Two Major Employment Law Changes in 2024 You Should Know About Today

Two Major Employment Law Changes in 2024 You Should Know About Today

 

The Department of Labor (DOL) is keeping employers on their toes this year as they seek to clarify existing law and protect employees from unfair labor practices. Two significant rulings have been made recently that affect how individuals are classified and when they are guaranteed overtime pay.

Whether you’re an employer making sure you’re staying in compliance, or an employee entering into a new employment relationship, read on for more information about these two new rulings.

 

The Final Rule: Determining Employee vs. Independent Contractor Status

In March 2024, the DOL issued a final rule to clarify how workers are classified, replacing a previous ruling from 2021. The distinction between employees and independent contractors has historically been complex, with courts typically considering the “economic reality” of the relationship between employer and individual. However, interpretations have varied, leading to inconsistencies in outcomes.

The 2021 ruling faced multiple challenges, prompting the DOL to rescind it and introduce the current final rule, effective March 11, 2024. The new rule outlines six factors to determine whether an individual is an employee or independent contractor, with no single factor carrying greater weight than others. These factors are:

  1. Opportunity for profit or loss depending on managerial skill
  2. Investments by the worker and the potential employer
  3. Degree of permanence of the work relationship
  4. Nature and degree of control
  5. Extent to which the work performed is an integral part of the potential employer’s business
  6. Skill and initiative

Despite this multifactor approach, the DOL emphasizes that “economic dependence” is the key consideration in determining classification. For example, an independent contractor working for one employer might be misclassified and should really be an employee. If they’ve set up their own business entity, such as an LLC, that may point to them being properly classified. However, neither scenario guarantees a particular classification.

It’s important to talk to your attorney to ensure that the totality of the situation is taken into account, and weigh the factors appropriately to your situation to determine the best course of action. Although this is a “final” rule, future legal challenges may follow, and other updates may take effect in the coming months or years as courts further define the rule’s meaning and other policymakers consider revisions. It is important to regularly evaluate your contractor-vs.-employee classifications.

 

A New Overtime Rule Is Coming Soon

The DOL also plans to release a new overtime rule in April, 2024, expected to take effect as early as June.

Key provisions include raising the salary and compensation thresholds, resulting in an estimated additional 3.6 million Americans being eligible for overtime pay. The threshold for standard employees is set at under $55,000, while highly-compensated employees must earn nearly $144,000 to be exempt. Additionally, the rule includes automatic updates to these thresholds every three years based on current wage data.

Employers should review all employees, either reclassifying them to avoid overtime rules or adjusting salaries to meet the new thresholds. If employees are exempt (employed in an executive, administrative, or professional capacity), it’s important to make sure they’re paid on a salary basis and primarily perform exempt job duties.

This is not yet a final rule, and legal challenges are expected. But employers should plan ahead in order to ensure compliance with the law as proposed.

Like most employment law issues, both of the DOL actions summarized here can be more complicated than described in this overview. If you may be affected by either ruling, give us a call to make sure you’re moving forward confidently under the applicable regulations. As always, THK is following these rules closely, and we will provide any updates as they come.

 

Michael J. Hays, Business Counsel & Partner, THK Law, LLP

Author: Michael J. Hays is a civil litigation attorney and Partner at THK Law, LLP. His practice areas include employment law, business transactions, and real estate law. Michael is licensed to practice in Indiana and Michigan.

You can contact Michael by calling 574.232.3538 or email mhays@thklaw.com

Disclaimer: The THK Legal Blog is for informational purposes only and should not be relied upon as legal advice. In no case does the published material constitute an exhaustive legal study, and applicability to a particular situation depends upon an investigation of specific facts. You should consult an attorney for advice regarding your individual situation. All THK blogs are considered advertising material by the Indiana Bar Association.

Are non-compete agreements still legal?

Are non-compete agreements still legal?

 

With a recent wave of new legislation and opinions, the future of non-competes is more uncertain than ever. 

What is a non-compete agreement?

A true non-compete agreement is a contract where an employee agrees to not accept competing employment for a certain length of time after their current employment ends. The agreement usually includes additional restrictions about the geographic location or specific market. Business owners sometimes also enter into non-compete agreements following the sale of a business, but those are treated differently by courts and fall outside this article.

