SCOTUS Update: Major Title VII Changes Following Muldrow v. City of St. Louis that Every Employer Should Know

On April 17, 2024, the Supreme Court of the United States rendered the most highly anticipated employment opinion of the year. In Muldrow v. City of St. Louis, the Supreme Court lowered the bar for plaintiffs bringing employment discrimination actions against their employers by only requiring an employee to prove that “some harm” occurred as a result of an employment decision.

Prior to this decision, a plaintiff bringing a discrimination claim needed to meet a higher standard of “significant,” “material,” or “substantial” harm.

In Muldrow, a female police officer claimed that her employer, the St. Louis Police Department, discriminated against her based on her sex by transferring her to another department where she had different job responsibilities but the same rate of pay. The City of St. Louis argued that because the transfer was not a “significant” or “material” change, the female officer was unable to establish her claim.

Both the district court and the circuit court agreed with the City of St. Louis and granted summary judgment in favor of the city, effectively ending the female officer’s lawsuit.

The officer, Sergeant Muldrow, petitioned the Supreme Court of the United States and the highest court considered whether a plaintiff can establish a discrimination claim based on an employment transfer without proving the transfer decision caused significant harm. The Supreme Court unanimously held that a plaintiff need only demonstrate “some” harm occurred with regard to a term or condition of employment and specifically rejected that the harm must be “significant.”

This decision will have a sweeping impact on employment discrimination cases across the country.

It clearly lowers the bar for plaintiffs to establish actionable discrimination claims under Title VII which leaves employers vulnerable to a larger range of employment discrimination lawsuits. Historically, federal courts required that an employee’s damage from an “adverse employment action” must be measurable through wages, compensation, terms, conditions or other privileges. This requirement is now gone and employers must consider whether their decisions could simply result in “some” harmful impact upon an employee.

There will soon be new interpretations and analysis through litigation in the courts regarding the Muldrow decision but employers are advised to review their current employment policies and practices that may appear to have any impact an employee’s work conditions. It is advisable to consult with your employment attorney for further clarification and information.

FTC Bans Non-Compete Agreements

The long-awaited Federal Trade Commission (“FTC”) rule banning non-compete agreements has finally arrived.  On April 23, 2024, the FTC issued its final rule.  As a justification for the outright ban, the FTC cites protecting the fundamental freedom of workers to change jobs, increasing innovation, and fostering new business formation.

The FTC estimates that this ban will result in the formation of an additional 8500 businesses each year.  Additionally, the FTC estimates higher wages for workers and lower health care costs over the next decade.  Finally, the FTC anticipates the filing of an additional 17,000 to 29,000 more patents each year for the next 10 years.

The new rule makes existing non-compete agreements for the vast majority of workers unenforceable.  The only surviving non-compete agreements are those for senior executives, defined as workers earning more than $151,164 annually and who are in policy-making positions.   While existing non-compete agreements for senior executives remain enforceable, future agreements for this section of the workforce are prohibited just like all other workers.

What do employers need to do with respect to existing non-compete agreements for the average worker?  The rule requires them to send notices to workers bound by existing non-compete agreements stating that the agreements will not be enforced against them in the future.  The FTC provided model language in the final rule that employers can use when drafting these notices.

Now that non-compete agreements are unavailable, employers must rely upon trade secret laws and non-disclosure agreements to protect employer’s sensitive and/or proprietary information.  The FTC also suggests that employers protect their information by retaining their workers with wage increases and improved working conditions.

The final rule will take effect 120 days after publication in the Federal Register.

Expanded Overtime Protections for Workers

Last year, the U.S. Department of Labor published a proposed rule expanding overtime protections to a wider population of employees.

Under existing Department of Labor rules, full-time salaried workers earning less than $35,568 annually, or $684 per week, are guaranteed overtime pay.  The proposed rule would increase the salary threshold to $55,000 annually, or $1,059 per week.

Department of Labor projections indicate that this change will create overtime protections for an additional 3.4 million employees.  The new rule also increases the minimum salary for the highly compensated employee exemption from $107,432 annually to $143,988 annually. 

This rule may be finalized as early as April and take effect as early as June.

Similar changes to overtimes rules and exemptions have already taken effect in the State of New York in recent months.

In December of 2023, the New York State Department of Labor increased the minimum salary thresholds for exempt executive and administrative employees in New York City and its surrounding counties to $62,400 annually, or $1,200 per week.  Throughout the rest of New York State, the salary threshold for this same population of employees increased to $1,124.20 per week, or approximately $58,458.40 per year.

