Businesses are constantly challenged by the ever-evolving landscape of labor and employment law, with new legislation and judicial developments occurring almost daily fueling a seemingly never-ending stream of litigation. For companies operating in multiple states, complying with this patchwork of federal, state, and local laws and developments can be daunting. Knowing these issues are a top concern for management and in-house counsel, Morrison Foerster keeps pace with this rapidly evolving landscape. MoFo ELC equips our clients with the most up-to-date and relevant information on employment and labor law issues covering key judicial, litigation and legislative developments, their implications for employers, and strategies to ensure compliance and avoid lawsuits.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Co-Chair, Global Employment and Labor Practice

Partner

Andrew Turnbull represents companies on a broad range of labor and employment litigation and counseling matters. He has successfully defended clients in complex employment litigation before federal and state courts and administrative agencies. A primary focus of his practice involves helping companies navigate the unique employment issues that arise when doing business with the federal government, including advising on all aspects of OFCCP compliance, creating and implementing affirmative action plans, defending OFCCP audits and onsite investigations, conducting mock pay equity audits, drafting and developing business ethics policies and programs, and complying with the Service Contract Act, E-Verify, and the Drug Free Workplace Act.

Andrew Turnbull

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MoFo ELC equips our clients with the most up-to-date and relevant information on employment and labor law issues, covering key judicial, litigation, and legislative developments, their implications for employers, and strategies to ensure compliance and avoid lawsuits. To learn more about our capabilities, please visit the <a href="https://www.mofo.com/capabilities/employment-labor" target="_blank">Employment + Labor</a> practice page and read about our <a href="https://www.mofo.com/people?practices=Employment%20%2B%20Labor" target="_blank">Team</a>.

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The “Preventative Duty”: New Law Places Active Duty on Employers in the UK to Prevent Sexual Harassment in the Workplace

Good News for Employers: Texas Court Blocks FTC’s Non-Compete Ban

Potential Exceptions Under FTC’s Non-Compete Ban

FTC Issues Final Rule Banning Non-Competes

Maryland Poised to Continue Trend of Jurisdictions Mandating Pay Transparency in Job Postings

In a reversal of Trump-era National Labor Relations Board (the “Board”) precedent, the Board found last week in McLaren Macomb that non-disparagement and confidentiality provisions in a severance agreement violate the National Labor Relations Act (“NLRA”) if those provisions have “a reasonable tendency” to interfere with an employee’s NLRA Section 7 rights. The Board also held that merely offering an agreement with such provisions to an employee is unlawful, even if the employee does not sign it or the employer does not enforce it.Read our <a href="https://www.mofo.com/resources/insights/230228-nlrb-limits-use-of-non-disparagement" target="_blank">client alert</a>.

Andrew co-chairs the firm’s Global Employment and Labor Group. He represents companies on a broad range of labor and employment litigation and counseling matters, successfully defending clients in number complex matters before federal and state courts and administrative agencies.

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Of Counsel

Kwan Park’s practice focuses on employment and labor litigation.
Kwan’s entire legal career has focused on representing employers. He seeks to understand each client’s unique business needs and objectives and relentlessly works to achieve them, whether in employment and labor litigation or in addressing novel legal issues.











Kwan Park

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NLRB Limits Use of Non-Disparagement and Confidentiality Provisions

New Guidance on COVID-19 Protocols for Contractor Employees at Federal Facilities

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In a reversal of Trump-era National Labor Relations Board (the “Board”) precedent, the Board found last week in McLaren Macomb that non-disparagement and confidentiality provisions in a severance agreement violate the National Labor Relations Act (“NLRA”) if those provisions have “a reasonable tendency” to interfere with an employee’s NLRA Section 7 rights.

NLRB Limits Use of Non-Disparagement and Confidentiality Provisions

In a reversal of its prior ruling, the Ninth Circuit recently held that the Federal Arbitration Act (FAA) preempts California Assembly Bill 51 (AB 51), a 2019 measure that aimed to bar employers from entering into new agreements—or extending previous ones—requiring job applicants or workers to arbitrate claims under the California Labor Code or California Fair Employment and Housing Act (FEHA).Read our <a href="https://www.mofo.com/resources/insights/230216-ninth-circuit-reverses-itself" target="_blank">client alert</a>.

