Employment Law Alert: New Job Posting Requirements for Maryland Employers

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The contents of this Alert are for informational purposes only and do not constitute legal advice. If you have any questions about this Alert, please contact the Shulman Rogers attorney with whom you regularly work or a member of the Shulman Rogers Employment and Labor Law Group.

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Employment Law Alert: FTC Bans Non-Competes Agreements

Posted on April 25, 2024April 25, 2024 by Hanna Hefner

As you may have already heard, on April 23, 2024, the Federal Trade Commission (“FTC”) issued a final rule banning most non-compete clauses in employment contracts in the U.S. (“Final Rule”).

This is a big deal—and we do not want to minimize it. But there is no need to panic! There are still options for protection and there is still plenty of time to think this through. Now is the time to review your strategy for post-employment restrictions.

The Final Rule is scheduled to take effect 120 days after publication in the Federal Register, which as of now means late August 2024. It is possible that enforcement will be enjoined until these legal challenges are sorted. There is immense interest in this Final Rule, and we would not be surprised if the issues goes all the way to the Supreme Court for resolution.

That said, below is an overview of the key points of the Final Rule and its implications for employers and workers:

What is a Non-Compete Agreement?

Generally speaking, a non-compete is defined in the Final Rule as a contract between an employer and a worker that restricts the worker from seeking or accepting work from a different employer/company or from opening their own competitive business.

Why did the FTC Ban Non-Competes?

The short answer is the FTC determined that non-competes are an unfair method of competition because it found that they restrict employees from changing jobs, depress wages, stifle innovation, and prevent new businesses from being formed.

The Unenforceability of Existing Non-Competes:

Assuming the FTC’s ban goes into effect, employment-based non-competes in effect prior to the effective date will become unenforceable for all employees except “senior executives.” The Final Rule defines the term “senior executive” as an employee who earns more than $151,164 annually and who is in a “policy-making position.” The senior executive threshold calculation includes an employee’s salary, bonuses, and commissions, and excludes fringe benefits, retirement contributions, and insurance premium payments. And “policy-making position” means an employee who has the authority to make policy decisions controlling “significant aspects of a business entity or common enterprise.” The exemption is intended to be narrow and the Final Rule expressly carves out positions that only have the ability to advise or exert influence over such policy decisions, and positions that only have final authority for a subsidiary or affiliate. It is also worth noting that the senior executive exemption only applies to non-competes in effect before the effective date of the Final Rule (probably August 2024).

The Final Rule also permits certain non-competes in connection with the sale of a business, and non-solicitation agreements that do not penalize or prevent the worker from accepting work with a competitor or starting their own business.

Notification Requirements for Employers:

When (if?) the Final Rule becomes enforceable, employers will be required to notify current and former workers that any non-compete they previously signed is no longer enforceable. The Final Rule also includes model language that employers should consider using to provide this notification.

The full text of the Final Rule can be accessed here.

If you have any questions about this Alert, we encourage you to contact your Shulman Rogers contact for solutions and recommendations.

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SBA Disaster Loan Assistance Available

Posted on April 18, 2024April 18, 2024 by Hanna Hefner

The Small Business Administration (“SBA”) recently announced relief for private nonprofits and small businesses impacted by the tragic accident involving the collapse of the Francis Scott Key bridge on March 26, 2024. All such businesses impacted by the bridge collapse are eligible for an Economic Injury Disaster Loan (“EIDL”).

The EIDL provides for a loan of up to two million dollars ($2,000,000.00) at low interest rates up to a maximum of 4% per annum and a repayment term of up to 30 years. Applications for disaster loans may be submitted online using the MySBA Loan Portal at https://lending.sba.gov or other locally announced locations. The terms and conditions of the EIDL can be found at the attached fact sheet issued by the SBA.

It is advisable that you consult with counsel before applying for this loan.

Client Alert: Corporate Transparency Act Update

Posted on April 12, 2024April 18, 2024 by Laura Gastwirth

Corporate Transparency Act

With the arrival of spring and the first set of Corporate Transparency Act (CTA) filing deadlines behind us, it is a good time for an update on lessons learned from the initial filings.

