FEDERAL UPDATES

Exempt Salary Threshold.  As expected, the DOL finalized a rule raising the federal exempt salary threshold for the EAP exemptions (executive, administrative, professional), as well as the HCE exemption (highly compensated employees).  Unexpectedly, it chose to make the changes in two phases, most likely as a hedge against expected litigation.  No changes were made to the duties tests.

For now, employees are entitled to overtime unless they qualify for an exemption, and the salary basis for exemptions will include earning a salary paid weekly and equivalent to:

EAP Exemptions (currently$684/week):

July 1, 2024:        $844/week ($43,888 annually)
Jan. 1, 2025:        $1,128/week ($58, 656 annually)

HCE Exemptions (currently $107,432 annually):

July 1, 2024:        $132,964 per year
Jan. 1, 2025:        $151,164 per year

The salary thresholds will be updated every three years to reflect current wage data, beginning July 1, 2027.  Some exemptions, such as teachers, certain academic administrators, medical doctors or lawyers, or computer employers meeting the hourly pay requirements, do not include a salary requirement so will remain unchanged (subject to any state requirements).

Some states already have salary thresholds that are higher than or close to the new federal standard, so the effect may not be as severe.  For example: Washington’s threshold is currently $67,724, California’s threshold is $66,560, and Colorado’s threshold is $55,000.  New York City and the rest of “downstate” NY is currently $62,400, while the rest of the state is $58,458 (rising to $$60,405 by the 1/1/25 implementation date).  The federal calculation differs from the formulas states use, so all employers will need to watch for increases and ensure they are using the higher threshold each time there is an increase.

As with most other federal agency changes lately, multiple lawsuits are expected and the Chamber of Commerce has already filed in the very conservative Eastern District of Texas.  However, there is no guarantee that a nationwide injunction will go into effect for an either scheduled increase before July 1.  Employers should review their exempt employees’ salaries to identify how many employees would be affected, making some preliminary decisions about whether to raise exempt salaries to the new minimums and considering how to communicate any conversions to nonexempt status.  Many currently exempt employees will object to becoming nonexempt as it is sometimes seen as a demotion to a “blue collar” position and requires them to track their time, so communication will be important.

EEOC  – Updated Harassment Guidelines.  In the first update since 1999, the EEOC released new workplace harassment guidelines that will likely require updates to discrimination and harassment policies.  At least one-third of all EEOC discrimination charges include an allegation of harassment, so considering how the EEOC will approach those claims is critical.  Key takeaways:

• Harassment of LGBTQ+ workers (and in particular transgender workers) is a form of sex discrimination under Title VII (as held in the 2020 U.S. Supreme Court Bostock decision). Examples include denial of access to a bathroom consistent with the individual’s gender identity, the intentional and repeated misgendering of an individual, disclosing an individual’s sexual orientation or gender without permission (“outing” them), or harassment of an individual because they do not present in a manner stereotypically associated with their gender.
• Harassment based on pregnancy, childbirth, and other “related medical conditions” is a form of sex discrimination. This also includes lactation, contraceptive choices, and the decision to have, or not to have, an abortion.  Examples include berating and making frequent negative comments about a pregnant person’s body, disturbing or making offensive comments about breastfeeding, or commenting on a person’s decision to have or not have an abortion.
• Harassment includes the virtual as well as physical environment, both inside and outside of work. Harassment online, at work-related events, using an employer’s technology, or on an employee’s social media page all fall within the employer’s obligation to prevent and address harassment.
• “Euphemistic language and conduct” may constitute unlawful harassment. The EEOC recognizes that in some contexts, terms that may not be facially discriminatory may still constitute harassment. For example, “you people” may operate as a “code word” that contributes to a hostile work environment.  Similarly, the EEOC provided the example of a Black truck driver repeatedly finding banana peels in his truck with no explanation, which could be considered harassment “given the history of racial stereotypes against Black individuals.”
• Employers are required to accommodate employees’ sincerely held religious beliefs, but also must protect workers against religiously motivated harassment. Repeated comments about religion, such as unwanted preaching to coworkers, may contribute to religious-based harassment.

 

Race and Ethnicity Categories:  The federal government published “Directive 15”, which changes how it will categorize people by race and ethnicity.  The OMB just approved new rules for federal agencies, which will eventually trickle down to employers through EEO-1 reporting, AAP plans for federal contractors, pay equity audits, and more in the coming years.  Agencies have been directed to update their surveys and forms “as quickly as possible”, and to submit a compliance plan within 18 months.  The intent is to have all agencies in compliance within 5 years (in time for the 2030 census).  For now, forthcoming changes include:

• There will be one combined question for race and ethnicity, rather than a separate Hispanic or Latino question.
• There will be a new category for Middle Eastern or North African (MENA) individuals.
• Hispanic or Latino will be added as one of the categories (rather than having a separate question.
• May require additional detail beyond the minimum, such as identifying tribes, country of origin, or other heritage.