Ninth Circuit Reverses Itself and Strikes Down California Law Targeting Mandatory Employment Arbitration Agreements

In a reversal of its prior ruling, the Ninth Circuit recently held that the Federal Arbitration Act (FAA) preempts California Assembly Bill 51 (AB 51), a 2019 measure that aimed to bar employers from entering into new agreements—or extending previous ones—requiring job applicants or workers to arbitrate claims under the California Labor Code or California Fair Employment and Housing Act (FEHA).

Ninth Circuit Reverses Itself and Strikes Down California Law Targeting Mandatory Employment Arbitration Agreements

With a potential recession looming and a growing number of companies announcing significant layoffs almost daily, employers are increasingly considering reductions in force (RIFs) to weather the financial uncertainty in the markets. Although RIFs can be a necessary measure to preserve financial resources and help to refocus business priorities, RIFs can present significant legal and business risks and require thoughtful and careful planning. Employers anticipating a RIF for their U.S. workforce should be prepared to address the following key considerations to help navigate and potentially mitigate the risks associated with a layoff.Read our <a href="https://www.mofo.com/resources/insights/230213-key-considerations-for-navigating-workforce-reductions" target="_self">client alert</a>.

Key Considerations for Navigating Workforce Reductions During Uncertain Economic Times

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Oliver Spratt is Of Counsel based in the London office of Morrison Foerster. 

Oliver Spratt

Key Considerations for Navigating Workforce Reductions During Uncertain Economic Times

With a potential recession looming and a growing number of companies announcing significant layoffs almost daily, employers are increasingly considering reductions in force (RIFs) to weather the financial uncertainty in the markets. 

With California’s new pay transparency and pay reporting obligations under S.B. 1162 now in effect, employers are seeking answers on various open questions for complying with the new law. As we previously reported, S.B. 1162 requires employers with 15 or more employees to include pay scale information in each job posting for positions in California, as well as disclose information to current California employees upon request. Failure to comply with these requirements can result in significant civil penalties (ranging from $100 to $10,000 per violation) and possible government investigations or private lawsuits.  Read our <a href="https://www.mofo.com/resources/insights/230117-new-guidance-on-californias-pay-transparency-law" target="_self">client alert</a>.

New Guidance on California's Pay Transparency Law

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New Guidance on California's Pay Transparency Law

Practical Considerations for Navigating the Upcoming Federal Ban on Predispute Arbitration and Class Action Waivers of Sexual Harassment and Assault Claims

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With California’s new pay transparency and pay reporting obligations under S.B. 1162 now in effect, employers are seeking answers on various open questions for complying with the new law.

On January 20, 2023, the Office of Federal Contract Compliance Programs (OFCCP) published a list of 500 contractor establishments scheduled to receive advance audit notices known as Corporate Scheduling Announcement Letters (CSALs). CSALs are courtesy letters that OFCCP sends to federal contractors and subcontractors to alert them that one or more of their establishments will likely be scheduled for an OFCCP audit in the coming months. Contractors receiving CSALs are typically scheduled for audits, so they provide a good opportunity for contractors on the CSAL list to check their practices to make sure they are prepared for an audit.  Read our <a href="https://www.mofo.com/resources/insights/230123-ofccp-releases-new-audit-list-for-2023" target="_self">client alert</a>.

