New Labor and Employment Rules for 2024

The DOL is also proposing to set the highly compensated employee annual compensation level equal to the 90th percentile of earnings for full-time salaried workers ($122,148 annually). Additionally, DOL is proposing to automatically update the salary level on an annual basis. Although the DOL did not propose changes to the duties portion of the white collar exemption tests, it did request public comment on several aspects related to the duties tests and, thus, regulatory language that was not initially proposed may be added into the Final Rule. However, shifting employees from salary to hourly or from overtime-exempt to overtime-eligible will have a wide range of operational and legal implications for employers and what employers save in direct labor costs could be lost in decreased morale and production. As expected, the proposal calls for raising the minimum salary level for exempt white collar employees. The increase to $970 per week reflects a “standard salary level” equal to the 40th percentile of earnings for full-time salaried workers and more than doubles the current salary requirement for exempt status.

• Unless employers raise HCEs’ pay to meet the new minimum salary level, whether these employees would remain exempt would depend on whether they would meet any of the more stringent duties tests for other exemptions.
• She added that HR can ensure compliance by meeting the strictest AI standards, which will be in Colorado’s upcoming AI law.
• The proposed rule also seeks to increase the threshold for exemption as a “highly compensated employee” (“HCE”) from $100,000 to at least $122,148.

It eliminates the concept of “voluntary agreement,” which is a fundamental principle of United States labor law. Under that principle, only the parties to a collective bargaining agreement should determine the terms of the agreement. But the proposed legislation takes that control out of the hands of the parties and turns it over to the federal government. Between October 2022 and July 2023, the Department of Labor concluded 765 child labor cases, finding 4,474 children employed in violation of federal child labor laws. That represents a 44% increase in the number of children illegally employed and an 87% increase in penalties compared to the same period the year before, according to the Labor Department.

On the other hand, many employers won’t want to go through this process twice for the same employees, so practicalities may call for addressing both updates at the same time, she added. In Texas, the court initially granted a limited injunction, preventing the final rule from becoming effective as to only public employers in Texas. On November 15, 2024, in a 62-page written opinion, the court found the 2024 rule to be an unlawful exercise of agency power, granting summary judgment and enjoining the final regulation on a nationwide basis. The court’s decision was predicated on issues of statutory interpretation and administrative procedure. While House Republican leaders have not released a specific tax plan — as described above, budget reconciliation simply creates a framework for such a plan. However, the Trump administration has put forward several tax proposals it expects will be included in future House reconciliation legislation.

DOL’s Proposed Rule on Independent Contractor Classification under the Fair Labor Standards Act

If adopted, the DOL estimates that the revised regulations will eliminate exempt status for millions of employees. On November 15, 2024, in a significant ruling that will impact employers across the nation, the U.S. Department of Labor’s (DOL) new rule that would have required employers to increase the salary-basis threshold under the Fair Labor Standards Act (FLSA). In light of the injunction, employees who otherwise satisfy the so-called “white collar” exemptions’ duties and payment requirements will remain “exempt” from the FLSA’s overtime requirements so long as they earn $35,568 per year. The proposed salary level change would generally mean that an employee earning an annual salary under the $55,068 threshold would be eligible for overtime pay at 1½ times their regular hourly rate for hours worked in excess of 40 in a workweek.

Current Legal Analysis

For further information about these entities and DLA Piper’s structure, please refer to the Legal Notices page of this website. District Court for the Western District of Texas rejected one attempt to strike down the 2019 rule in which an employer claimed that DOL lacked the statutory authority to issue it. Furthermore, in February 2024, Representative Eric Burlison introduced a new bill—the Overtime Pay Flexibility Act (H.R.7367)—that seeks to prohibit the Secretary of Labor from finalizing, implementing, or enforcing the recently proposed overtime rule that the DOL seeks to finalize in April 2024. HR must always include human intelligence and oversight of AI in decision-making in hiring and firing, a legal expert said at SHRM24.

• Be paid a salary, meaning a predetermined and fixed amount not subject to reduction based on work quality or quantity (the «salary basis test»).
• Should these changes become effective, to maintain exempt status, employers may either raise their salaries or reclassify employees as non-exempt and pay overtime.
• As many employers will recall, during the Obama administration the DOL proposed doubling the salary level threshold was $23,660 to $47,476 annually.
• The 2016 rule sought to increase the standard salary level requirement for exempt employees from $455 to $913 per week and increase the salary threshold requirement for highly compensated employees from $100,000 to $134,004 annually.
• Unlike their counterparts in the private sector, they are prohibited by law from bargaining over wages, benefits, or job classifications and are barred from striking.
• The DOL also has proposed changing the thresholds for the salaries under the white collar exemptions, which are expected to be released this spring.

Nevertheless, due to the high risk of opposition by business groups, among others, and legal challenges in court, employers are strongly encouraged to remain strategic about increasing salaries or reclassifying employees in response to the proposed rule even after it is finalized. FLSA has long been a cornerstone of labor regulations in the United States, governing various aspects of employment law, such as minimum wage, overtime, recordkeeping and youth employment standards. At the heart of the Act are policies designed to protect workers’ rights and set fair and ethical labor practices.