A non-solicitation agreement, non-disclosure agreement, or anti-raiding agreement is not the same thing as a non-compete agreement, even though they are sometimes lumped together.  These types of agreements, standing alone, do not prevent a former employee from working for a competitor, but they can have a valuable place in protecting a business through other restrictions.

What is changing with non-competes?

On the national level, the Federal Trade Commission (FTC) has proposed a new rule that would ban employers from using non-competes with their workers in most circumstances. They also signed an agreement with the Department of Labor in September 2023 to work together on protecting workers from unfair conditions, which includes these agreements. This is not currently binding law, but it is a developing situation.

Also, The National Labor Relations Board issued a separate memo in May 2023 that called non-competes an unfair labor practice under many circumstances. Again, this is not a legal rule against the agreements, but it may cast a shadow over them, at least in some industries. 

At a local level, many individual states from Colorado to Oregon have also introduced legislation either banning or restricting non-compete agreements in the last few years. Indiana made its own update in July that redefines the law surrounding non-competes for physicians, making them unenforceable under some circumstances.  

What led to this new trend?

According to the FTC, non-compete agreements are harmful to workers because they lead to lower wages and benefits, while creating inferior working conditions. The FTC claims they also hurt businesses by restricting the amount of competition in a market and limiting innovation and progress. Some business owners may disagree with this, but some policymakers are paying attention to it.

Can you still have a non-compete agreement with an employee?

In both Indiana and Michigan, you can still have employees sign non-competes in most industries – at least for now. But based on these trends, employee non-competes might not be around forever. In fact, some employers are now abandoning them to show recruiters and employees they are a positive place to work. 

Employers still have other options available to protect their business. Non-solicitation agreements legally keep former employees from soliciting the company’s clients or other employees for a certain time, even if working for a competitor. Anti-raiding agreements can prevent valuable workers from being recruited away. And confidentiality or other non-disclosure agreements should be used to prohibit employees from sharing certain proprietary company information. All of these can help to preserve your company’s competitive advantage.

What does this mean for your business?

The law on post-employment restrictions can be intricate, and it has always been an area requiring a custom approach. Now, it’s more important than ever to partner with trusted legal advisors who understand your unique situation and the changing legal landscape. At THK, we are monitoring these ongoing changes and are available to create tailored solutions for your business.

 

Michael J. Hays, Business Counsel & Partner, THK Law, LLP

Author: Michael J. Hays is a civil litigation attorney and Partner at THK Law, LLP. His practice areas include employment law, business transactions, and real estate law. Michael is licensed to practice in Indiana and Michigan.

You can contact Michael by calling 574.232.3538 or email mhays@thklaw.com

Disclaimer: The THK Legal Blog is for informational purposes only and should not be relied upon as legal advice. In no case does the published material constitute an exhaustive legal study, and applicability to a particular situation depends upon an investigation of specific facts. You should consult an attorney for advice regarding your individual situation. All THK blogs are considered advertising material by the Indiana Bar Association.

Corporate Transparency Act (CTA) Compliance Guide for Business Owners – Key Details and Deadline Approaching

Corporate Transparency Act (CTA) Compliance Guide for Business Owners – Key Details and Deadline Approaching

If you own or control an LLC or corporation (or certain types of partnerships), a new law called the Corporate Transparency Act (CTA) will soon require that you file a report identifying owners and managers of the entity. The law takes effect in a few short weeks. Contact your THK lawyer for full details of how this may impact your business entity.

As a high-level overview, here are a few questions that THK lawyers have been answering lately:

Does the CTA apply to every small LLC or corporation?
There are very few exceptions. The average small LLC or corporation is included. Medium to large companies (those that have at least 20 full-time employees and more than $5 million in gross receipts), are exempt, as are 501(c)(3) nonprofit corporations.

What kind of report is required?
Each company is required to report “beneficial ownership information” about the owners and individuals who control the company. An owner is anyone who owns 25% or more of the company, either directly or indirectly. A person who “controls” the company is someone who, directly or indirectly, leads, determines, or influences the decisions of the company. This includes officers and managers.

What information is included in the report?
The company itself must report its legal name and any trade names (DBAs) that it uses, along with its addresses and its taxpayer identification number (EIN).