OFCCP Releases New Audit List for 2023

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OFCCP Releases New Audit List for 2023

OFCCP Signals Return to More Aggressive and Less Transparent Audits

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On January 20, 2023, the Office of Federal Contract Compliance Programs (OFCCP) published a list of 500 contractor establishments scheduled to receive advance audit notices known as Corporate Scheduling 

20 second read: While courts generally appear to give greater deference to enforcement of sale of business non-competes, at least one Delaware court confirmed that if a court thinks the restrictions go beyond the scope of the business being sold, it may refuse to enforce the non-compete and strike it in its entirety without blue-penciling. A consideration for parties when drafting sale of business non-competes.From the pending <a href="https://www.congress.gov/bill/117th-congress/senate-bill/2375/text">Freedom to Compete Act</a> and potential upcoming initiatives at the <a href="https://www.mofo.com/resources/insights/220805-doj-and-ftc-enter-separate-mous">Federal Trade Commission</a>, to laws recently passed from Washington, to <a href="https://elc.mofo.com/topics/preparing-for-colorados-new-limits-on-employee-non-competes">Colorado</a> to Massachusetts to the <a href="https://elc.mofo.com/topics/dc-council-waters-down-non-compete-ban-while-keeping-some-significant-limitations">District of Columbia</a> and in multiple states in between, there has been an increasing trend across the country in restrictions being placed on non-competes in the employment context. Non-competes in the sale of business context, however, have continued to withstand this trend.  Even jurisdictions such as California that ban or drastically limit non-competes in the employment context allow non-competes in the sale of the business context (with some limitations). Otherwise, courts in general tend to apply a less searching standard for determining the reasonableness of sale of business non-competes, which favors enforcement, since the restricted individuals are selling their business, including their businesses’ confidential information, trade secrets, and goodwill, usually in exchange for significant monetary and other consideration.  As a practical matter, many non-competes in the sale of business context are also governed by Delaware law because, among other reasons, Delaware is a popular state for incorporating companies and generally viewed as being favorable to businesses.In the recent decision of Kodiak Building Partners, LLC v. Adams, 2022 WL 5240507 (Del. Ch. Oct. 6, 2022), however, the Delaware Court of Chancery struck down a sale of business non-compete and refused to blue pencil it because the non-compete sought to prohibit the seller from competing against both the buyer’s existing businesses and what the buyer acquired in the sale.  Despite there being no dispute that the restricted seller breached the non-compete by joining a competitor operating in the same industry as the sold business, the court reasoned that the buyer could not show a legitimate interest to support barring the seller from competing against all of the buyer’s existing businesses in the company group, even though many of those entities were in the same industry as the business that was sold.  And rather than blue pencil it, the court struck it down altogether.BackgroundThe case arose out of what appears to have been a relatively small transaction, in which the plaintiff, Kodiak Building Partners, entered into a stock purchase agreement with Northwest Building Components and Mandere Construction, Inc. (“Northwest”).  Kodiak purchased the companies directly from Northwest’s four stockholders.  One of the stockholders, defendant Philip Adams, was a general manager for Northwest.  