Insights

On April 26, 2024, the Department of Labor (“DOL”) published the Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees Rule (“Final Rule”), which will increase the minimum salary thresholds for bona fide executive, administrative, and professional exemptions under the FLSA.  Effective July 1, 2024, the annual salary thresholds for these “white collar” exemptions will increase to $43,888 (from $35,568) and increase again on January 1, 2025 to $58,656 and the threshold for highly-compensated employees will also increase from $107,432 to $132,964.  Effective July 1, 2025, the methodology will change and these thresholds will increase again (to $58,656 and $151,164, respectively).

On January 10, 2024, the U.S. Department of Labor (“DOL”) published its final rule on Employee or Independent Contractor Classification under the Fair Labor Standards Act (“FLSA”). Crowell & Moring previously reported on the proposed rule announced on October 11, 2022. The final rule rescinds the “core factors” independent contractor rule adopted by the Trump administration in 2021 and returns to a “totality of the circumstances” analysis for determining whether a worker is properly classified as an employee or independent contractor. According to the DOL, the new final rule institutes an analysis that better aligns with judicial precedent and the FLSA’s text and purpose. The final rule goes into effect on March 11, 2024.

Effective January 1, 2024, California employees will be entitled to accrue and use more paid sick leave per year.  On October 4, 2023, California Governor Gavin Newsom signed SB 616 into law, which amends the Healthy Workplaces, Healthy Families Act of 2014 (“HWHFA”) and significantly expands paid sick leave requirements for employers in California.  Further, non-construction industry employees covered by a collective bargaining agreement (“CBA”), previously excluded from coverage, will now be entitled to certain benefits and protections under the HWHFA.  The amendment also preempts local ordinances that are contrary to the HWHFA with respect to certain issues, for example, rate and timing of pay, and advance leave and notice.

Chicago and Illinois will soon join the growing number of states that require employers to provide employees with paid all-purpose leave, rather than, for example, leave that can only be used as paid sick or safe leave. The new laws are Chicago’s Paid Leave and Paid Sick and Safe Leave Ordinance (“Ordinance”) and the Illinois Paid Leave for All Workers Act (“Act”). Under the new Ordinance, Chicago-based employees may accrue twice as much paid leave (including, now, all-purpose leave and paid sick and safe leave) than under the City’s prior ordinance. And for the first time, Illinois employers outside of Chicago will be required to provide their employees with up to 40 hours of all-purpose paid leave each year.

On September 8, 2023, the Department of Labor (“DOL”) published a Notice of Proposed Rule Making (“NPRM”) proposing a number of changes that would, if enacted, substantially increase the number of workers who would be eligible for overtime pay under the federal Fair Labor Standards Act (“FLSA”).  Most critically, the NPRM would raise the annual salary threshold for the FLSA’s administrative, executive and professional exemptions -- the so-called “white collar” exemptions -- from $684 per week ($35,568/year) to $1,059 per week ($55,068/year).

On June 21, 2023, the New York State Department of Labor (“NYSDOL”) issued updated regulations to the New York State Worker Adjustment and Retraining Notification Act (“NYS WARN Act”), which requires employers with 50 or more employees to provide 90 days’ notice of mass layoffs, plant closings and other specified employment losses.  According to the NSYDOL website, these new regulations are intended to “address the post-pandemic employment climate” and “simplif[y] language to ensure businesses better understand their obligations.”  The changes include, among other things:

In Clark v. A&L Homecare and Training Center, LLC, Nos. 22-3101/3102, a split three-judge panel for the U.S. Court of Appeals for the Sixth Circuit held that notice to potential plaintiffs should only be issued if lead plaintiffs show a “strong likelihood” that such absent employees are “‘similarly situated’ to the plaintiffs themselves.” In so holding, the Sixth Circuit joined the Fifth Circuit in rejecting the long-standing “lenient” two-step collective action certification process.  The Sixth Circuit declined, however, to apply the Fifth Circuit’s approach and adopted a “strong likelihood” standard.  The Clark decision, issued on May 19, 2023, will significantly impact FLSA collective action litigation in favor of employers in federal district courts in Ohio, Michigan, Kentucky, and Tennessee.  The widening Circuit split ripens this issue for review by the Supreme Court of the United States.

On May 30, 2023, the General Counsel of the National Labor Relations Board, Jennifer Abruzzo, issued a memorandum stating broadly that the proffer, maintenance, and enforcement of non-compete agreements between employers and employees tend to infringe on employees’ exercise of rights under Section 7 of the National Labor Relations Act (the “Act”). General Counsel Abruzzo opines that non-competes are therefore unlawful under the Act (as to non-supervisory employees), unless “narrowly tailored” to a special circumstance justifying the infringement on employee rights. This memorandum comes on the heels of her prior memo, taking the position that confidentiality and non-disparagement provisions in employee severance agreements are invalid, as Crowell reported in late March.

