It’s still early, but members of Congress and the Texas legislature have proposed a few laws that have a better chance of passing than others. Here I discuss four proposed laws, one federal and three from Texas. They have gotten attention, and have a reasonable chance of being passed, because the federal one was introduced by a Republican Senator in the Republican-controlled Senate, and the three Texas ones were introduced by Republicans, who control both Texas houses. The proposed federal law suggests a trend toward greater scrutiny of noncompete agreements at the federal level. The state laws reflect a trend at the state level of requiring increased compliance from employers with employment eligibility verification laws, while limiting the ability of cities to regulate employers within their borders.
Freedom to Compete Act. Senate Bill 124, sponsored by Senator Marco Rubio, would amend the Fair Labor Standards Act to void any non-compete agreements (including retroactively) other than for employees who fall into the FLSA’s white-collar exemptions (which exempt executive, administrative, learned professional, creative professional, outside sales, and computer employees from the statute’s overtime pay requirements).
The proposed law’s goal is to prevent non-compete agreements from preventing lower-level workers from changing jobs. This law passing would have serious consequences for employers. As many employers have experienced first-hand, non-compete lawsuits often begin with temporary restraining orders and preliminary injunctions, which—combined with the time restrictions in non-compete agreements—lead to expedited consideration. This law would inject FLSA exemption decisions into these fast-tracked cases, with decisions on this complicated area of federal law being made by state courts less familiar with FLSA principles and precedent.
This could lead state courts to decide whether positions are FLSA-exempt or not, outside the context of a squarely presented FLSA exemption dispute, and with serious consequences for pay practices and future FLSA lawsuits against the employer.
Requiring Texas state contractors to use E-Verify. Senate Bill 197 would require employers to use E-Verify to compete for Texas state agency contracts. Employers would have to certify that they participate in E-Verify, and if that certification is inaccurate, then the employer could be barred from state contracts. Even more concerning, if the certification that the employer uses E-Verify becomes inaccurate, the employer could be barred. This raises the danger of an employer who attempts but fails to comply with E-Verify being barred based on their certification being “inaccurate.” E-Verify is notoriously difficult to comply with, and expanding its use without addressing these difficulties could create significant burdens for covered employers.
Prohibiting Cities from Requiring that Employers Provide Paid Sick Leave. House Bill 222 would forbid any municipality’s governing body from requiring an employer to provide paid sick leave to an employee. This would eliminate the paid sick leave ordinances in Austin and San Antonio (with the Austin one already being challenged in court).
Prohibiting Cities from Requiring that Employers Provide Other Benefits. Senate Bill 762 would not only prohibit cities from requiring paid sick leave—it would also prohibit cities from requiring employers to provide paid holiday, vacation, or personal leave. And it would go even further, prohibiting cities from requiring employers to provide health, disability, retirement, profit-sharing, death, or group accidental death and dismemberment benefits.
Bottom Line for Employers: Several already-proposed laws could significantly impact employers when it comes to overtime exemptions, noncompete agreements, immigration compliance, and city-specific regulations on wages and benefits. Whether all of these proposed laws pass or not, they are a good reminder for employers to seek out legal advice and to review and update their policies to reduce risk and ensure compliance with the law.