The federal government is also considering how the categories should be ordered (by population, alphabetically, or other method), and has established the Interagency Committee on Race and Ethnicity Statistical Standards to identify additional standards and carry out the Directive.

Federal Trade Commission – Noncompetes.  The FTC issued a final rule banning nearly all noncompete agreements nationwide under the theory that they restrict trade (eff. in August).  There is a very narrow exception for certain senior executives who make policy decisions.  The rule also requires employers to provide a “clear and conspicuous” notice to anyone subject to a noncompete telling them that it is unenforceable, preferably using the FTS’s model notice.  Multiple lawsuits have already been filed, and are making their way through the judicial system.

National Labor Relations Board – Moonlighting.  The NLRB General Counsel issued a memorandum opining that prohibiting employees from having other jobs usually violates the NLRA because they are then economically dependent on the employer and may therefore feel like they have to refrain from discussing or complaining about the terms and conditions of their employment or risk losing their livelihood.  This “chilling” of their Section 7 rights violates the NLRA for both union and non-union employers absent a compelling business-related reason for the policy.

EEO-1 Reporting – The portal is now open, and the deadline for filing EEO-1 reports is June 4.  In past years the reporting system has slowed down considerably toward the end of this window, so employers should file as early as possible.  The EEOC rarely grants extensions.

Marijuana – the federal government rescheduled marijuana from a Schedule I drug (most potential for abuse, i.e. heroine) to a Schedule III drug (moderate to low potential for abuse, i.e. Tylenol with codeine).  Recreational marijuana is still illegal at the federal level, but because it is now permitted for research and medical use there may be more claims asserted under the ADA based on requests for accommodation of medical marijuana.  Employees can still be prohibited from being under the influence of marijuana at work, but if they have accommodation and test positive, employers will need to prove they were actually under the influence while working and not as a result of using legal medical marijuana off-duty.

 

STATE/LOCAL UPDATES

Illinois (Chicago) – Paid Leave Final Rules.  Chicago just published final rules interpreting the Chicago Paid Leave and Paid Sick and Safe Leave Ordinance set to take effect July 1, 2024.  While the rules fail to address several issues raised by employers, they do cover some of them. Highlights include:

• Employers are permitted to establish 12 months of their choice (anniversary, calendar, contract, fiscal, tax, etc).
• If frontloading, employers do not have to carry over general Paid Leave but do have to carry over any Paid Sick Leave.
• When considering the denial of approval for general Paid Leave, employers should take into account the “significant” impact on business operations, whether the work is critical to the health, safety, or welfare of the people of Chicago, how similarly situated employees have been treated, and whether the employee has had meaningful access to Paid Leave during the year.
• The regular rate of pay is calculated by dividing the employee’s total wages by the total hours worked in full pay periods of the prior 90 days of employment. Wages do not include overtime pay, premium pay, tips or gratuities, or commissions.
• Employers must post the City’s notice (in English and any other language primarily spoken by 5% of employees), provide a notice on an employee’s first pay stub or as part of the onboarding process, provide an annual notice within 30 days of July 1, have a written policy that includes notice and the basis for denial of paid leave requests, and have a system to notify employees of the availability and use of both types of leave.

Maryland – Pay Transparency – Although not effective until October 1, Maryland employers may want to start reviewing pay scales to be prepared for the new Pay Transparency Act.  The act will require all employers to include a good faith pay range and general description of benefits in all postings for jobs, promotions, transfers, or other job opportunities

New York:  New York State included several new laws in its finalized budget, including:

Paid Prenatal Leave for Pregnant Employees:  In what is the first law of its kind, effective January 1, 2025, NYS employers will be required to provide employees with 20 hours of paid prenatal leave each year for use during their during pregnancy for healthcare services, such as medical appointments, procedures, tests, and discussions with healthcare providers.  This type of leave is in addition to required NY Paid Sick Leave and can be used in hourly increments. Employees are entitled to their regular rate of pay during this type of leave but are not entitled to payout at separation.

Paid Lactation Breaks:  While current state and federal laws grant breastfeeding employees generous unpaid break time to express milk, effective June 19, 2024, all NYS employers will be required to provide 30 minutes of paid break time for this purpose.  In addition, employees can use existing paid break time or mealtime for lactation reasons in any period exceeding 30 minutes.  As written, it’s not clear whether the 30 minutes of paid lactation break time applies to each break, or is 30 minutes total to be used throughout the day.  Forthcoming regulations are expected to clarify this.

