated in the workplace.
Employers should take note, as return-to-work and remote work policies may someday serve as the basis for disparate impact claims under Title VII or Equal Pay Act claims. If women and minorities are more likely to opt to work from home (or risk termination or quit when return to the office is mandated), then employers must carefully implement policies or practices to avoid violating the law. These policies or practices should be implemented both to comply with the law, and to promote the well-being and job satisfaction of all of their employees.
Disparate Impact under Title VII
Disparate impact claims under Title VII can be tricky for employers to defend because there is no intent requirement. To state a claim of disparate impact, a plaintiff must allege a facially neutral policy that causes statistically significant disparities in employment between a favored class and a disfavored class. Here, women or minorities may be able state a claim for disparate impact where a remote work policy caused them to be disfavored.
For example, a mandatory return to the office under threat of termination may cause a disparate impact if it causes women and minorities to quit in much higher numbers than white workers or men. The policy itself does not discriminate based on race or sex, so it is facially neutral. However, if it falls more harshly on a particular group, it may support a claim.
Disparate impact claims are analyzed under a burden-shifting scheme similar to the familiar McDonnell Douglass framework. If the plaintiff makes a prima facie case, then the burden shifts to the employer to demonstrate that the policy serves a “legitimate, non-discriminatory business purpose.” Then the burden shifts back to the plaintiff to show that the articulated reason is pretextual.
Some employers may have difficulty proving a legitimate business justification for ordering employees to return to the office. Many employers have seen that productivity has remained steady or in some cases increased as more employees work from home. In some cases, it may be more expensive for employers to have workers in the office than working remotely. Therefore, employers seeking company-wide return to work should carefully consider the reasons for doing so.
Minimizing Impacts on Remote Workers
A major potential pitfall will be in promotions. Employers must be mindful of the subjective and objective criteria managers employ in determining promotions. Traditional factors such as “face time” with the boss, being seen in the office early in the morning and late at night, or overall “attitude,” “personality,” or “fit,” may disfavor remote workers. Where these factors would tend to disfavor remote workers, they may work to cause statistical disparities between male and female or white and minority workers.
Equal Pay Act
The Equal Pay Act requires that employees of opposite sexes be paid the same for “equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions.”). In the absence of direct evidence of discriminatory intent, the court applies the familiar McDonnell Douglas burden-shifting framework. The plaintiff puts forth a prima facie case, and the employer must show that there exists a legitimate nondiscriminatory factor on which it based the wages paid. Legitimate factors include seniority systems, merit systems, piecework pay rates, for example. The burden then shifts back to the plaintiff to come forward with evidence that the proffered reason was pretextual.
Some employers may feel inclined to pay remote workers less than in-office workers. And studies indicate that some workers would be willing to take a pay cut to work from home. However, if disproportionate numbers of women intend to continue working remotely, then pay differentials could potentially support an Equal Pay Act claim. It is not a complete defense that there are also some men who work remotely at lower salaries. Likewise, it is an open question whether working from home versus working in the office would be a legitimate nondiscriminatory factor supporting pay disparities. However, if an employer saves money by having employees work remotely, it will be hard to avail themselves of that defense.
Planning and Recordkeeping Can Help Avoid Liability
In crafting a return-to-work policy that works for everyone, for purposes of potential employment-related claims, employers should consider:
- Whether an across-the-board return to work policy is necessary or desirable.
- If individual approval of remote work is practical. A policy should be based on specific, objective (and recorded) criteria such as seniority, performance evaluations, disciplinary history, and productivity. A copy of the determination should be placed in the employee’s file.
- Whether to re-evaluate promotion and job performance criteria, to focus on objective work-related factors, while weeding out unintentionally discriminatory factors (such as face time with the boss, early arrival at work, etc.).
- Whether remote work may be a reasonable accommodation for disabled workers.
- How to ensure that remote workers have equal access to career-advancing training, mentorship, and special projects.
There is never a bad time to consider whether office culture can be made more inclusive. As more people return to the office, it is important to ask whether there are employees who are reluctant to return, and why.
In November 2020, many Americans breathed a sigh of relief, as news broke that an effective and safe vaccine had been developed against COVID-19. As vaccines from Pfizer, Moderna, and Johnson & Johnson began to roll out in early 2021, numerous citizens began to roll up their sleeves for protection against the virus. In May 2021, many COVID-19 related restrictions were abandoned in the continental U.S. (including the dreaded indoor mask requirement) after the CDC advised that vaccinated individuals did not need to wear masks while indoors.