Adams received around $1 million in the transaction for the 8.33% interest he held in Northwest.In connection with the deal, Kodiak entered into non-compete agreements with Adams, where Adams agreed to the following non-compete in favor of Kodiak and its subsidiaries and affiliates (together defined as the “Company Group”):Non-Competition.... Adams ... for a period of 30 months beginning on the date hereof (as applicable, the “Restricted Period”), agrees not to ... anywhere in the states of Idaho and Washington, and within a 100 mile radius of any other location outside of those states in which [Northwest, MCI,] or any member of the Company Group have sold products or provided services within the 12 months prior to Closing (the “Territory”), own, manage, operate, control, or participate in the ownership, management, operation or control of, or carry on, be engaged in, permit his, her or its name to be used in connection with, have any financial or other interest in or be otherwise commercially involved in (including as a lender or a donor), any endeavor, activity or business which is similar to or is in competition with the Business or any part of it, or provide any service to any business or Person engaged in the Business....As part of the non-compete, Adams acknowledged the agreement was reasonable and that he was waiving as a defense any issue of reasonableness.It appears that six of the Company Group members provide similar services or products as Northwest: roof trusses.  Id. at *10.  The rest of the Company Group members apparently provide different but related services concerning home improvement, such as “manufacturing, marketing, selling, distributing, installing and/or delivering ... floor and stair components; framing; siding and other building materials and supplies, and providing services with respect thereto, including design, engineering, turn-key solutions, project management and trade coordination services.”  Id. at *12.A little over a year after closing, Adams left Northwest to become general manager of one of its competitors, Builders First Source, Inc. (BFS), which is also a supplier of roof trusses, at a location about 24 miles from where he worked for Northwest.  Shortly thereafter, Kodiak filed a complaint for breach of contract against Adams and moved for a preliminary injunction.  Id. at *3.DecisionIn its briefing, Kodiak pointed to Adams’s failure to cite a single case from Delaware or elsewhere where a court found a sale of business non-compete to be unenforceable.<a href="#_ftn1" target="_self" id="_ftnref1">[1]</a>  The Kodiak court, however, proceeded to do just that, finding the non-compete to be unenforceable because its scope was not supported by a legitimate interest and refusing to blue pencil the restriction to make it enforceable.<ul><li>Agreement Not to Challenge Non-compete Not Sufficient for Injunction: Kodiak argued that it was entitled to an injunction because Adams had stipulated in the non-compete that he would not challenge the reasonableness of the non-compete as a defense.  The court disagreed. Despite acknowledging Delaware’s contractarian nature and acknowledging that there was no authority on point, the court found that “an employee’s promise not to challenge the reasonableness of his restrictive covenants cannot circumvent this Court’s mandate to review those covenants for reasonableness.” </li><li>No Legitimate Interest to Protect Competition Against the Company Group: Kodiak argued that the non-compete was enforceable because: (1) Kodiak had “a legitimate interest in protecting not only Northwest and MCI’s goodwill, but also that of Kodiak, other members of the Company Group, and the Business” and, in the alternative, (2) the non-compete was needed to protect all confidential information about the entire business from misuse. Despite Kodiak demonstrating that Adams knew and had access to confidential information belonging to Northwest and several members of the Company Group, the court found that Kodiak did not have a legitimate interest in enforcing the non-compete to prevent competition against members of the Company Group, other than Northwest. Although the court recognized that buyers have legitimate interests under Delaware law to prohibit sellers from competing “in the relevant industry” and conceded that Adams was violating the non-compete, the court proceeded to draw a line between the goodwill of the seller’s business and the existing goodwill of the buyer’s, at least insofar as the buyer’s goodwill concerned industry “segments” different from what it was getting from the seller through the transaction. The court reasoned:</li></ul><ul><li>Restrictive covenants in connection with the sale of a business legitimately protect only the purchased asset’s goodwill and competitive space that its employees developed or maintained. The acquirer’s valid concerns about monetizing its purchase do not support restricting the target’s employees from competing in other industries in which the acquirer also happened to invest. Kodiak’s legitimate economic interest supporting a restrictive covenant binding a Northwest employee and stockholder does not extend to goodwill and competitive space acquired in other transactions with other Company Group members in other industry segments.