Well, that went fast. The year 2023 is coming to a close, and 2024 is shaping up to be a challenging year for employers with several potential changes and challenges lurking on the horizon. Here’s a list of some of the issues that employers will be facing in the new year.
FLSA Changes to the ‘White Collar’ Exemptions, Highly Compensated Exemption
The Biden administration has proposed raising the salary threshold for an employee to meet the salary basis component of the so-called white-collar exemptions to the Fair Labor Standards Act (FLSA). The white-collar exemptions are the most often used exemptions to the FLSA, and they apply to employees properly classified as exempt under the professional, administrative, or executive exemptions.
One of the requirements for an employee to be exempt under one of the white-collar exemptions is for the employee to be paid on a salary basis. Currently, the salary basis level is set at $684 per week, or $35,568 annually. The Biden administration has proposed raising the minimum salary basis requirement to $1,059 per week, or $55,068 annually.
The Department of Labor estimates that 3.4 million Americans classified as exempt earn more than $35,568 and less than $55,068. If the change were to go into effect, then anyone previously classified as exempt who is being paid a salary of less than $55,068 would now be a non-exempt employee and eligible to be paid overtime.
This puts employers in a situation in which the employer either has to raise the employee’s salary up to at least $55,068, or has to reclassify the employee as non-exempt under the FLSA. If non-exempt, then the employer has to track the employee’s time and pay the employee overtime if the employee works more than 40 hours in a workweek.
In addition to the potential for raising the salary basis test, the Biden administration is proposing raising the threshold to qualify for the highly compensated exemption. Currently, the highly compensated exemption is set at $107,432. The Biden administration is proposing raising it to $143,988.
If enacted, any one earning less than $143,988 could not qualify for the highly compensated exemption to the FLSA. This would cause someone making $140,000 a year potentially eligible for overtime if the employee did not meet another exemption to the FLSA. The Department of Labor estimates that 248,900 additional employees would be eligible to earn overtime if the threshold for the highly compensated exemption were raised.
It is not clear when the proposed overtime rule will go into effect or if it ever will. A similar effort to raise the salary basis threshold to more than $50,000 during the Obama administration was struck down in federal court. A legal challenge is again expected to be filed concerning the Biden administration’s proposed rule.
Continued Attacks on Non-Competes
In addition to the FLSA, the ever-changing world of restrictive covenants will also be an area employers need to monitor.
We were just a few days into 2023 when the Federal Trade Commission (FTC) proposed a rule banning non-competes altogether. During 2023, some states passed laws making it more difficult to enforce non-competes, and more legislation will surely follow in 2024 at the state level.
As far as the FTC goes, the agency has not yet voted on a final rule. A vote may occur as early as April 2024. Similar to the FLSA rule concerning raising the salary thresholds, expect a legal challenge as well to the FTC’s proposed rule to ban non-competes.
The NLRB is even getting in on the act, with the NLRB’s general counsel advocating that some non-competes and other restrictive covenants may constitute unfair labor practices.
More Issues with Remote Employees
The pandemic likely permanently changed the office environment, but there has been recent momentum for a return of employees to the office. As more and more employers work to get employees back into the office, employers should prepare for (and likely already have experienced) pushback from employees on being required to come back into the office.
While an employer by policy can certainly require employees to come into the office from a legal perspective, a requirement like that can hurt recruiting and retention efforts. Survey after survey shows that the ability to work remotely can help an employer attract a candidate over a more restrictive in-person requirement.
Separate from the recruiting and retention issue, where the more challenging situation can arise relates to the Americans with Disabilities Act (ADA). As more and more employees are expected to come into the office, employees will (and have) requested to work from home as part of a reasonable accommodation under the ADA for a disability. An accommodation request to work from home begs the question – is in-person attendance at work an essential function of that employee’s position? This is a vital consideration under the ADA because an employer does not have to eliminate essential job functions as part of a reasonable accommodation under the ADA. But which job functions are essential? Simply because an employer says a job function is essential does not make it so in the eyes of the law.
Employers who are responding to an accommodation request to work from home will need to be able to articulate why in-person attendance is an essential function of that employee’s position. Having an updated job description that supports the employer’s position is a great place to start to help support the employer’s case. The employer should also obtain medical documentation from the employee’s physician to support any accommodation request to work from home, and seek to find alternative accommodations that may also be reasonable. Remember, employees are not entitled to their preferred accommodation, only a reasonable one (assuming other requirements for an accommodation are met).
Election Year Blues and Division
Compounding the issue for employers is the fact that 2024 is an election year. And this will be an election year unlike any other.
Former President Donald Trump will likely be undergoing multiple criminal trials in 2024, and those trials – and their outcomes – will be massive events for the country as a whole. Whatever the outcome of the trials, they will likely cause protests and division, and that will find its way into the workplace. On the other side of the aisle, there will be an impeachment inquiry into President Joe Biden.
Election years are always difficult ones to manage for employers, especially in this polarized time, but 2024 promises to be particularly difficult. Expect the unexpected, and work to try and keep politics out of the workplace as much as possible.
After the Supreme Court’s Students for Fair Admissions decision outlawing affirmative action in higher education, the focus has now shifted from the classroom to the workplace. During the summer of 2023, Republican attorney generals from 13 states sent a letter to Fortune 100 companies warning the companies to end racial preferences in hiring. In addition, some very prominent law firms have been the subject of lawsuits concerning their diversity efforts.
It remains to be seen how much Students for Fair Admissions affects employers’ DEI efforts and initiatives, but we will add this to the list of issues to watch in 2024.
All in all, enjoy the holidays and buckle up for what will likely be a tough and challenging year for employers in 2024.