Fast forward to August 2021, and the unwelcome spread of the highly contagious Delta variant, and we seem to be creeping back to mandatory mask wearing in many states, as the CDC recently recommended that fully vaccinated individuals wear masks in public indoor settings in areas of “substantial or high transmission.” This recommendation comes as no surprise with the Delta variant on the rise, coupled with the fact that vaccinated individuals can still become sick from the virus, as well as transmit the virus.
So what is an employer to do with these new CDC guidelines? While the new guidelines do not define “public indoor settings,” such settings were previously differentiated by the CDC from household settings. Hence, it is safe to say these new guidelines apply to businesses outside of individuals’ homes. Because it is assumed that these guidelines pertain to companies, employers and businesses should consult with the CDC’s COVID-19 Integrated County View website (covid.cdc.gov/covid-data-tracker/#county-view) to determine if the areas in which they do business are COVID-19 hotspots with substantial or high transmission. This website is updated by the CDC daily, reflecting locations that have substantial transmission or high transmission over a 7-day period.While CDC guidelines are not considered “law,” OSHA and the courts could interpret CDC guidelines to be a standard of care. Accordingly, in the event an employer does not abide by the new CDC guidelines, OSHA could cite an employer for not abiding by the guidelines, on the grounds that the employer breached the OSHA “general duty clause.” In addition, individuals who contract the virus while visiting non-CDC abiding businesses may sue, claiming that the business was negligent by not abiding by the respective restrictions. Although CDC guidelines are just that – guidelines – employers and businesses should therefore heed the CDC’s guidance… to the possible dismay of your some of your vaxed and vexed employees.
On July 9, 2021, President Biden signed Executive Order 14306. The EO has inspired headlines warning that non-compete agreements as we know them are doomed. These prognoses are premature. The EO itself does not affect non-compete agreements in employment, but merely recommends that the Federal Trade Commission begin the rulemaking process with the principles of the EO in mind.
Section 5(g) instructs that “To address agreements that may unduly limit workers’ ability to change jobs, the Chair of the FTC is encouraged to consider working with the rest of the Commission to exercise the FTC’s statutory rulemaking authority under the Federal Trade Commission Act to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.”
The overall tenor of the EO is that the consolidation of large corporations unfairly restricts competition. To date, the enforceability of non-compete clauses has been almost entirely governed by state law, and state laws dramatically vary on this subject. For example, California law is rather hostile to these provisions, while the laws of Missouri, Illinois, and Kansas are more in the mainstream, allowing restrictions that are appropriately limited in scope and duration. While we have no idea what the FTC’s proposed regulation will look like, we can begin to guess by examining state laws on non-compete agreements generally.
In Missouri, non-compete agreements are enforceable to the extent they protect a legitimate business interest, such as confidential information, trade secrets and customer contacts, and are reasonable in temporal and geographic scope. Importantly, customer contacts are protectable only as to those employees who actually interact with customers and can influence customers’ decisions. Whelan Security Co. v. Kennebrew, 379 S.W.3d 835 (Mo. banc 2012). A related restrictive covenant, the non-solicitation clause, which prevents employees from snatching up their former co-workers, is presumed enforceable for up to one year, where its purpose is to protect company loyalty, customer goodwill, and related interests. See Mo. Rev. Stat. § 431.202. For more information on Missouri non-competes, see our blog posts Non-Compete Agreements in Missouri: The Missouri Supreme Court (Once Again) Explains it All from December 2012 and Sometimes You Just Can't Compete from April 2020.
Illinois common law generally resembles Missouri with regard to non-competes. However, in Illinois, non-competes with “low-wage employees,” an employee who earns the greater of the federal, state, or local minimum wage or $13.00 per hour, are explicitly prohibited by statute. “Illinois Freedom to Work Act,” 820 ILCS 90/5.
The landscape in Kansas is also similar to Missouri. In Idbeis v. Wichita Surgical Specialist, P.A., 112 P.3d 81, 279 Kan. 755 (2005), the Supreme Court of Kansas established guidelines for enforcement that drafters of non-competes should note. In pertinent part, the Court held that non-competes are enforceable if they are not intended to avoid ordinary competition, do not create an undue burden on employees, and does not harm the public welfare.