COVID-19 Paid Sick Leave:  This will finally be eliminated, but unfortunately not until July 31, 2025.  In the meantime, employees will continue to be eligible for paid (through PFL benefits) time off when they are under a mandatory quarantine or isolation order.  Use of this leave is still limited to three times in total (not annually), and for the 2^nd and 3^rd requests employers can still require a positive PCR test.

Oregon – Small Business Assistance Grants/Paid Leave.  The Oregon Employment Department is highlighting assistance grants for small employers (under 25 employees) when an employee goes on Oregon-paid leave.  To be eligible, employers must pay employer contributions for eight calendar quarters from the time they receive the assistance grant, and be current on contributions payments.  The grants may be used up to 10 times per year and may include:

• $3,000 to hire a worker to replace an employee on paid leave.
• Up to $1,000 to cover significant additional wage-related costs, like paying additional wages to an existing employee or additional training costs.
• Up to $3,000 to cover a replacement worker when the employee taking paid leave extends the length of their leave beyond the initially expected time frame.

Utah – Expanded Religious Protections.  The Utah Antidiscrimination Act has been amended to expand religious accommodation requirements (eff. 5/1/24).  Currently, under Utah law employees are permitted to express religious or moral beliefs and commitments in the workplace as long as they do so in a reasonable, non-disruptive, and non-harassing way, and employers are prohibited from retaliating against employees for expressing religious beliefs outside the workplace absent and direct conflict with business interests.  Under the new law, employers are also required to provide a religious accommodation to any employee if the employee reasonably believes an employment requirement includes a “religiously objectionable expression” that they think would burden or offend their sincerely held religious beliefs, including dress and grooming requirements, speech, scheduling, prayer, and abstention, including abstentions relating to healthcare.  The only exceptions are if it would “substantially interfere” with the employer’s core mission or ability to conduct business in an effective or financially reasonable manner, or if it relates to safety training or instruction for the job.  Employers with fewer than 15 employees are not required to provide scheduling accommodations.

Washington:

Pay Transparency Lawsuits – In what may be good news for employers, a district court judge in western Washington dismissed a class action pay transparency lawsuit on the basis that failing to include a pay range in a job posting is a “technical” violation, and the lead plaintiff in the class action lacked standing because they were not a “bona fide” applicant representing a “bona fide” class.  As a practical matter, this means that individuals cannot just apply for a job they don’t intend to accept and then sue the employer on behalf of a class of applicants for damages (as certain plaintiff’s lawyers have been encouraging).  While it may still be appealed, and other judges may come to a different conclusion, this decision should help discourage attorneys from aggressively pursuing these types of “straw man” class action lawsuits.

Mandatory Retirement Plans – Joining multiple other states, Washington will launch an IRA retirement savings program (by July 2027) that will require employers who do not offer a retirement plan to enroll employees in the state plan.  One twist is that it will currently be based on total hours worked rather than headcount, although it may be phased in based in headcount.  Covered employers will be those who (i) have been in business in Washington State for at least two years, (ii) have a physical presence in Washington as of the immediately preceding calendar year, and (iii) whose employees have worked a combined minimum of at least 10,400 hours in the immediately preceding calendar year (about 5 FTE).

Nonsolicitation Restrictions (eff. 6/6/24) – Washington currently prohibits noncompete agreements that restrain employees or independent contractors from “engaging in a lawful profession, trade, or business of any kind”, unless they fit within certain income and duration requirements and follow the rules with respect to disclosure and payments during layoffs.  The state is broadening the definition of a noncompete agreement by including nonsolicitation agreements in that prohibition (agreements “that directly or indirectly prohibit the acceptance or transaction of business with a customer.”)  Currently nonsolicitation agreements that prohibit soliciting “any customer” are expressly permitted, but that will be narrowed to only those that prohibit soliciting “current customers”.  There are also new requirements related to a sale of a business, notice and choice of law procedures, and third party enforcement.  Given these new requirements, as well as the many federal agencies attempting to outlaw most noncompetes, employers may want to have their agreements reviewed by counsel to ensure enforceability and avoidance of penalties.

If you’d like to speak to an Asure HR expert about your business, connect with us.

Asure Software provides this information for general information purposes only.  We are not attorneys, and the information in this update should not be relied upon or regarded as legal advice.  This information may not be accurate or complete as it relates to a particular company or situation, and does not reflect all developments or laws in all jurisdictions.