As a reminder, the CTA was enacted by Congress to combat money laundering, fraud, and other illicit activities by increasing transparency in corporate ownership. Under the CTA, certain corporations, limited liability companies (LLCs), limited partnerships and other entities created by state law registration are now obligated to disclose information regarding their “beneficial owners” to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). For an in-depth understanding of the CTA, refer to our detailed client alert dated January 1, 2024.

With that high-level background, we offer these observations from the CTA trenches.

Increased Filing of Beneficial Ownership Information

Our January 2024 alert projected that more than 30 million companies would need to submit beneficial ownership information (BOI) reports in 2024 to comply with the CTA. The filing deadline for companies formed prior to January 1, 2024 is January 1, 2025, so there will be significant activity leading up to January 1, 2025.

Currently, the submissions primarily are from companies formed after January 1, 2024. During a March 13, 2024 CTA webinar hosted by LexisNexis, Jared Elostra from FinCEN revealed that approximately 940,000 BOI reports had been filed to date.

Companies are well-advised to consult with legal counsel as soon as possible to determine whether they are exempt from the CTA’s requirements or if they need to file a BOI report.

Service Providers Report Filing Backlogs

In the face of potential liability, many law firms are declining to file BOI reports on behalf of their clients. Companies are increasingly seeking BOI filing support from third-party service providers who traditionally handle document filing for business entities. Because FinCEN has not yet enabled a direct connection of the service company systems with FinCEN’s filing system, some service providers are reporting filing backlogs of two weeks or more as filing information has to be entered manually. Accordingly, companies that are required to file BOI reports should plan ahead and seek to file as early as possible.

Self-Application for FinCEN Identifiers

Entities and individuals applying for a FinCEN identifier, which simplifies amendments to BOI reports, must complete the application process themselves. Neither attorneys nor third-party entities can do this on behalf of a company, as the login information must align with the details provided for the FinCEN identifier.

No Current Option to Cancel FinCEN Identifiers

Once assigned, the FinCEN identifier cannot currently be canceled or terminated. This may lead to ongoing update requirements, even when the identifier is obsolete. FinCEN has been asked to address this quandary, but the timeline and certainty of any resolution are unclear.

Persistent Uncertainties in Some CTA Requirements

Identifying a reporting company’s “beneficial owners” under the CTA’s definition can be a very challenging task. An individual with “substantial control” over a company falls under this definition, yet the regulations lack clear-cut criteria for determining substantial control. As such, determining substantial control can be a highly fact-specific and subjective undertaking. Therefore, companies should seek legal counsel for precise evaluations regarding substantial control and beneficial ownership.

Additional ambiguity persists around whether subsidiaries of exempt entities qualify for exemption. The applicable CTA provisions look to control and ownership factors that have been subject to conflicting interpretations by lawyers and other commentators.

Physical Office Requirement for Filing BOI Reports

To comply with the CTA, companies must report their BOI and indicate a physical office address as their principal place of business in the United States. The use of post office boxes or registered agent addresses for this purpose is not permissible. The acceptability of a virtual office address remains uncertain, and while the use of a residential address seems viable and often the only address available given the trending shift to remote work, FinCEN has yet to provide explicit confirmation in this regard.

There have been requests to FinCEN to provide clarity on this requirement because many newly formed entities may not secure a physical office before their filing deadlines. This issue is expected to become more pressing in 2025 when the filing deadline will be shortened to 30 days post-formation.

There are already lawsuits challenging the CTA–and one court has held the CTA to be unconstitutional.

Legal challenges to the CTA have commenced, including a lawsuit filed in Alabama. In the case of National Small Business United v. Yellen, a federal court ruled on March 1, 2024 that the BOI reporting requirements are unconstitutional on the grounds that the CTA exceeds Congress’ power under the Constitution. This decision applies exclusively to the plaintiffs of the case, meaning other companies must still adhere to the CTA. The government has since appealed this ruling.

