By Leah Shepherd
HR professionals will need to keep an eye out for new regulations coming soon from federal agencies. Among those expected in the near future are the final rules on the overtime pay exemption, independent contractor status and joint employer standard. Federal officials also may move to clarify the legality of corporate diversity initiatives and require reporting on pay rates by gender and race.
“Underlying all this is the election year next year, and the Biden administration is in an accelerated pace right now, trying to get these regulations done in anticipation of the elections,” said Jim Plunkett, an attorney with Ogletree Deakins in Washington, D.C.
The U.S. Department of Labor’s (DOL’s) proposed rule to update overtime pay regulations is pending review at the White House.
“The conditions are now ripe for the overtime exempt status rule that seems like it’s been delayed, delayed, delayed,” said Gerald Maatman, an attorney with Duane Morris in Chicago. “That would be the No. 1 priority” for the DOL.
The current salary threshold for exemption from overtime pay is $35,568 per year, a figure set by the Trump administration in 2019. That threshold is much lower than the Obama administration’s 2016 salary level—$47,476—but a federal court in Texas held that rule to be an invalid extension of executive authority.
“We expect an increase in the required salary level for the exemption,” said Fiona Ong, an attorney with Shawe Rosenthal in Baltimore. “Given how aggressive the agencies have been under the Biden administration, I would not be surprised to see some changes to the duties tests to make it more difficult to meet the white-collar exemptions from the minimum wage and overtime requirements under the Fair Labor Standards Act.”
“We will have to see how high the new exempt salary test will be. Rumors go from the 50s to the low 80s. And the duties test will have to be changed, too,” said Michael Lotito, an attorney with Littler in San Francisco.
“Are they going to index it? Are they going to tie it to inflation so that it increases every year? Are they going to take away the duties test? Some of these things are up in the air,” Plunkett said.
Independent Contractor Rule
The DOL’s independent contractor proposed rule would implement a multiple-factor test to determine whether a worker is an employee or an independent contractor; the weight of each factor depends on the facts of the case and where additional factors may be relevant. It differs from the Trump-era rule that emphasized two core factors for determining if someone is an independent contractor: the worker’s control over the work and the worker’s opportunity for profit or loss.
“I would expect the final rule to look substantially like the proposed rule that was issued back in October 2022. The DOL stated that it was returning to a totality of the circumstances test, which will make findings of independent contractor status less likely,” Ong said. “According to the DOL, the ultimate question is whether, in looking at the whole situation, the individual is economically dependent on the employer or truly in business for themselves.”
The final rule likely “will be challenged based on the direction of the district judge who negated the DOL’s attempt to withdraw the Trump rule still in effect,” Lotito said. “Further, I expect that the rule will give rise to other challenges, including delegation of authority issues and the status of [U.S. Labor Secretary nominee] Julie Su,” whose nomination has not yet been confirmed by the U.S. Senate.
Joint Employer Standard
Under the National Labor Relations Board’s (NLRB’s) proposed rule, two or more employers would be considered joint employers if they “share or co-determine those matters governing employees’ essential terms and conditions of employment.”
“The NLRB should issue the new joint employer rule in late August or September, likely ignoring the direction of the D.C. Circuit [Court] and prior precedent by making a finding of joint employment much easier for franchise operations, temp agencies and others,” Lotito said, adding that there will be a challenge in court.
“We fully expect the final rule to look very much like the proposed rule, and thus once again, the NLRB will find joint employment where two employers share or co-determine essential terms and conditions of employment, even if one of the employers possesses only indirect or contractually reserved control,” Ong said.
Pay Data Reporting
Maatman expects the U.S. Equal Employment Opportunity Commission (EEOC) to push to resume pay data reporting requirements for private employers. In 2017, the EEOC began requiring employers to submit information on employees’ pay, to enhance the agency’s efforts to sue for race and gender discrimination in pay, but the agency halted this collection in 2019, following employer complaints about the collection of pay data being burdensome.
This issue “is key because it dovetails with the EEOC’s initiative on equal pay. It seems to be in the top two or three initiatives of the EEOC,” Maatman said. “It’s very controversial, so it wouldn’t surprise me if it’s attacked” in court.
Maatman said he also expects to see enforcement guidance or regulations from the EEOC on how the Supreme Court’s ruling banning affirmative action in college admissions may apply to corporate diversity, equity and inclusion (DE&I) programs.
The application of the ruling “is very important because diversity initiatives are so critical to the mission of many employers, opening up job opportunities, opening up a path to promotion” and having a workforce that reflects the community, Maatman said.
In general, “impediments will be removed because [Democrats] will have a full complement of commissioners,” since Democrat Kalpana Kotagal was confirmed last month in a 49-47 Senate vote to serve a five-year term and was formally sworn in this week, Maatman said. The EEOC now has three Democrats and two Republicans.