On October 11, 2022, the United States Department of Labor (“DOL”) announced that it is seeking public comment on a proposed rule, which modifies the legal framework for determining whether a worker is an employee or independent contractor under the Fair Labor Standards Act (“FLSA”).  The proposed rule would rescind the current independent contractor rule (adopted by the Trump Administration in 2021), which simplified the multi-factor test, and heavily weighted two “core” factors—workers’ control over their work and opportunity for profit or loss—in determining the status of workers.  The new rule returns to a “totality-of-the-circumstances” analysis, which balances all factors equally.  While the current rule is perceived as more favorable to respecting a worker’s independent contractor status, this shift in legal framework is expected to lead to more determinations that workers are employees, most particularly, gig workers.

On June 6, 2022, the Supreme Court of the United States ruled in an unanimous opinion in Southwest Airlines Co. v. Saxon, No. 21-309 that airline cargo loaders are exempt from the Federal Arbitration Act (“FAA” or the “Act”) under the Act’s “transportation worker” exemption. The Supreme Court reasoned that while not all employees of an airline are exempt from the FAA, ramp employees who load and unload cargo from planes are part of a “class of workers engaged in foreign or interstate commerce” specifically exempted by the Act. The Supreme Court’s broad interpretation of this exemption permits airline cargo loaders to bring wage-and-hour claims in court rather than being forced into arbitration. This case is the second of three arbitration cases argued before the Supreme Court this term. Crowell previously issued an alert about the first case, Morgan v. Sundance, which held that the courts may not create “arbitration-specific variants of federal procedural rules,” despite the FAA’s “policy favoring arbitration.” The third case, Viking River Cruises v. Moriana, involving FAA preemption of representative claims under California’s Private Attorneys General Act, is pending before the Court.

On May 23, 2022, the Supreme Court of the United States ruled in a unanimous opinion in Morgan v. Sundance, No. 21-328 that the Federal Arbitration Act (“FAA”) serves to make arbitration agreements as enforceable as other contracts; it does not permit the courts to “devise novel procedural rules” to foster arbitration. Specifically, prior to this ruling, almost all federal circuits used an arbitration-specific waiver rule requiring a showing of prejudice to one party in order to demonstrate that the opposing party waived its right to compel arbitration. Under this new ruling, a party seeking to demonstrate that the opposing party waived its right to compel arbitration by litigating for too long need not make a showing that it was prejudiced, which is consistent with federal waiver law.

Effective May 6, 2021, the U.S. Department of Labor (“DOL”) has withdrawn a rule published on January 7, 2021, titled “Independent Contractor Status Under the Fair Labor Standards Act,” finding it “inconsistent with the FLSA’s text and purpose.” The DOL determined that this rule “would have a confusing and disruptive effect on workers and businesses alike due to its departure from longstanding judicial precedent.” The DOL concluded as well that it “does not believe” that this rule “is fully aligned with the FLSA’s text or purpose, or with decades of case law describing and applying the multifactor economic realities test.”  After the DOL delayed the effective date of this five-factor rule shortly after the Biden Administration took office, this action was widely expected.

On Tuesday, March 2, 2021, the U.S. Department of Labor (DOL) postponed the effective date for a new regulation establishing a five-factor test for determining independent contractor classification. The rule, promulgated by the Trump Administration and previously scheduled to go into effect on March 8, and titled “Independent Contractor Status under the Fair Labor Standards Act” (Rule), is now slated to go into effect on May 7. The DOL announced that it will take this additional time to consider the legal, policy, and enforcement implications of the Rule, potentially calling into question whether the Rule will take effect at all, or if it does, how it might be modified. 

Yesterday, U.S. District Court Judge Dolly Gee of the Central District of California denied Uber and Postmates’ motion for a preliminary injunction to enjoin California Assembly Bill 5—the new California statute that broadly restricts the ability of California employers to classify workers as independent contractors. In Olson, et al. v. State of California, et al., Uber and Postmates, along with two individual drivers, requested a preliminary injunction when they filed their suit against the State on December 30, 2019, alleging violations of the U.S. and California Constitutions. 

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The Department of Labor (DOL) has released its much-anticipated final rule on the often-litigated “joint employer” issue under the Fair Labor Standards Act and its statutory requirements relating to minimum wage and overtime obligations. This final rule represents the first significant revisions to DOL’s regulations on this subject in more than 50 years. As expected, the final rule represents good news for employers, as it sets forth a standard that is more difficult for plaintiffs to meet. The final rule will be published tomorrow in the Federal Register and becomes effective March 16, 2020. The DOL’s Fact Sheet is found here. The final rule, as published in the Federal Register, is found here.

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Employees earning less than $35,308 per year will be automatically eligible for overtime, if the Department of Labor's (DOL’s) new Fair Labor Standards Act (FLSA) regulations, which were announced March 7, 2019, take effect. The mandatory salary level would increase from $455 to $679 per week.