Watch for States Enacting Legislation Similar to the CTA

Finally, as if deciphering and complying with the CTA were not enough for businesses to deal with, some states are now passing CTA-like legislation of their own. For example, on March 1, 2024, New York Governor Kathy Hochul signed into law the amended LLC Transparency Act, which will go into effect on January 1, 2026 and will require limited liability companies formed or doing business in New York to file reports disclosing their beneficial ownership information. According to the National Association of Secretaries of State, other jurisdictions, including the District of Columbia, collect ownership and control information regarding businesses either through their articles of incorporation/organization or through periodic reports that businesses must file in their jurisdiction. Only time will tell if more jurisdictions will pass their own CTA-like legislation. Whether more jurisdictions decide to do so may depend on how the CTA fares as more legal challenges to the statute and regulations are resolved. Moving forward, we will continue to monitor these developments and provide updates on new legislative developments.

This is a summary of the laws and regulations in connection with the Corporate Transparency Act. This is a summary only and there are important details that may apply to an individual situation. Reference is made to the Act at 31 USC 53 Subch II Section 5336 and the regulations at 31 CFR Part 1010.380. You are strongly advised to read the law and regulations and consult with an attorney or other professional before filing or deciding not to file.

In addition, FinCEN has published a Small Entity Compliance Guide, FAQs and other information here.

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Tax Alert: You Got a Call From the IRS – Now What?

Posted on April 8, 2024 by Hanna Hefner

The Internal Revenue Service has received substantial funding from Congress, and the fruits of that funding are beginning to become apparent. If your business or anyone you know is contacted by the IRS, it is important to know how to respond. Here are some guidelines:

Unsolicited Telephone Call from someone identifying as an employee of the IRS: DO NOT ENGAGE! This call is either spam or something more nefarious. The IRS never calls a taxpayer unless the taxpayer has consented to the call. Even in that situation, the IRS wants everything memorialized in writing. Do not respond to telephone calls. Do not give any financial information to someone over the phone, via text or via email.
Letter from the IRS: Make certain that the letter is legitimate. The IRS Letter will include the identification number of the taxpayer such as a Social Security Number or Employer Identification Number (although possibly only the last four digits). The letter should also include instructions regarding the next steps and will give the IRS employee’s contact information. If you have any suspicion that the letter may not be legitimate, call the contact person on the letter to verify. Even in that situation, do not give that person any financial information, Social Security Number/Taxpayer Identification Number or other identifying information. All of that information should be communicated in writing by mail or fax (yes, the IRS still uses faxes as a means of communicating). The IRS only uses encrypted emails, and only with taxpayers that have signed up to communicate via online communications. Never send information to an email address that is not encrypted. That is not a legitimate inquiry from the IRS.
Legitimate Letter from the IRS: Do not panic! The process with the IRS is a long and slow road with many detours along the way. The IRS mails many letters that are issued automatically via computer. These letters are intended to intimidate taxpayers to get them to comply with whatever it is that is being requested. It is best to read all of the fine print and take advantage of all of the appeal rights available to taxpayers. The IRS makes mistakes. It is important to take the time to hold the IRS accountable, find the mistakes and get to a fair and equitable conclusion for all parties.

This communication is not intended to be and is not legal advice. Every taxpayer’s situation is unique. If you have any questions, please contact Nancy Ortmeyer Kuhn at nkuhn@shulmanrogers.com.

Employment Law Alert: D.C. Expands Coverage of Minimum Wage Law

Posted on March 1, 2024March 1, 2024 by Hanna Hefner

On January 10, 2024, D.C. Mayor Muriel Bowser signed an amendment to D.C.’s minimum wage law that expands the coverage of the law to include individuals working 2 or more hours a week in D.C. Prior to the amendment, the law applied to individuals who regularly spend more than 50% of their working time in D.C. or the employee’s employment is based in D.C. and they regularly spend a substantial amount of their working time in D.C. and not more than 50% of their working time in any particular state. D.C.’s minimum wage law requires non-tipped employees to be paid $17.00 per hour, and tipped employees $8.00 per hour. Effective July 1, 2024, these rates will be increased to $17.50 per hour and $10.00 per hour, respectively.

It is important to note that D.C.’s minimum wage law only applies to hours worked in D.C. This may result in an employer having to pay two different hourly rates to an employee who works in both D.C. and another state in the same week. For example, if an employee works in Maryland for 35 hours in a week and earns Maryland’s minimum wage rate of $15.00 per hour, and also works 5 hours in D.C. that same week, the employee would earn $15.00 per hour for 35 hours and $17.00 for 5 hours.