</li></ul><ul><li>Court Declined to Blue Pencil: Unable to persuade the court to enforce the non-compete in its entirety, Kodiak asked the court to blue pencil and enforce it as modified. Although the court acknowledged that Delaware is a blue-pencil state, where courts have discretion to modify overbroad non-competes, it declined to exercise that discretion, striking down the entire non-compete.  In doing so, the court relied on cases in the employment context (rather than the sale of the business context), appearing to suggest that Adams had unequal bargaining power with Kodiak. The court also seemed to suggest that it is not appropriate to blue pencil a non-compete in a preliminary injunction order, quoting the following language from a Delaware Supreme Court opinion: “[t]o blue-pencil a contract ... is not an appropriate exercise of equitable authority in a preliminary injunction order.”  Id. at n. 49 (citing C & J Energy Servs., Inc. v. City of Miami Gen. Employees’, 107 A.3d 1049, 1072 (Del. 2014)).  But the full quote from that case indicates that, instead of adopting a categorical rule, the Delaware Supreme Court was taking issue with the manner in which it had been applied—namely blue penciling “to excise a provision beneficial to a third party.”  C & J Energy Servs., Inc. v. City of Miami Gen. Employees’, 107 A.3d 1049, 1054, 1072 (Del. 2014) (“To blue-pencil an agreement to excise a provision beneficial to a third party like Nabors on the basis of a provisional record and then declare that the third party could not regard the excision as a basis for relieving it of its own contractual duties involves an exercise of judicial power inconsistent with the standards that govern the award of mandatory injunctions under Delaware law.”). </li></ul>TakeawaysAlthough it is unclear whether other courts applying Delaware law to sale of business non-competes will follow the Kodiak decision, the case raises certain considerations for companies to keep in mind when drafting or trying to enforce non-competes in the sale of business context in Delaware.<ul><li>Even in the sale of business context, careful consideration should be given to drafting and determining the scope of the non-compete and the legitimate business interests the non-compete is intended to protect.</li></ul><ul><li>If the non-compete will cover a buyer’s existing businesses, consider whether the existing businesses are in the same industry as what the buyer is acquiring.</li></ul><ul><li>If buyer wants to subject individual sellers to non-competes that cover the company’s existing businesses, the non-compete could be even more defensible if the buyer employs the individual seller post-closing rather than have the individual seller remain employed by the acquired entity (as seemed to be the case in Kodiak). In that case, the buyer should also consider having the seller enter into separate employment non-competes in addition to having a non-compete related to the sale of business.</li></ul><ul><li>Care should be paid before blue penciling is relied upon as a guaranteed fail-safe.  Blue pencil often means something different depending on the jurisdiction.  Just because a court is in a jurisdiction where it can blue pencil, does not necessarily mean it will or that it must.</li></ul><a href="#_ftnref1" target="_self" id="_ftn1">[1]</a> Plaintiff’s Reply Brief in Support of Its Motion for a Preliminary Injunction, KODIAK BUILDING PARTNERS, LLC, Plaintiff, v. Philip D. ADAMS, Defendant, 2022 WL 4758315 (Del.Ch.) (“But Adams has failed to cite a single case—from Delaware or otherwise—where the Court found a non-compete entered into in connection with the sale of a business to be unenforceable.  To the contrary, Delaware courts have enforced restrictive covenants much broader than the one at issue here because such restrictions are ‘common-place’ and designed to ‘clear the seller from the competitive space while the buyer strives to make the business he just bought successful.’”).