For each beneficial owner, you will need to report the name, address, birthdate, and a unique ID number such as a driver’s license number or passport number (not a Social Security number). You also need to include an image of the document from which that unique identifying number was obtained, including the individual’s photograph. An example would be a copy of your driver’s license.

What is the point of all this?
Congress passed this law to help law enforcement investigate money laundering and other financial crimes. It is intended to prevent bad actors from hiding their identities through the use of shell companies.

When is this report due?
For all existing companies, or those created prior to the end of 2023, the deadline is January 1, 2025.

For all companies created on or after January 1, 2024, the report will be due within 90 days from the date the business is created.

Is there a cost to file this report?
No, there is no charge to file the report.

How do I file the report?
FinCEN (the Financial Crimes Enforcement Network, a division of the U.S. Treasury Department), is creating a website through which you will complete and submit the report. At the time of this article’s publishing, the website is not available yet.

If I have a company that I’m not using for anything, should I dissolve it before the end of this year?
That’s not a bad idea. If the company is dissolved before the end of 2023, it would not be subject to disclosure requirements under the act.

On the other hand, there is an exemption for companies that (a) have no assets at all and (b) have not had any money flowing through them during the past 12 months.

If I’m planning to form a company in early 2024, should I form it before the end of this year?
That’s not a bad idea either. That way your reporting deadline would not be until January 1, 2025.

If I own or operate a number of companies, is there any way to streamline this?
FinCEN will be assigning you a unique identification number, called a FinCEN identifier. Once you have this, it will be simpler to report your information for each entity.

Is there any penalty for failing to file this report?
Yes. If FinCEN finds that you willfully violated the law, you can be fined $500 for each day that the violation continues, up to $10,000, and imprisonment for not more than two years or both.

Will this information be publicly available?
No. But FinCEN is authorized to disclose it to U.S. federal law enforcement agencies and, with court approval, certain other government agencies. FinCEN can also disclose the information to financial institutions if they have received consent from you (as might be included in the small print in forms signed when you open an account) for such disclosure.

Is this a one-and-done report?
No. You are required to keep the information up-to-date. This includes filing an updated report within 30 days after the date on which a change occurs, such as a change in ownership, a change in management, or change in the residential address of a beneficial owner.

This is just a sample of common questions that have arisen. Detailed information regarding the CTA is available through FinCEN at www.fincen.gov/boi. Please note that THK will not be preparing or filing reports with FinCEN, but we are available to answer any legal questions you might have and otherwise guide you on how to manage this, including how you might connect with a third-party service provider who can prepare and file reports for you.

Contact your THK professional for further advice about the Corporate Transparency Act.

James (Jay) M. Lewis, Certified Mediator, Trial Lawyer, Partner, Tuesley Hall Konopa,LLP

Author: Partner James (Jay) M. Lewis, is a business and civil litigation attorney at Tuesley Hall Konopa, LLP. Jay counsels business clients on employment-related matters. He is also a certified mediator and is licensed to practice in Indiana and Michigan.

You can contact Jay by calling 574.232.3538 or by email at jlewis@thklaw.com.

Disclaimer: The THK Legal Blog is for informational purposes only and should not be relied upon as legal advice. In no case does the published material constitute an exhaustive legal study, and applicability to a particular situation depends upon an investigation of specific facts. You should consult an attorney for advice regarding your individual situation. All THK blogs are considered advertising material by the Indiana Bar Association.

Michigan Court Stops Big Changes for Sick Leave and Minimum Wage – For Now

Michigan Court Stops Big Changes for Sick Leave and Minimum Wage – For Now

 

Michigan employers have been working with the state’s Paid Medical Leave Act since 2019. For a refresher, you can access the state-required poster here. It provides a good summary of the law and the rights it confers on employees.

But Michigan employees thought they were getting even more sick leave rights (and higher minimum wage) beginning on February 20, 2023. On January 26, the Michigan Court of Appeals ruled otherwise.

Because a few things have happened since 2019, you may have forgotten how the Paid Medical Leave Act came about in the first place. Michigan had a ballot initiative for the Earned Sick Time Act, but the Legislature passed the Act on its own, thereby taking it off the ballot. Then, shortly before the Act was scheduled to take effect, the Legislature amended it to weaken many of the employee rights. Following court challenges, this was held unconstitutional, with a February 19, 2023 expiration date on the current law and the re-activation of the Earned Sick Time Act the next day. But on appeal, the Court ruled the Legislature acted properly. So, we are back to where we started with 2019 law—for now.

