“All politics is local,” former U.S. Speaker of the House Tip O’Neill is said to have made famous (even though he did not originate it). We are not quite there yet with employment laws, but increasingly state and even local legislatures are adding new wrinkles for employers. So employment law is a lot more local than it used to be, and becoming more so.
You do not have to have bricks and mortar in a state or city for their laws to matter to you. Remote workers could possibly make your company subject to a jurisdiction’s laws. So could the fact that you are competing with a company in another jurisdiction; you might find another state’s laws being applied to your noncompete agreement.
First, some quick historical background. Not all employment law has historically been federal – indeed, Ohio passed a Civil Rights Act addressing race discrimination in 1959, five years before its federal counterpart. But for decades federal law generally led the way – Title VII of the Civil Rights in 1964, the Age Discrimination in Employment Act in 1967, the Americans with Disabilities in 1990, the Civil Rights Act of 1991, and the Family and Medical Leave Act of 1994 are key building blocks. States could have additional requirements, but for the most part employers complying with those federal laws were complying with the law.
First slowly, and in recent years more quickly, that has started to change. Two areas have stood out for some time as those with significant local variations. One is drug testing laws, where different states have very different requirements employers must meet to drug test employees. Sometimes some of the more stringent requirements are not where you might expect (e.g. Iowa).
The other area marked for a longer period of time by state law variations is noncompete agreements. Suffice it here to say that states vary significantly in how they treat noncompetes, and you may find yourself litigating a noncompete issue under a different state’s law than you expected. (Ohio is on the pro-enforcement side of the spectrum by the way.)
In the last decade or so, and seemingly with increasing frequency, more and more states and municipalities are legislating a variety of employment law issues. For starters, about half of the states had some noncompete legislation introduced in 2021. Not all legislation becomes law of course, but there is an increasing array of different noncompete rules in different states.
Minimum wage and other wage and hour issues are a common subject of state and local legislation. Different jurisdictions may have greater discrimination protections than others. The most notable example is the prohibition of discrimination on the basis of sexual orientation or gender identity. That variation was diminished somewhat by the U.S. Supreme Court decision in 2020 that Title VII prohibits such discrimination in employment, but there are still variations both across states and cities. (See this map from Equality Ohio for some of those.)
Often variations result from more employee-friendly states or cities passing laws that would not get passed at a federal or state level. (And sometimes states try to limit what cities can do in that regard, as the Ohio General Assembly did a few years ago when Cleveland sought to have its own minimum wage.)
COVID of course saw a wide range of different laws in different locations, with variations tending to track red vs. blue areas. Not all variations are partisan, though – while states with more noncompete bells and whistles tend to be more employee friendly in general, that is not uniformly true and there seems to be gradually growing sentiment against at least some aspects of noncompetes.
Can’t an employer just say what law will apply? Sometimes yes – for example, often a “choice of law” clause in a contract such as a noncompete will be respected by a court. That is not always the case though. And when it comes to discrimination and wage/hour and other employment laws, typically the applicable state’s statute will dictate whether its law applies, and it can be a low threshold for your company to be covered by that state’s laws, not only with respect to employees working in that state but perhaps with respect to reporting and other requirements.
It is a tough job for any employer to keep track of it all, particularly for a newer or smaller company. There are various online resources that can help you do it, but make sure you have something in place to make sure you are not inadvertently missing laws that apply to you. That gets more likely with each new law.
This article should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.
Barnes & Thornburg LLP is a national, Midwestern-based business law firm that strives for a more entrepreneurial and cost-effective approach both to client service and its own business. Read more Metropreneurial Legal Insights.