The text of the amendment is available here.

If you have any questions about this Alert, we encourage you to contact your Shulman Rogers contact for solutions and recommendations for addressing these issues.

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Employment Law Alert: DOL Issues Final Rule Requiring Successor Contractors to Offer Employment to Predecessor Employees Under the Service Contract Act

Posted on February 14, 2024 by Hanna Hefner

The U.S. Department of Labor recently issued a final rule implementing Executive Order 14055 (EO), which requires federal contractors and subcontractors on certain successor federal service contracts to offer employment to service employees on predecessor contracts. The final rule is effective February 12, 2024 and applies only to contract solicitations issued on or after that date by the Federal Acquisition Regulatory Council.

The final rule and FAQs prepared by the DOL state, among other things:

The final rule applies to any contract, contract-like instrument or subcontract for services covered by the Service Contract Act. It does not apply to prime contracts under the simplified acquisition threshold (currently $250,000) and any subcontracts of any tier under such prime contracts.
Contracting agencies are responsible for determining whether a solicitation is covered by the EO, deciding whether to waive the requirements of the EO and conducting a “location continuity” analysis to consider whether to include a location-continuity requirement or preference in a covered solicitation.
Contracting agencies must send the successor contractor a certified list of names of the employees working under the predecessor prime contract and any subcontract.
Successor contractors must make written job offers to service employees who were employed under the predecessor contract. The successor contractor must offer employment even if it does not receive a list of employees on the predecessor contract (in which case, it is required to accept other reliable evidence of a worker’s right to receive a job offer). Employees must be given at least 10 business days to consider and accept the offer. The offer does not need to be for a position similar to the one the employee previously held—it just needs to be a position for which the employee is qualified. The offer also may include different employment terms and conditions, including changes to pay, benefits or the option of remote work, as long as the different terms are not offered to discourage the employee from accepting the offer.

If you have any questions about this Alert, we encourage you to reach out to your Shulman Rogers contact for solutions and recommendations for addressing these issues.

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Employment Law Alert: D.C. Enacts New Pay Transparency Law

Posted on February 12, 2024 by Hanna Hefner

On January 12, 2024, D.C. Mayor Muriel Bowser signed the Wage Transparency Omnibus Amendment Act of 2023, which will require employers with at least one employee in D.C. to post the pay ranges and benefits information for open positions. The Act also increases protections for employees and applicants to inquire about and discuss compensation. The Act takes effect on June 30, 2024.

The Act requires employers to provide “the minimum and maximum projected salary or hourly pay in all job listings and position descriptions advertised.” Employers also must disclose available benefits to prospective employees before the first interview. Notably, the Act does not define “job listing” or “position description advertised.” The Act is also silent about whether it covers jobs outside of D.C., including remote positions.

In addition, the Act prohibits employers from screening applicants based on their wage history. It also prohibits employers from requesting or requiring that applicants disclose their wage history, and from seeking an applicant’s wage history from a prior employer. Employers also must post a yet-to-be-developed notice in the workplace regarding the Act.

If you have any questions about this Alert, we encourage you to reach out to your Shulman Rogers contact for solutions and recommendations for addressing these issues.

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Divorce & Family Law Legal Alert: D.C. Removes the Waiting Period Requirement for Divorce and Legal Separation Filing

Posted on February 5, 2024April 4, 2024 by Laura Gastwirth

2024 brings a significant change to grounds for divorce and legal separation in the District of Columbia. Previously, D.C. law required that parties be either mutually and voluntarily separated for at least six (6) months, or separated for one (1) year (regardless of whether the separation was mutual and voluntary), prior to filing for divorce.

Effective January 26, 2024, under the new law known as the “Grounds for Divorce, Legal Separation, and Annulment Amendment Act of 2023”, parties are no longer required to live separate and apart for any amount of time in order to file for divorce, legal separation or annulment. The Court may grant a divorce upon the assertion by one or both of the parties that they no longer wish to remain married. Additionally, the Court may grant a legal separation upon the assertion by one or both of the parties that they intend to pursue a separate life without obtaining a divorce.