This is a hot issue in Michigan, and I expect further appeals to the Michigan Supreme Court. I also expect political pressure on the other branches of government. Changes to paid sick leave may still be on the horizon.

And minimum wage changes are even more likely.

The same court case and the same adopt-and-amend issues are at play with Michigan’s minimum wage laws. So, the new general minimum wage of $13.03 (with some exceptions) will NOT take effect in Michigan on February 20, 2023. But again, I expect court challenges to continue, and I expect Michigan lawmakers to take up the minimum wage through other channels as well.

THK’s employment lawyers will continue to monitor these ongoing developments and are available to assist Michigan employers with a wide variety of workplace legal issues.

Michael J. Hays, Business Counsel & Partner, THK Law, LLP

Author: Michael J. Hays is a civil litigation attorney and Partner at THK Law, LLP. His practice areas include employment law, business transactions, and real estate law. Michael is licensed to practice in Indiana and Michigan.

You can contact Michael by calling 574.232.3538 or email mhays@thklaw.com

Disclaimer: The THK Legal Blog is for informational purposes only and should not be relied upon as legal advice. In no case does the published material constitute an exhaustive legal study, and applicability to a particular situation depends upon an investigation of specific facts. You should consult an attorney for advice regarding your individual situation. All THK blogs are considered advertising material by the Indiana Bar Association.

Employment Questions for 2021 and Beyond

Employment Questions for 2021 and Beyond

 

About a year ago, most employers had to abruptly change their operations. You may have rushed out work-from-home arrangements. You may have been forced to reduce your workforce. You may have sought out PPP loans to keep your business afloat. And while you tried to maintain some business operations through all of this, you had to keep your eyes on changing state and federal laws and guidance. We hope you developed a COVID-19 plan and kept track of new paid time off requirements for pandemic-related work absences. But now that case counts seem to be coming down, that more and more people are getting vaccinated, and that we’ve all learned to live with masks, many employers have to face new choices. Below, I’ve assembled some of the leading questions employers face and some guidance for complying with the latest standards.

 

A. Can I mandate vaccines for my workforce?

The short answer is yes. If you wish to do this, consult with legal counsel to structure it properly, as you will have to allow for some exceptions under the standards of the Civil Rights Act and the Americans with Disabilities Act. But it is possible to enact a mandate, and data suggest that very few workers would qualify for exceptions. However, you should also consider the non-legal implications. If you expect some workers to refuse, are you prepared to terminate their employment? Many employers are not ready to take that step, and the latest reports suggest that few employers will make vaccination mandatory. As an alternative, some have suggested paying a premium to workers who get vaccinated. Ironically, this “voluntary” option could create a greater legal risk than a mandate. Older EEOC guidance on wellness programs suggests that if employers give more than a de minimis incentive to encourage participation, they could be discriminating against workers whose disabilities prevent them from taking part in the wellness initiative. And there is no current guidance on what amounts to “de minimis.” Even so, at least one national company announced a plan to pay $100 bonuses to vaccinated employees. Employers certainly can—and probably should—take steps to encourage vaccination, but be sure you check with your legal advisors before wading into this area.

 

B. Am I required to offer paid time off for COVID-19?

Maybe. Many employers re-set benefits at the start of a year, so plenty of workers will have access to some paid sick time in 2021. And some states (such as Michigan) mandate paid sick leave that could be used for many Coronavirus-related situations.

Further, although the paid leave rights under the Families First Coronavirus Response Act expired December 31, 2020, there are circumstances where that can extend to March 31, 2021. And some lawmakers are exploring further extensions. Even without new legislation, employers should also be mindful of unpaid leave rights under the FMLA and other controlling policies on workplace leave.

 

C. What safety precautions should I have in my workplace?

The primary considerations are the things we have been hearing for months now: social distancing, face coverings, and frequent hand washing. But OSHA recently published comprehensive standards on what that means. See the latest guidelines here.

 

D. Can I enforce mask mandates on my clients and customers?

Yes. You have a duty to reasonably accommodate business patrons whose medical conditions prevent them from wearing a face covering. But that does not necessarily mean letting them into your place of business unmasked. The accommodation could be conducting business online, sending a (mask-wearing) representative into your business on behalf of the customer, or having the person wear a different kind of face covering.

