From: North Dakota Employment Law Letter | 07/01/2019
From January to April 2019, the North Dakota Legislature convened for its 66th Legislative Assembly. Both the house and the senate introduced several employment-related bills, which were met with varying degrees of success. Read on to find out more about the most notable employment bills from this year’s session and whether they passed or failed.
Noncompete provisions in contracts
House Bill (HB) 1351 revised North Dakota’s law related to contractual noncompete provisions. Before the revision, the law generally prohibited any contract restraining an individual or entity from exercising a lawful profession, trade, or business unless there was the sale of a business’s goodwill or a partnership dissolution. HB 1351 didn’t modify the general prohibition against noncompete provisions in contracts, but it did slightly expand the exceptions to the prohibition, likely to reflect modern-day business transactions.
With respect to the goodwill sale exception, HB 1351 added language that both a person who sells a business’s goodwill and the person’s partners, members, or shareholders may agree the person must refrain from carrying on a similar business in conjunction with the sale. Where the current law restricted the noncompetition to “a specified county, city, or a part of either,” the bill provides that the restriction may be within a “reasonable geographic area and for a reasonable length of time.” Under the current law and the bill, however, it’s clear the restriction can be in place only if the buyer or the person deriving title to the goodwill carries on a similar business in the restricted area.
HB 1351 expanded the partnership exception’s application to not only a partnership’s dissolution but also the dissociation of only one partner from a continuing partnership. The bill also expanded its application to limited liability companies and corporations as well as partnerships. Therefore, partners, members, and shareholders may now agree that all or any of them will not carry on similar businesses as part of an agreement to dissolve or dissociate from one of these types of entities. Lastly, where the current law required the restriction to stay within the same city as the partnership, HB 1351 allows the restriction to be within a “reasonable geographic area,” provided the business was transacted in that area.
Likely much to the excitement of businesses in North Dakota, HB 1351 passed and was signed by Governor Doug Burgum. It will take effect on August 1, 2019. Although it will provide businesses more latitude to include noncompete provisions within certain types of contracts, remember the general prohibition against noncompetes in employment contracts with employees still exists. Additionally, what constitutes a “reasonable geographic area” or a “reasonable length of time” isn’t defined in the new law, so the terms may be subject to interpretation in the future.
Investigations of wage collection claims
Senate Bill (SB) 2145 added teeth to the enforcement efforts of the labor commissioner when investigating wage collection claims. It allows the commissioner to require the attendance of witnesses or the production of documents at any wage claim hearing or during any wage claim investigation. If a witness refuses to appear or produce the documents, the commissioner may issue a subpoena to compel attendance or production. If the witness refuses to obey the subpoena, the commissioner may further petition the district court for an order requiring compliance.
SB 2145 also removes a sunset provision related to the amount of wages the state labor department is able to investigate for a wage claim. The current law provides the department may only review wage claims of at least $125 but no more than $15,000. Anything lower than $125 may be heard by small claims court, and anything higher than $15,000 must be heard by a district court. This limitation was set to be removed on July 1, 2019, but the bill amended the law to keep the investigatory amounts in effect.
Both chambers passed SB 2145, and the governor signed it on March 6. Because it was deemed an “emergency measure,” it went into effect on July 1.
Protections against sexual orientation discrimination
SB 2303 took another stab at amending the North Dakota Human Rights Act (NDHRA) to prohibit discrimination based on sexual orientation. The bill expressly added sexual orientation as a protected class, defining it as “actual or perceived heterosexuality, bisexuality, homosexuality, or gender identity.” The bill further defined gender identity as “actual or perceived gender-related identity, appearance, or mannerisms, or other gender-related characteristics of an individual, regardless of the individual’s designated gender at birth.” Finally, it added certain religious exemptions.
Many states have passed protections similar to those proposed by SB 2303. Just like in past years, however, the bill failed to pass in North Dakota. Given the issue’s nationwide attention and the number of prior attempts by the legislature to pass sexual orientation protections, a similar bill could very well resurrect itself in a future state session. Whether the house or senate attempt to introduce another bill in the future may also depend on how the U.S. Supreme Court rules on the issue of whether Title VII of the Civil Rights Act of 1964 (the federal law that extends to most employers) protects sexual orientation and/or gender identity status in employment. A ruling from the Court is anticipated within the next few months.
Paid family and medical leave
HB 1509 was a bill to enact a new chapter under North Dakota’s workforce safety and insurance laws to create a paid family medical leave fund. Under the bill, the paid family medical leave program would require all eligible employees and any employer with more than 49 employees to contribute two cents for every $10 earned. The bill defined an “eligible employee” as one who works for a single employer at least 25 hours per week. Employees could take paid leave for personal medical reasons or to care for a family member once they had been employed with the same employer for at least 12 consecutive months and had accrued at least 1,000 hours of service in the 12 months before taking leave.
Under the program, eligible employees would receive 66 percent of their wages for up to 12 calendar weeks while on approved leave. They also could maintain their existing benefits while taking leave and could return to their same position, or an equivalent position. An employer, however, could require employees to use up to two weeks of sick or vacation leave before using paid leave. Lastly, the bill provided protections to employees against retaliation from employers when requesting or taking leave under the program.
The house tacked on similar paid leave requirements in another bill (HB 1484), but both bills ultimately failed to pass. So, for the time being, private-sector employers aren’t required to provide any paid leave for family or medical reasons. Keep in mind, however, you may still be required to provide unpaid leave under the federal Family and Medical Leave Act (FMLA) or other laws.
HB 1293 amended the NDHRA and the state’s day-of-rest statute by eliminating an employer’s ability to claim an undue hardship when employees request time off to attend worship services. In other words, the bill made it an absolute requirement for employers to grant religious accommodations in those circumstances. It also removed the law’s limited application only to businesses that sell merchandise at retail, thereby extending its reach to all North Dakota employers. After committee, the bill was amended to allow extremely limited circumstances under which employers could deny religious accommodations.
Although the house adopted the amendment, the bill ultimately failed and never made its way to the senate. Consequently, North Dakota employers may maintain the status quo when assessing religious accommodation requests. The current law requires North Dakota retail employers to grant employees time off for rest or worship unless honoring them would cause substantial economic burden or would impose a significant burden on other employees required to cover their shifts or if the employer has made a reasonable effort to accommodate the requests.
The North Dakota Legislature introduced several employment-related bills this session. They all largely flew under the radar in terms of media coverage or publicity. For the few bills that did pass, it’s important to review them and understand their implications for your business, if any.
The author can be reached at [email protected].