2024 Midyear Employment Law Compliance Trends

Posted: July 31, 2024 in Compliance , Human Resources

Throughout 2024, there have been significant changes in employment law at the federal, state and local levels. A review of recent and proposed legislation reveals a number of emerging trends that will affect employers for the remainder of the year. Employers should ensure that they are apprised of significant legal developments and are either in compliance or prepared to comply with their requirements.

Federal agencies have been especially active in 2024, passing major regulations, including with respect to overtime compensation, independent contractor classification, the use of noncompete agreements and protections for pregnant workers. In 2024, we’ve also seen the emergence and continuation of a number of state legislation trends. In particular, states have continued to increase minimum wage rates, pass pay transparency laws, expand paid sick leave protections, and broaden protections from discrimination on the basis of hairstyles and hair textures historically associated with race. In addition, states have passed protections for the use of artificial intelligence (AI) in the workplace and captive audience meetings in which employers discuss religious or political matters.

Highlights

Some of the most significant employment law trends in 2024 include:

Increases to the federal salary threshold to be exempt from overtime pay;
Federal ban on noncompete clauses;
Changes to the federal independent contractor rules;
Clarification on the protections for pregnancy and related medical conditions;
State minimum wage increases;
More state “captive audience” bans;
Continued increase in state CROWN Act legislation;
Expansion of pay transparency laws;
Enhanced regulation of AI in the workplace; and
Increased state paid sick leave laws.

Action Steps

The midyear point is a great time for employers to evaluate their compliance with recent and upcoming employment laws. Understanding and responding to these trends will be essential for employers’ success for the remainder of 2024 and beyond.

This Compliance Advisor highlights some of the key employment law trends and challenges that employers will continue to face in 2024 and beyond.

The DOL’s Final Overtime Rule

On July 1, 2024, the U.S. Department of Labor’s (DOL) overtime rule took effect. The new overtime rule amended current requirements employees in white-collar occupations must satisfy to qualify for an overtime exemption under the Fair Labor Standards Act (FLSA). The FLSA requires employers to pay employees overtime pay at a rate of 1.5 times their regular rate of pay for all hours worked in excess of 40 in a workweek unless the employees qualify for an exemption under the FLSA. The FLSA provides several exemptions from the overtime pay requirements, the most common of which are the “white-collar” exemptions. The FLSA white-collar exemptions apply to individuals in executive, administrative, professional (EAP), and some outside sales and computer-related occupations. Some highly compensated employees may also qualify for the FLSA white-collar overtime exemption. To qualify for this exemption, white-collar employees must satisfy the standard salary level test, among other criteria. This salary level is a wage threshold that white-collar employees must receive to qualify for the exemption.

Starting July 1, 2024, the DOL’s final rule increased the standard salary level from:

$684 to $844 per week ($35,568 to $43,888 per year) for EAPs; and
$107,432 to $132,964 per year for highly compensated employees.

On Jan. 1, 2025, the standard salary level will then increase from:

$844 to $1,128 per week ($43,888 to $58,656 per year) for EAPs; and
$132,964 to $151,164 per year for highly compensated employees.

The final rule also includes mechanisms allowing the DOL to automatically update the white-collar salary level thresholds without having to rely on the rulemaking process. Effective July 1, 2027, and every three years thereafter, the DOL will increase the standard salary level.

While the first increase on July 1, 2024, had a significant impact (the DOL estimated nearly 1 million workers were affected), the second increase on Jan. 1, 2025, is expected to have an even greater impact (affecting approximately 3 million workers). Therefore, employers should take steps in the second half of 2024 to ensure that they will be in compliance with the next increase by the new year. However, the new overtime rule is already subject to a number of legal challenges seeking to block its implementation. Depending on the outcome of such cases, the overtime rule may be delayed, modified or even vacated. Therefore, employers should continue to monitor for updates regarding such legal challenges and may want to wait to implement any changes before the date any applicable changes take effect.

The DOL’s Final Independent Contractor Rule

On March 11, 2024, the DOL’s final independent contractor rule took effect. The rule revised the agency’s guidance on how to analyze who an employee or independent contractor is under the FLSA. The final rule rescinds the 2021 Independent Contractor Rule and returns to the pre-2021 rule precedent. In doing so, the final rule restores the multifactor, totality-of-the-circumstances analysis to assess whether a worker is an employee or an independent contractor under the FLSA. The final rule ensures that all economic realities test (ERT) factors are analyzed equally without assigning a predetermined weight to a particular factor or set of factors. These six factors include:

1.The opportunity for profit or loss depending on managerial skill;

2.Investments by the worker and the potential employer;

3.The degree of permanence of the work relationship;

4.The nature and degree of control;

5.The extent to which the work performed is an integral part of the potential employer’s business; and

6.The worker’s skill and initiative.

