In the third installment of our 2021 Trade Secrets Webinar Series, Seyfarth attorneys Dan Hart, Kevin Young, and Cary Burke outlined the connection between wage and hour law and restrictive covenant law. We addressed how these important and impactful areas of employment law intersect and can, if not managed appropriately, create layered and compounding risks for employers. We also addressed practical tips for managing those risks, such as conducting proactive audits and considering arbitration clauses.
As a conclusion to this webinar, we compiled a summary of takeaways:
- Wage and hour lawsuits continue to be one of most common types of employment lawsuits that employers face.
- Meanwhile, with data being more important, and more accessible to employees, than ever before, restrictive covenants remain one of the most important tools in an employer’s toolkit.
- Even if not obvious, these two forces—wage and hour lawsuits on the one hand and restrictive covenants on the other—can converge and feed one another. Many states, for example, expressly or implicitly look to statutory overtime exemptions to define which types of workers may be bound by a non-compete promise. Other states limit non-compete covenants to employees who earn compensation above a certain level or perform duties that are typically associated with exempt employees.
- Given the potential for a restrictive covenant action to feed an exempt misclassification claim, or vice versa, it is important for employers to take proactive steps to ensure proper classification of employees. In addition, multi-state employers relying on restrictive covenant agreements are well-served to periodically assess their standard restrictive covenant agreements to ensure consistency with state-specific laws, including laws restricting the types of employees who may be bound by such an agreement.
Because of the ever-evolving nature of restrictive covenants and wage and hour law, it is more important than ever for employers to stay abreast of the latest legal developments to ensure that the company’s template restrictive covenant agreements are compliant with applicable laws and meet business needs without posing unintended risks. If your company has not recently reviewed and revised its template restrictive covenant agreements, please contact a member of Seyfarth’s Trade Secrets, Computer Fraud & Non-Competes practice group for help.