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Eric Akira Tate co-chairs the firm’s Global Employment and Labor Group. He represents technology and other companies in bet-the-company trade secrets and employee mobility cases.

Eric Akira Tate

Eric Tate chairs the firm’s Global Employment and Labor Group. He has represented technology and other companies in the biggest and most highly-publicized trade secrets and employee mobility cases across multiple industries. Eric also represents companies in whistleblower, wage and hour, and other employment litigation.

Eric Tate

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Cooper Spinelli is a member of the Litigation Department and part of the firm’s Employment & Labor Group. His practice focuses on trade secrets and restrictive covenants, employee mobility and executive disputes, whistleblower claims, and general business litigation.

Cooper J. Spinelli

Cooper Spinelli

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Delaware Court Refuses to Enforce or Blue Pencil Sale of Business Non-compete

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While courts generally appear to give greater deference to enforcement of sale of business non-competes, at least one Delaware court confirmed that if a court thinks the restrictions go beyond the scope of the business being sold, it may refuse to enforce the non-compete and strike it in its entirety without blue-penciling. A consideration for parties when drafting sale of business non-competes.

Delaware Court Refuses to Enforce or Blue Pencil Sale of Business Non-compete

Interested parties now have until December 13, 2022, to provide comments to the DOL’s proposed rule to codify a six-factor, economic reality test to determine who is an “independent contractor” under the Fair Labor Standards Act (“FLSA”), and thus not subject to minimum wage and overtime rules. What does the DOL’s proposed rule change?The DOL’s proposal would rescind a 2021 rule that primarily focused on two core factors—control over the work and opportunity for profit or loss—and considered to a lesser extent the amount of skill required for the work, degree of permanence of the working relationship, and whether the work was part of an integrated unit of production.The proposed test calls for a totality-of-the-circumstances analysis considering the following factors:1. Opportunity for profit or loss depending on managerial skill.2. Investments by the worker and the employer.3. Degree of permanence of the work relationship.4. Nature and degree of control.5. Extent to which the work performed is an integral part of the employer's business.6. Skill and initiative.The proposed test would not assign special weight to any individual factor, nor would the above factors be exhaustive. Additional factors that indicate whether the worker is in business for themselves (as opposed to being economically dependent on the employer for work) would also be relevant to the independent contractor analysis.How can this impact my business?If finalized, the changes could have a significant impact on certain industries—such as the gig economy—that rely on independent contractor business models by reducing the number of workers who can be treated as independent contractors. The DOL’s analysis widens the scope of policies that may evidence “employee status,” calling out policies requiring workers to comply with legal, safety, or regulatory obligations, and placing greater weight on situations when an entity other than the worker sets a price or rate for the goods or services offered by the worker. Notably, the DOL’s test only applies to the FLSA, and it will have a limited impact on businesses operating in states with more stringent tests for classifying workers. For example, California primarily uses the “ABC test,” which presumes workers are employees instead of independent contractors unless the employer proves that the worker is free from the control and direction of the hiring entity; performs work that is outside the usual course of the hiring entity's business; and is customarily engaged in an independently established trade, occupation, or business. However, the rule reflects ongoing moves by federal authorities (including the National Labor Relations Board and U.S. Equal Employment Opportunity Commission) to extend federal worker protections to additional workers, while many state and local agencies are taking a similar approach.How should my business respond?Given increased enforcement focus on independent contractor classifications by federal and state authorities in recent years, it is important for any business that regularly utilizes independent contractors to continually evaluate these classifications and take steps to bolster their defensibility (e.g., by reviewing and revising written agreements, creating worker engagement and classification policies and procedures, and reviewing long-term contractor relationships).The DOL’s 2021 rule will remain in place until a final rule is issued, likely in the first half of 2023. We will continue to monitor developments related to the DOL’s proposed rule and its impact on employers.

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Michael Schulman is a partner in the firm’s Global Employment and Labor Group. Michael has extensive employment and labor law experience, regularly advising clients in connection with workforce related counseling, investigation, transactional, and litigation matters. 

Michael Schulman

Department of Labor (“DOL”) Extends Comment Period Deadline for Proposed New Independent Contactor Test

Interested parties now have until December 13, 2022, to provide comments to the DOL’s proposed rule to codify a six-factor, economic reality test to determine who is an “independent contractor” under the Fair Labor Standards Act (“FLSA”), and thus not subject to minimum wage and overtime rules. 

Department of Labor (“DOL”) Extends Comment Period Deadline for Proposed New Independent Contactor Test