The same law also brings additional changes to D.C. domestic relations law. Specifically, the Court is now required to consider the “history of physical, emotional or financial abuse by one party against the other” when making an award of alimony and/or a determination as to allocation of marital property. This is a step beyond the Court’s previous and more limited consideration of making a legal finding of “intrafamily offense.”

Lastly, under the new law, the Court can now order exclusive use and possession of a marital home during the pendency of litigation to one party, regardless of whether that party holds an ownership interest in the marital home.

If you are considering filing for divorce or legal separation in the District of Columbia, or have a divorce action that you believe may be impacted by this new law, please contact Shulman Rogers.

Tracy E. Phillips is a family law attorney who handles cases involving divorce, custody and support in both Washington, D.C. and Maryland. For more information, contact Tracy at TPhillips@shulmanrogers.com.

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Employment Law Alert: Virginia’s Non-Compete Wage Cap Rises in 2024: What It Means for Employers and Employees

Posted on February 1, 2024 by Hanna Hefner

In 2020, Virginia enacted Virginia Code § 40.1-28.7:8 which makes non-compete agreements unenforceable for “low-wage earners” in Virginia and prohibits employers from entering into, enforcing, or threatening to enforce a covenant not to compete with any “low-wage employee.” The law defines “low-wage employee” as one whose average weekly earnings are less than the average weekly wage of the Commonwealth, as determined annually in January by the Virginia Department of Labor and Industry.

On January 16, 2024, the Virginia Department of Labor and Industry announced that the average weekly wage was determined to be $1,410. This establishes the 2024 annual salary threshold at $73,320, under which non-compete agreements are not enforceable in Virginia. It is important to note that this regulation does not apply to employees who primarily earn through commissions and bonuses.

The increase in the salary threshold for non-compete agreements marks an increase from the previous limit of $69,836. Since the law’s introduction in 2020, there has been an upward adjustment of nearly $14,820. Importantly, the law targets agreements made post-July 1, 2020, but also extends to current agreements, potentially rendering some non-competes unenforceable against employees who now fall under the updated wage threshold.

Employers must tread carefully, as violations of this law can lead to serious financial penalties. Affected employees have the right to pursue legal action, which can include seeking damages, lost wages and legal fees. Employers could face civil penalties as high as $10,000 per violation. This law aligns Virginia with other states that have similar restrictions, emphasizing a growing national movement to limit the use of non-compete clauses, particularly for low-wage workers.

The national landscape is also shifting. The Federal Trade Commission’s proposal in early 2023 to ban most non-compete agreements, along with the National Labor Relations Board’s stance against them, signifies a strong federal interest in curbing these restrictive practices. Given these developments, employers are advised to conduct thorough audits of their post-employment agreements to ensure compliance with both state and potential federal regulations.

If you have any questions about this Alert or the use of non-compete agreements, we encourage you to reach out to your Shulman Rogers contact for solutions and recommendations for addressing these issues.

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Employment Law Alert: New D.C. Paid Family Leave Poster

Posted on January 31, 2024January 31, 2024 by Hanna Hefner

The D.C. Department of Employment Services recently issued an updated Paid Family Leave poster to be displayed in the workplace, which is available here. The poster was updated to reflect the new maximum weekly benefit amount of $1,118. The previous maximum weekly benefit amount was $1,049.

If you have any questions about this Alert, we encourage you to reach out to your Shulman Rogers contact for solutions and recommendations for addressing these issues.

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New Maryland Minimum Wage Rate and Poster

Posted on January 19, 2024January 19, 2024 by Hanna Hefner

Maryland’s minimum wage rate increased to $15.00 per hour for all employers, regardless of size, effective January 1, 2024. The tipped wage rate remains at $3.63 per hour. The Maryland Department of Labor has issued an updated minimum wage poster to be displayed in the workplace, which is available here.

Don’t forget – employees working in Montgomery County might be subject to a different wage rate, depending on company size.

If you have any questions about this Alert, we encourage you to reach out to your Shulman Rogers contact for solutions and recommendations for addressing these issues.

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