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The FTC’s Updated Endorsement Guides: Do They Say More Than We Already Know?

On June 29, the Federal Trade Commission (FTC) published its updated Guides Concerning the Use of Endorsements and Testimonials in Advertising (“Guides”), together with an FAQ document, FTC’s Endorsement Guides: What People Are Asking (“FAQ”). One day later, it announced its proposal for a new Trade Regulation Rule on the Use of Consumer Reviews and Testimonials (“Trade Regulation”). In the spirt of the FTC’s FAQ, we figured we would post a brief one of our own, highlighting some of the big changes (and non-changes).

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Minnesota Legislature Agrees to Complete Ban on Noncompetes

On May 11, 2023, the Minnesota Legislature agreed to a new law rendering void and unenforceable all future covenants not to compete, with limited exceptions for agreements entered into in connection with the sale or dissolution of a business. Following a final vote in the House and Senate, the law will be sent by Gov. Tim Walz for his signature. The law is written to take effect July 1, 2023, and to apply to contracts and agreements entered into on or after that date. With enactment, Minnesota will become the fourth state to impose a complete ban on employment-related noncompetes (joining California, Oklahoma and North Dakota).

The law prohibits any noncompete agreement with an employee or independent contractor that restricts the person from working for another business after termination of employment or independent contractor engagement regardless of a person’s income, with only two very limited carveouts for noncompetes agreed upon (1) during the sale of a business where the agreement prohibits the seller from carrying on a similar business within a reasonable geographical area for a reasonable period of time, or (2) in anticipation of the dissolution of a business where the dissolving partnership or entity agrees that all or any number of the partners, members, or shareholders will not carry on a similar business in a reasonable geographical area for a reasonable period of time. Subject to those limited exceptions, the law provides that any “covenant not to compete” contained in a contract is void and unenforceable. Importantly, a “covenant not to compete” does not include nondisclosure, confidentiality, trade secret, or non-solicitation agreements (including specifically those restricting the ability to use client or contact lists or restricting the solicitation of customers). Also, because “covenant not to compete” is defined in terms of prohibiting conduct “after termination of the employment,” the new law will not prohibit agreements that restrict an employee or independent contractor from working for another business while performing services for a business.

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“Greenwashing” Claims Strike Consumer-Facing Companies: How to Avoid the Increasing Threat of Litigation

Consumers are increasingly conscious of how the products they buy impact the environment. Due to this heightened focus on environmental issues, consumer-facing companies frequently highlight the environmentally friendly attributes of their goods and services in advertising and on product labels. Unfortunately, leading companies are facing a wave of “greenwashing” class action lawsuits challenging these environmental claims. The Federal Trade Commission’s Green Guides provide some direction for companies seeking to avoid problematic environmental claims. However, the Green Guides are currently nonbinding and they do not preempt state law. The plaintiffs’ bar has seized upon this ambiguity and many preeminent companies have faced greenwashing class actions alleging claims under state consumer fraud statutes and related common law theories of liability. The FTC has also filed lawsuits against several companies. Consumer-facing companies should take immediate action to assess whether they are complying with the Green Guides and to review their exposure to greenwashing claims.

This article provides a high-level overview of the FTC’s Green Guides, analyzes the recent wave of greenwashing class actions and identifies practical strategies that companies can use to mitigate the risk of greenwashing litigation.

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Retail Employers and the National Labor Relations Act

The recent trend of increasing union activity in retail and service industry workplaces makes it imperative that retailers, even those that do not have a unionized work force, understand the National Labor Relations Act (“NLRA”), and the ways the NLRA (as interpreted and enforced by the National Labor Relations Board “NLRB”) can impact an employer’s ability to protect its brand image through standard practice such as employee uniforms, severance agreements, and restricting certain activities on their premises.

Union organizing and election successes are on the rise at retail and service industry locations. Since December of 2021, employees at nearly 300 Starbucks locations have voted to unionize. At the end of 2022, approximately 5% of all retail workers were represented by labor unions and the trend of increased unionization shows no sign of reversing.