A worker’s coverage by a particular law or entitlement to a particular benefit often depends on whether they are an employee or an independent contractor. In general, employment laws, labor laws and related tax laws do not apply to independent contractors. Arguably, the final rule may result in classifying a greater number of workers as employees, not independent contractors. This classification would be significant, particularly in the gig economy, as it would afford more individuals FLSA rights and protections. The DOL has released guidance to help employers comply with the final rule. Employers should note that the independent contractor rule is also subject to multiple lawsuits alleging that the regulation is illegal. Depending on the outcome of these cases, the new independent contractor rule could be modified or thrown out entirely. Therefore, while employers should take steps to ensure compliance with the current rule, they may also want to monitor for updates regarding these lawsuits.

The FTC’s Noncompete Ban

On May 7, 2024, the Federal Trade Commission (FTC) published a final rule to prohibit employers from entering into or enforcing noncompete clauses with most employees. The ban is scheduled to take effect on Sep. 4, 2024. In general, a noncompete clause is a contractual term between an employer and a worker that blocks the worker from working for a competing employer or starting a competing business, typically within a certain geographic area and period of time after the worker’s employment ends.

Subject to very limited exceptions, the final rule provides that:

The use of noncompete clauses will be banned as of the effective date;
Any existing noncompete clauses (other than those entered into with senior executives) will be invalidated;
Employers must notify all employees (other than senior executives whose existing noncompete agreements will remain enforceable) that their existing noncompete agreements will not be enforced.

Currently, the enforceability of noncompete clauses is determined by state and local legislatures and courts. The FTC rule would instead govern the enforceability of noncompete clauses at the federal level and supersede any less restrictive state laws or judicial interpretations.

Employers that use noncompete or similar protective clauses should familiarize themselves with the rule’s requirements and take steps now to prepare for its effective date. However, employers should note that a number of lawsuits (including one brought by the U.S. Chamber of Commerce) seeking to block the final rule have already been filed, so employers should monitor for additional legal challenges and prepare for potential uncertainty.

The EEOC’s Final Rule to Implement the PWFA

The Pregnant Workers Fairness Act (PWFA), which went into effect on June 27, 2023, requires employers to provide reasonable accommodations for known limitations of employees and applicants related to pregnancy, childbirth or related medical conditions. On April 19, 2024, the U.S. Equal Employment Opportunity Commission (EEOC) published a final rule to implement the PWFA. The final rule went into effect on June 18, 2024. Highlights from the final rule include:

Examples of reasonable accommodations, including additional breaks to drink water, eat or use the restroom; a stool to sit on while working; time off for health care appointments; temporary reassignment; temporary suspension of certain job duties; telework; or time off to recover from childbirth or a miscarriage, among others;
Guidance regarding limitations and medical conditions for which employees or applicants may seek reasonable accommodation, including miscarriage or stillbirth; migraines; lactation; and pregnancy-related conditions that are episodic, such as morning sickness;
Guidance encouraging early and frequent communication between employers and workers to raise and resolve requests for reasonable accommodation in a timely manner;
Clarification that an employer is not required to seek supporting documentation when an employee asks for a reasonable accommodation and should only do so when it is reasonable under the circumstances;
Explanation of when an accommodation would impose an undue hardship on an employer and its business; and
Information on how employers may assert defenses or exemptions, including those based on religion, as early as possible in charge processing.

The PWFA has significantly expanded workplace rights and protections for employees affected by pregnancy, childbirth and related conditions, and employers will likely continue to face increased compliance burdens and litigation risks. Employers should also anticipate experiencing a learning curve and other growing pains related to certain PWFA concepts and how they may interact with other applicable employment laws. For example, many states already have their own laws requiring accommodations for pregnancy, childbirth and related medical conditions, and an ongoing trend toward more expansive and enhanced protections for employees is expected to endure. These laws often provide greater employee protections than those granted under the PWFA and usually apply to smaller employers as well. Thus, many employers may expect to encounter differing standards when analyzing whether they can reasonably accommodate an employee’s known limitation related to pregnancy or childbirth.

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