If implemented, this rule will require employers to review currently exempt employees’ pay data to determine if they proposed changes to the fair labor standards act will continue to be exempt from overtime requirements moving forward. It will also require employers to either change employees from exempt to nonexempt status or increase the wages earned by certain employees to maintain exempt status. The issue of whether a worker should be classified as independent contractor or an employee has taken on increased significance because of the gig economy. In mid-October, the Department of Labor unveiled a new proposed rule that could change how workers are classified as employees or as independent contractors under the Act. Worker classification under the FLSA is important because independent contractors are not subject to the minimum wage and overtime requirements of the FLSA. While independent contractors are a key component of the economy, the courts and the DOL have often been inconsistent in determining how to classify workers.

The department conducted extensive engagement with employers, workers, unions and other stakeholders before issuing its proposed rule in September 2023, and considered more than 33,000 comments in developing its final rule. The updated rule defines and delimits who is a bona fide executive, administrative and professional employee exempt from the Fair Labor Standards Act’s overtime protections. In reaching this outcome, the court emphasized that the FLSA’s white-collar exemptions focus on an employee’s duties, not their salary. By significantly raising the salary threshold and making it the predominant factor in determining exemption, the court held that DOL effectively displaced the statutory duties-based test outlined in the FLSA.

New Proposed Changes to the Fair Labor Standards Act (FLSA): What you Need to Know

The U.S. has a talent problem — not due to a lack of talent, but because workers are not being connected with the skills needed for today’s workforce, Boughan said further in written testimony. But upskilling opportunities can unintentionally impact employment status, deterring businesses from investing in workforce development, she noted. In 2024, SHRM research found that 70% of employers recognized flexible work arrangements as “very important” or extremely important” for a third consecutive year. In addition, the availability of flextime during core business hours has remained relatively stable, with 53% of organizations offering it in 2024, down 1 percentage point from 54% in 2023, but up 3 percentage points from 50% in 2020. Understanding and planning for the financial implications of the proposed FLSA changes is critical for employers to determine which option is best for them. Both strategies — increasing salaries or reclassifying positions — have advantages and disadvantages that should be weighed carefully.

The Trump administration later implemented a more moderate increase in 2020 raising the salary threshold to its current level of $35,568 per year. Earn at least a specified weekly salary level, which is currently $684 per week ($35,568 annually for a full-year employee) (the «salary level test»). While no action to comply with this proposed rule is required at this time, employers should track the status of this proposed rule closely and take it into consideration when forecasting budgets.

The Employer’s Wage and Hour Advisor

Accordingly, the pending appeal was rendered moot, the 2016 rule never went into effect, and many employers who had already increased salaries/reclassified employees in anticipation of the 2016 rule were left in a bind. Unlike the 2016 rule or the current proposed rule, the 2019 rule did not include regulatory mechanisms for periodically updating the minimum salary thresholds. The proposed new rule is expected to expand overtime protections to 3.4 million employees nationwide. However, it remains to be seen whether the Notice of Public Rulemaking (NPRM) will be impacted by public comment or litigation challenging the rule, which has hampered similar efforts by past administrations to significantly increase the minimum salary levels for overtime exemption. While the proposed rules would not go into effect until 2016, employers should, with the help of counsel, analyze their exempt population and identify the positions that would not meet the proposed increased salary threshold. Employers should also analyze the amount of time that exempt employees are spending on exempt and non-exempt work, as the Final Rule could very well include changes to the duties tests.

Fact Sheet: Application Of The Fair Labor Standards Act To Domestic Service, Final Rule

Many may remember the proposed increase to the exempt salary thresholds from 2016 that was blocked by the courts. In the meantime, employers should evaluate the potential impact of the proposed changes on their organization and be prepared to address the rules if they are finalized. The FLSA generally requires covered employers to pay employees minimum wage and overtime when an employee works more than 40 hours in a workweek. The FLSA provides categories of employees who are exempt from its regulations, including those who are “employed in a bona fide executive, administrative, or professional capacity.” Specific criteria must be met in order for an employer to classify employees as exempt under the FLSA.

Final Rule: Employee or Independent Contractor Classification Under the Fair Labor Standards Act, RIN 1235-AA43

Together they wish to take a wrecking ball to labor law, asserting that the 90-year-old National Labor Relations Act and the independent agency it established are unconstitutional. The U.S. DOL says the federal child labor provisions of the Fair Labor Standards Act of 1938 (FLSA) were enacted to «ensure that when young people work, the work is safe and does not jeopardize their health, well-being or educational opportunities.» DeSantis signed a bill into law last year allowing 16- and 17-year-olds to work more than 30 hours a week if they obtained parental permission. Sen. Carlos Guillermo Smith, D-Orlando, and Sen. Tracie Davis, D-Jacksonville, both spoke out against the bill during the meeting, according to CBS News.

Revisions included increases to the standard salary level and the highly compensated employee total annual compensation threshold, and a mechanism for updating these earnings thresholds to reflect current earnings data. District Court for the Eastern District of Texas vacated the Department’s 2024 final rule. Consequently, with regard to enforcement, the Department is applying the 2019 rule’s minimum salary level of $684 per week and total annual compensation requirement for highly compensated employees of $107,432 per year. Lawsuits regarding the 2024 final rule are currently pending in two other federal district courts, and the United States has filed a notice of appeal from the November 15 decision.