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The Class Action Playbook: Immediate First Steps for Companies Defending Against Consumer Class Actions

Class action litigation is a significant risk for consumer-facing companies. An adverse outcome in a class action case can result in astronomical liability. Moreover, defending a class action may consume company resources and divert attention from core business objectives. To mitigate these risks, executives and in-house lawyers must take deliberate and decisive action when presented with a newly filed class action case, a litigation threat letter or mounting consumer complaints that appear to be headed toward litigation.

The list below outlines the first steps a company should take to gather and preserve the information that may be necessary to defend against consumer class action claims. For each of these steps, it is imperative that in-house attorneys or outside counsel take the lead to ensure preservation of the attorney-client privilege and attorney work product protections.

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New NLRB Decision Limits Severance Agreement Terms for Employers

The National Labor Relations Board (Board) issued a decision in February which should be on every employer’s radar, even if your employees are not unionized. The decision, McLaren Macomb, 372 NLRB No. 58 (Feb. 21, 2023), limits the confidentiality, non-disclosure, and non-disparagement terms employers may include in severance agreements with their lower-level employees. In the decision, the Board reversed course from two recent decisions which provided more latitude to employers in what they could include in agreements with former employees as long as signing the agreement was voluntary and the agreement was not offered under coercive conditions.

In McLaren Macomb, the Board snaps back to its earlier line of cases that held that provisions in a severance agreement that restrict an employee’s participation in the Board’s unfair labor practice proceedings violate the National Labor Relations Act (the Act). The Board also signaled that it may expand on this precedent, testing not just whether a severance agreement interferes with participation in an unfair labor practice proceeding but also whether it restricts an employee’s ability to exercise other rights protected by Section 7 of the Act. Because Section 7 gives employees the right to talk about working conditions with other employees and even the general public, broad-based confidentiality and non-disparagement clauses will likely run afoul of the new requirements. In March, the General Counsel issued additional guidance that indicated that the NLRB will broadly interpret this holding and go after not only confidential, non-disparagement, and non-disclosure clauses but any portion of a severance agreement that might restrict a former employee’s participation in Board proceedings or exercising his or her Section 7 rights.

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New California Laws for 2023 and Beyond: What Employers Should Know

In 2022, California Gov. Gavin Newsom signed many laws impacting California employers. Some of the new laws became effective immediately and others, including some that were signed into law just weeks ago, take effect January 1, 2023, or later. These new laws address several topics, including supplemental paid sick leave, pay transparency, leaves of absence and fast-food restaurant employment standards.

As a reminder, the minimum wage in California is increasing to $15.50 per hour on January 1, 2023, for all employers — regardless of the number of workers employed by an employer. Also, many cities and local governments in California have enacted minimum wage ordinances exceeding the state minimum wage.

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California’s new “Pink Tax Law”

California’s new “Pink Tax Law,” Cal. Civ. Code § 51.14, which prohibits charging a higher price to one gender vs. another for similar services, takes effect on Jan. 1, 2023. On paper, California’s law resembles a New York law, Gen. Bus. Law § 391-u, that has been on the books for more than two years. In practice, the breadth of California’s Unfair Competition Law is likely to yield a bevy of cases testing the boundaries of the Pink Tax Law, with consumer products companies and retailers as the unfortunate victims of these tests.

The Pink Tax Law prohibits businesses from “charg[ing] a different price for any two goods that are substantially similar if those goods are priced differently based on the gender of the individuals for whom the goods are marketed and intended.” The law considers two items to be “substantially similar” if (1) there are no substantial differences in the materials used to produce them, (2) the intended use is similar, (3) the functional design and features are similar, and (4) the brand is the same or both brands are commonly owned. Defenses that might justify higher prices include the amount of time, effort, and cost involved in manufacturing the two products. As a practical matter, however, at least in many cases, these will not be defenses that companies will be able to invoke at the motion to dismiss stage.

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