What about e-Commerce?
In the Internet Age, geographic restrictions on non-competes sometimes seem irrelevant. A company headquartered in Kansas City, Missouri, may have a sales representative located in Juneau, Alaska, selling products to customers in Key West, Florida. A geographic prohibition of a 50-mile radius does not make sense. Can’t a company just prohibit its employees from going to work for a competitor?
These types of non-compete agreements, where a company identifies competitors and seeks to prohibit employees from switching teams, are likely to be an area of focus in the FTC regulations. Particularly in the post-pandemic Big Tech world, where remote work is becoming the norm, companies may seek to protect their employees from being raided by Silicon Valley with global non-competes. The tension is obvious: how will the FTC limit monopolistic raiding behavior by the Googles and Facebooks of the world and protect employees’ freedom of movement?
Employers and practitioners would do well to examine Sigma-Aldrich v. VIkin, 451 S.W.3d 767 (Mo. App. E.D. 2014). There, the Court held invalid a global non-compete that would have forbidden an employee to
“engage in, provide any services or advice to, contribute my knowledge to or invest in any business that is engaged in any work or activity that involves a product, process, service or development which is then competitive with, the same as or similar to a product, process, service or development on which I worked or with respect to which I had access to Confidential Information while with the Company anywhere the Company markets or sells any such product or service.”
The Court held that this broad prohibition sought to protect itself from regular competition. For more on Sigma-Aldrich, see our blog post Court of Appeals Affirms Denial of Sigma-Aldrich's Request for Injunctive Relief Against Former Employee. The Court instructed employers to evaluate the employee’s specific duties, use of trade secrets in their work, and then identify the protectable interest at stake, then to narrowly tailor the non-compete to protection of those interests. As always, a one-size-fits-all approach to non-competes simply does not work.
FTC’s Rulemaking Authority
Generally, a properly promulgated agency rule will preempt conflicting state laws on the same subject matter. But as an administrative agency, the scope of the rule is strictly confined to the agency’s statutory authority. The FTC can only issue a rule “where it has reason to believe that the unfair or deceptive acts or practice which are the subject of the proposed rulemaking are prevalent […],” that is “information available to the Commission indicates a widespread pattern of unfair or deceptive acts or practices.” 15 U.S.C.A. §15a(b)(1)-(3).
When can we expect this new rule to go into effect? Section 18(a) of the Federal Trade Commission Act includes rulemaking procedures that exceed those of the Administrative Procedures Act. The FTC is required to publish an Advanced Notice of Proposed Rulemaking in the Federal Register with information about the rule’s purpose and invite interested parties to comment. The FTC must also seek input from certain House and Senate committees. Then at least 30 days later, the FTC may issue a Notice of Proposed Rulemaking.
Enforceability of Current Non-Competes After FTC Regulation
The logic of the EO is somewhat circular, given the law of restrictive covenants in Kansas, Missouri, and Illinois. By law, the FTC only has authority to regulate where there is widespread unfairness. Restrictive covenants are only enforceable to the extent they are reasonable and protect an employer’s legitimate interest in protection from unfair competition. So in theory, a non-compete that is enforceable under Missouri, Illinois, or Kansas law should also be enforceable under the FTC regulations.
Protecting Your Business Interests
There is no reason for the EO to scare businesses into abandoning non-compete agreements. However, the EO is an important reminder that now is a good time for employers to re-evaluate their non-compete agreements. Are they targeted at a protectable interest, such as customer contacts, trade secrets, and goodwill? Importantly, the EO does not address trade secrets, and Missouri, Illinois, and Kansas have already enacted the Uniform Trade Secrets Act. Employers whose businesses are dependent on trade secrets and proprietary information should consider a trade secrets agreement separate from its non-compete agreement.
Ultimately, we will not know what the FTC seeks to regulate until their proposed rule is published. Baker Sterchi Cowden & Rice attorneys will be closely monitoring and reporting on developments in this blog.
About Employment & Labor Law Blog
The BSCR Employment & Labor Law Blog examines topics and developments of interest to employers, Human Resources professionals, and others with an interest in recent legal developments concerning the workplace. This blog will focus on Missouri, Illinois and Kansas law, and on major developments under federal law, and at the EEOC and NLRB. Learn more about the editor, David M. Eisenberg, and our Employment & Labor practice.
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