Following the enactment of the Directive on Transparent and Predictable Working Conditions (the “Directive”), EU Member States have had to implement into their national laws additional information obligations on employers. The deadline for the transposition of the Directive into national law was August 1, 2022. The Directive extends existing provisions based on a former EU directive and broadly follows the UK regime, which has itself broadened in scope in recent years. To avoid falling foul of these new and expanded requirements—which could result in substantial fines—companies with employees across the EU and the UK should review their existing employment contract templates for new hires and take steps to provide all required information to existing employees, whilst also taking into account any “special rules” that might apply in a particular country.I. How does the Directive impact employers with EU-based employees?Extended content requirementsEmployers are required to provide their employees based in the EU with information on the essential terms and conditions of their employment relationship. Whilst this is not a new concept—similar requirements have been in place under a former EU directive since 1991—and it was always common practice throughout the EU to provide employees with an employment agreement containing the key terms of their employment (such as remuneration, working hours, position, etc.), the Directive transforms this practice into a mandatory and publishable obligation, by obliging EU Member States to prescribe penalities for breaches of the information obligations. In addition, the catalogue of terms to be provided (set out in full at the end of this article) includes information that has not traditionally formed part of contract templates in the EU.These changes affect not only new employment relationships, but also existing employees. Employers are now required to fulfill the information obligations and provide all new employees with a document containing the necessary information, and existing employees are entitled to receive a summary of their essential working conditions upon their request.New mandatory deadlinesThe Directive stipulates different deadlines within which employers need to provide the relevant information to their employees. The most essential terms, such as the identity of the contractual parties, remuneration, and working hours, must be provided within the first seven days of employment. The remaining terms (described below) should be communicated within the first month. In Germany, some information, such as the employer’s (legal) name and address, the remuneration, and the agreed-upon working hours, even must be provided by the first day of employment at the latest. Employers should adhere to the shortest deadline, as set out in the applicable law of the relevant Member State. In Germany, each infringement of the information obligations, including a delayed handover, is considered an administrative offense that can be punished with a fine up to EUR 2,000 per case (i.e., per employee).Form of informationThe Directive requires the information to be provided in writing, either on paper or in electronic form. If an employer chooses electronic form, the employee must be able to store and print the document, and the employer should receive a proof of transmission. This information is usually provided in the form of an employment agreement. Typically, most of the information prescribed by the Directive is already included within employment contracts and employers will need only update their template documents to include all necessary information. No separate notice is required.Special aspects in GermanyIn Germany, the information obligations prescribed by the Directive are laid down in the Act on Notification of Employment Conditions (Nachweisgesetz). In contrast to the Directive, the German legislation does not allow for electronic signatures to be used within employment contracts. Thus, strict formal requirements apply: employment contracts must be signed by an authorized person and physically handed out to the employee. Signatures must be in wet-ink; the signing of the employment contract via DocuSign, or provision of a scanned copy of the signed agreement to an employee, will not meet Germany’s legal requirements.Any non-compliance with these requirements can be punished with a fine of up to EUR 2,000 per contract. Consequently, companies with larger workforces could be fined huge amounts if they systematically fail to comply with these requirements.II. What about in the UK?Under UK employment law, employers of UK-based employees have been subject to a longstanding requirement to provide written statements of key employment terms to their employees. It has been mandatory to do so for all employees starting work on or after 30 November 1993. Certain terms, those considered most important, must be provided to employees in a single document; these are detailed in section 1 of the UK Employment Rights Act 1996 (the “ERA 1996”) and usually provided to employees in the form of an employment contract. The ERA 1996 provides that other mandatory terms must also be provided in writing, but the details can be set out in supplementary documents, e.g., in a handbook or standalone policies. Written statements can be provided in electronic or paper form and wet-ink or electronic signature is acceptable.Following a review of employment practices in the UK, the government proposed a package of workplace reforms as part of its “Good Work Plan” to increase the transparency between workers and employers and improve the enforcement of employment rights. A key element of the Good Work Plan reforms was ensuring that companies be transparent with contingent and gig-economy workers who do not enjoy the full protection of UK employment laws.