These thresholds will continue to increase incrementally in 2025 and 2026.

Employers impacted by these changes should review their employee salaries and payroll practices to ensure compliance.

Now may be a good opportunity to compile a list of employees impacted by these changes and decide whether to raise their salaries to meet the new thresholds or convert them to non-exempt status.  This is only part one of an employer’s review.  Employers should also consider employees’ job duties and responsibilities to determine whether their current duties and responsibilities qualify for an exemption.

Adjustments to employee compensation and exempt status can impact a company’s budget, so consider including personnel from human resources, legal, and finance in these discussions.  

New Requirements Governing Employee Separation in New Jersey

The New Jersey Unemployment Compensation Act has long required employers to provide instructions to their separated employees for filing unemployment benefits using a form widely known as the BC-10. Form BC-10 provides a separated employee with information needed to file for unemployment benefits, such as the legal name of the employer, its identification number, and address, the date of separation of the employee, and information pertaining to whether the separation is of a temporary or permanent nature.

New Jersey Governor Phil Murphy recently signed new legislation requiring employers to do more than simply hand over a Form BC-10 to their employees. Beginning on July 31 of last year, employers must satisfy some additional requirements.

For instance, employers are now required to submit a Form BC-10 to the New Jersey Department of Labor and Workforce Development (the “NJDOL”) at the same time they provide the form to their departing employee.

Separated employees must be given a Form BC-10 regardless of the reason for their departure. Therefore, employees who quit, are fired or are laid off must all be provided with Form BC-10s.
Additionally, the new legislation requires the Department of Labor to respond to initial benefits determinations within three (3) weeks of receipt of a claim. Thereafter, the claimant has twenty-one (21) days to appeal an initial determination. Employers have the shortest period of time, a total of seven (7) days, to appeal the Department’s determinations.

The new legislation also reduces the time employers have to respond to requests for missing information from the Department of Labor from ten (10) days to seven (7) days.

Employers must provide all forms to the Department of Labor in electronic format. If they have not already done so, employers should open an account on the Department of Labor’s website to submit responses to department requests.

Finally, penalties have also increased for employers who fail to issue a Form BC-10 or provide false information, these fines include a $500 per day fine or 25% of the amount of unemployment benefits whichever is greater.

Employers should be adapting their human resources practices and procedures to comply with these additional requirements and shortened timeframes and should consult with their attorneys for further assistance with compliance.

Regulation of AI Software in Hiring and Recruitment

Recently, we have all heard the buzz about Artificial Intelligence (“AI”) and how it is impacting the workplace. Particularly concerning are new questions raised about the disparate impact AI software may have on the recruitment and hiring of job applicants.

Companies have begun utilizing AI software to assist them in hiring and recruitment by applying the software to complete initial screenings and information gathering on the applicant pool. This can save businesses a significant amount of man hours and is typically very successful in weeding out unqualified applicants. There are increasing concerns, however, that AI software screening may fail to consider diversity and may negatively impact minorities and individuals with disabilities.
In response to these concerns, New York City passed a law in April 2023 regulating automated decision tools or AI software by requiring “bias audits”. The bias audit assesses whether the tool in question negatively impacts applicants based on their race, gender, disability, and any other protected class. The law also requires companies using AI software in hiring and recruitment to disclose its use to candidates or employees who reside in the city.

The State of New Jersey is contemplating similar legislative action. Assemblywoman Sadaf Jaffer of Mercer County, New Jersey recently proposed bill A4909, with accompanying bill S1926 in the Senate, establishing guidelines for employers to follow in order to minimize the potential negative impacts of AI software in hiring and recruitment. One of the guidelines proposed is annual “bias auditing” designed to search for and identify any patterns of discrimination.

Also like the New York City law, A4909 obligates employers to notify candidates within 30 days that a) the company uses automated software; 2) the company is subject to bias auditing; and 3) that the company used this automated software to assess the characteristics and qualifications of potential job candidates. Non-compliance with the New Jersey law could result in fines that start at $500.00 for the first violation and $1,500 for subsequent violations.

Employers should consult with their attorneys before implementation of AI software in the workplace, particularly in the area of hiring and recruitment. It is unclear at this time how results of bias audits could be used as evidence in employment law court actions against an employer.

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