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Labor & Employment Bulletin - March 7, 2016 - 3/7/2016

 

Saved by the Bill: Governor Bentley Signs Bill to Block Birmingham Minimum Wage Ordinance

 

Thanks to the Alabama Legislature and Governor Bentley, Birmingham employers no longer have to worry about the increased labor costs and payroll complexities that were previously looming over them.  On February 25, 2016, Governor Bentley signed a bill preventing cities and counties from setting their own minimum wages.  As a result, the City of Birmingham Ordinance No. 15-124, which sought to raise the minimum wage in the city from $7.25 to $8.50 as of March 1, 2016, is void.  It is likely that there will be legal challenges to this new state law.

This battle between local and state governments over minimum wages and other employment-related mandates is not unique to Alabama.  Many local governments across the country are enacting laws affecting various areas of employment such as minimum wage and sick leave.  While some municipalities have been successful in doing so, others, like Birmingham, have been blocked by their state legislature.  This trend will likely continue as long as the federal laws on these issues remain unchanged.  We will continue to monitor the trend and update you on any changes that may affect employers in our area.

The Birmingham Ordinance would have required employers with employees who perform at least twenty hours of work in a calendar year within the geographical boundaries of the City of Birmingham to pay the increased minimum wage rate.  Alabama does not have its own minimum wage law, so Alabama employers are currently governed by the federal minimum wage of $7.25.  Although this Ordinance has been blocked, it is still interesting to understand what was required by this Ordinance and the steep penalties associated with noncompliance.  Here is an overview of the Ordinance:

 Mandates:

• Ordinance applies to any employee who performs at least twenty hours of work within a calendar year while physically present within the geographic boundaries of the city of Birmingham.

• Employers must pay employees at least the minimum wage rate for each hour worked within the geographic boundaries of the city.

• The minimum wage rate is to be increased each year.  Effective March 1, 2016, the rate is $8.50.  Beginning July 1, 2017, the minimum rate is $10.10.  Beginning July 1, 2018, and each year following, the rate is to be increased by the increase (if any) of the cost of living.

• Employers with tipped employees may consider tips as part of the wages of tipped employees, but the tip credit cannot exceed 50% of the minimum wage rate.  In other words, employers must pay tipped employees a direct cash wage of not less than 50% of the minimum wage rate and must ensure that the combination of the direct cash wage and tips equals at least the minimum rate.

Enforcement and Penalties:

• If an employer fails to pay the required minimum wage, it will be required to pay the employee the unpaid wages plus an additional two times that amount in liquidated damages.  Notably, this liquidated damages rate of two times is more than even federal law requires!

• An employee not paid the minimum wage can bring a lawsuit against his/her employer for the wages due.  If an employee wins the lawsuit, they will also be awarded appropriate legal or equitable relief, including unpaid wages, two times liquidated damages, reinstatement, actual damages, civil penalties, and attorney’s fees.  There is no administrative exhaustion requirement prior to filing a lawsuit.

• In addition to these civil remedies, a violating employer will be subject to a civil penalty not to exceed $100 per day, per employee who does not receive the minimum wage rate.  If an employer does not pay the penalty within 15 working days, the City will initiate a civil action to collect the penalty.

• Any employer found to have violated the Ordinance may be required to reimburse the city for any costs associated with its investigation and enforcement of the matter.

• An employer may not discriminate or take adverse action against an employee in retaliation for exercising his/her rights under this Ordinance.  Notably, the Ordinance specifically states, “Taking adverse action against a person within ninety (90) days of the person’s exercise of rights protected under this Chapter shall raise a rebuttable presumption of having done so in retaliation for the exercise of such rights.”

• If an employer is found to have violated the Ordinance and does not cure the violation, the city may, after notice and a hearing, revoke or suspend any registration, certificates, permits or licenses held or requested by the employer until the violations are remedied.

As you can see, the requirements of this Ordinance would have changed the way many Birmingham employers do business.  Likewise, many employers in surrounding areas would have been forced to develop detailed guidelines for any time their employees spent working inside the city and would have been forced to pay employees two separate wage rates.  There is no doubt that compliance with this Ordinance would have been costly and time-consuming; however, the costs of not complying could have been much more expensive.  Because this Ordinance has been blocked, employers can rest easy for now.  We will monitor any legal challenges to the state law and update you should this Ordinance be revived in any way.

 

Breanna H. Young


 

New Alabama Non-Compete Law

 

On January 1, 2016, Alabama’s new statute governing the enforceability of non-compete and non-solicitation agreements went into effect.  The new statute is not a dramatic change to the law.  However, it does clarify several issues and should make the enforceability of non-compete and non-solicitation agreements with employees more predictable – and less litigious.

In the past, it has been almost impossible for employers and employees to know their rights and obligations when changing jobs.  No lawyer could accurately advise a client to what extent an agreement was enforceable.  While this new law does not resolve all issues, it is certainly a step in the right direction.

For example, the period of time a former employee could be restrained has always been an area of uncertainty and, therefore, fertile ground for litigation.  According to the new law, agreements that prohibit a former employee from working for a competitor for a period of two years after employment are presumed to be reasonable in duration.  Agreements that prohibit a former employee from soliciting customers are presumed, by the statute, to be reasonable if they are for 18 months after employment ends or for as long as post-separation consideration is paid.  In other words, if a former employee receives severance pay for longer than 18 months, that longer period of time would be presumed reasonable.

One substantive change made by the statute relates to independent contractors.  Under prior law, courts had held, strictly construing the old statute, that non-compete agreements were not enforceable against independent contractors.  The new law makes such agreements enforceable against both employees and independent contractors.

As has always been the case, for a non-compete or non-solicitation agreement to be enforceable, the employer must have a protectable interest, such as trade secrets, confidential information, or customer relationships.  Specialized training provided to an employee can serve as a protectable interest as well, provided the training is specified in the written non-compete agreement.  The new law explicitly lists the possible protectable interests an employer might assert.  It is arguably an all-inclusive list and leaves no room for other possibilities.

As before, to be enforceable, a non-compete agreement must be entered into with a current employee.  The new law perpetuates this principle.  An agreement entered into with a prospective or former employee will not be enforceable.  Therefore, the timing of entry into such agreements is critical.

Although the new law does not invalidate agreements entered into before its effective date, making it unnecessary to have employees enter into a new agreement, it does make sense to use the change in the law as an opportunity to review existing agreements and perhaps make changes that will enhance enforceability.  Our labor and employment lawyers are available to review your existing agreements and advise you on any changes that should be made.

 

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