<a href="#_ftn1" target="_self" id="_ftnref1">[1]</a> New legislation, which came into force on April 6, 2020, was enacted to implement the reforms proposed by the Good Work Plan, which expanded the scope of the requirement to provide a section 1 statement of terms to give all workers the right to receive a written statement setting out the basic terms of employment, a right previously only available to employees.The new legislation also further amended the requirements under the ERA 1996 so that written statements must now be provided on or before the individual’s first date of employment, rather than within two months of their start date, as previously required, and the scope of the written statement has also been expanded. For example, employers are now required to list, within the primary written statement, all paid leave to which the employee is entitled and all benefits; previously, these items would appear in supplementary documents.Where an employer does not comply with any of the provisions, the employee or worker can bring a claim to the employment tribunal at any time during the period of their employment or engagement, or within three months of termination. If a claim on the above provisions is brought in conjunction with another successful substantive claim, the tribunal is obliged to award the employee or worker a minimum of two weeks’ pay, unless it would be unjust or inequitable to do so (and the award can be up to four weeks’ pay if the tribunal sees fit). It is worth noting, however, that the risks attaching to failure to fully comply with the requirements on written statements of employment terms are low in practice as, absent another substantive claim (e.g., for discrimination or unfair dismissal), the most a tribunal would do would be to ask that the relevant particulars be clarified.III. What practical steps should employers of EU-based employees be taking in light of the Directive?<ul><li>Review and—if necessary—update existing employment contract templates for new hires to include all mandatory terms and conditions;</li><li>Prepare a notice for existing employees to be able to provide them with a summary of the employment conditions without delay;</li><li>Ensure that processes are in place to respond to any statutory requests from employees; and</li><li>Check who needs to be authorized to sign employment agreements and other notices to limit any delay.</li></ul>IV. What are the “mandatory” details that companies must provide to their workforce (in a single or ‘primary’ written statement)?These terms are mandatory for both the UK and the EU:<ul><li>identities of the contractual parties;</li><li>place of work;</li><li>title or a brief description of the work;</li><li>commencement date of the employment or engagement;</li><li>for fixed-term employment relationships: the end date or the expected duration;</li><li>duration and conditions of the probationary period;</li><li>if applicable, the training entitlement provided by the employer;</li><li>amount and nature of paid leave, including holiday leave;</li><li>termination procedure, including the formal requirements, notice periods, and (in some countries) time limits for bringing a lawsuit before the labor court;</li><li>remuneration (base salary and any other compensation);</li><li>length of the worker’s standard working day or week and arrangements for overtime and its remuneration;</li><li>any collective agreements governing the conditions of work;</li><li>except for in the UK, where it is the responsibility of the employer, the identity of the social security institutions receiving the social contributions;</li><li>where the employee or worker will be required to work outside the country of work for a period of one month or more: the period for which they will work outside their country of work, the currency of pay, and any additional remuneration or benefits; and</li><li>additional details in the event that there is a contracting out certificate in force in respect of the employment or any labor leading arrangements apply.</li></ul>For the UK, the following additional terms are also mandatory:<ul><li>terms and conditions relating to holiday entitlement (including public holidays) and holiday pay (sufficiently detailed so that entitlement on termination can be calculated); and</li><li>days of the week required to be worked, whether working hours are variable, and how any variation will be determined.</li></ul>Further, the following terms are mandatory in the UK, but may be provided for in a separate, reasonably accessible policy document so long as they are referenced in the single statement:<ul><li>terms and conditions relating to pension and pension schemes;</li><li>terms and conditions relating to sickness, incapacity, and sick pay;</li><li>disciplinary rules applicable and the disciplinary procedure;</li><li>person to whom the employee or worker should appeal against disciplinary and grievance decisions and the procedure to be followed; and</li><li>any non-compulsory training entitlement</li></ul>Please note that national laws of EU member states may vary with regards to other required terms, so this list must be compared and, if necessary, adjusted to be compliant with the relevant national law.<a href="#_ftnref1" target="_self" id="_ftn1">[1]</a> There are broadly three categories of employment status under UK employment law: employee, worker, and independent contractor. Workers are defined as those with a contract (express or implied) who undertake to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual. In short, personal service is a key element of being a worker; the services cannot be performed by a substitute, unlike with independent contractors. Employees have full statutory employment protection, workers are entitled to some statutory employment protections but not all, and, at the end of the spectrum, independent contractors are treated as commercial parties with no statutory employment rights.

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For more than two decades, Hanno has advised and represented leading domestic and international corporations in a wide variety of industries, including technology, consumer products, automotive, and 

Hanno Timner

Hanno Timner is a partner in the Berlin office and head of the Employment and Labor practice group in Germany. He advises and represents national and international employers in all labor law issues and disputes.

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Senior Associate

Christin is a senior associate at Morrison & Foerster’s German office in Berlin and is a member of the Employment & Labor practice group. She advises national and international companies on all issues

Christin Dunkel

Christin is a senior associate at Morrison & Foerster’s German office in Berlin and is a member of the Employment & Labor practice group. She advises national and international companies on all issues and disputes arising under labor law.

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Associate

Lara Sirimanne is an associate in the London employment practice of Morrison & Foerster. She advises domestic and international clients on the full spectrum of both contentious and non-contentious emp