 

E. How should I approach the future of work-from-home?

The answer to this will vary greatly from company to company. Some employers are eager to get their workforce back into the office and will be looking for ways to scale back, or even eliminate, working from home. Others will find the forced experiment of 2020 pushing them towards a business model that encourages telecommuting. And still others will fall in between. As a general rule, employers have a lot of latitude in setting the terms of employment, but anti-discrimination laws figure into the equation. Under some conditions, telecommuting could be a reasonable accommodation for a worker with a disability. The option to work from home could also be considered a perk of employment, so you will want to be sure it is offered on a fair basis. The same could be said of the option to not work from home. In other words, you will need to take steps to ensure workspace assignments are made in a non-discriminatory manner.

 

F. Where can I find more help?

We’ve already pointed you to the OSHA website, and useful guidance is also available from the EEOC. For employers with memberships in local or national human resources organizations, your membership likely entitles you to helpful publications on these and many other issues. And our employment lawyers at Tuesley Hall Konopa are always ready to help. As our communities move into the next season of this pandemic, we look forward to working with you to promote legal compliance and help keep everyone healthy and safe.

Michael J. Hays, Business Counsel & Partner, Tuesley Hall Konopa, LLP

Author: Michael J. Hays is a civil litigation attorney and Partner at Tuesley Hall Konopa, LLP. His practice areas include employment law, business transactions, and real estate law. Michael is licensed to practice in Indiana and Michigan.

You can contact Michael by calling 574.232.3538 or email mhays@thklaw.com

Disclaimer: The THK Legal Blog is for informational purposes only and should not be relied upon as legal advice. In no case does the published material constitute an exhaustive legal study, and applicability to a particular situation depends upon an investigation of specific facts. You should consult an attorney for advice regarding your individual situation. All THK blogs are considered advertising material by the Indiana Bar Association.

COVID-19 Planning for Employers

COVID-19 Planning for Employers

I Love it When a Plan Comes Together: COVID-19 Planning for Employers

Most episodes of the 1980s hit show, The A-Team, involved the team cobbling together some super-weapon from a collection of spare parts that they would use to defeat the bad guys. After securing their victory, team leader, Col. John “Hannibal” Smith, would often say, “I love it when a plan comes together . . .”

As employers have been cobbling together their defenses of hand sanitizer, disinfecting wipes, and face masks, they need to also work on crafting a plan. In fact, Indiana Governor Eric Holcomb’s latest Executive Order says, “On or before May 11, 2020, all Hoosier employers shall develop a plan to implement measures and institute safeguards to ensure a safe environment for their employees, customers, clients, and members. The plan shall be provided to each employee or staff and posted publicly.” As you develop your company’s plan, here are some important considerations:

  • It doesn’t have to be lengthy. Written workplace policies serve many goals, but the most important one here is communication. Use this plan to send clear messages; don’t bog down your workforce with too many details.
  • It should be flexible. None of us have ever lived through a pandemic like this. Things have changed a lot in recent weeks and months and are likely to keep changing. Let your employees know that current workplace procedures are temporary and are likely to change.
  • It must take safety seriously. Read the relevant CDC guidance; study other reputable local, regional, and national resources to determine concrete steps your company can take to do its part in preventing the spread of COVID-19. Seek professional advice if you need it.
  • It must respect other relevant employment laws. All the existing rules against discrimination, harassment, and retaliation—along with laws requiring reasonable accommodations for disabilities and religious beliefs—continue in force. Congress recently passed new laws providing paid sick leave and family leave to most workers, and various other state or federal employment laws could be implicated by your company’s COVID-19 response. Keep these considerations in mind.

Having a plan is required in Indiana, but it is a good practice in other states, too. Tuesley Hall Konopa attorneys are available to assist businesses and individuals in Indiana or Michigan with a variety of legal needs. Visit our website at thklaw.com for a comprehensive list of our legal services.

Michael J. Hays, Business Counsel & Partner, Tuesley Hall Konopa, LLP

Author: Partner, Michael J. Hays, is an employment law and civil litigation attorney at Tuesley Hall Konopa, LLP. His practice areas include civil litigation, employment law, business counsel, real estate transactions, and contract review. Michael is licensed to practice in Indiana and Michigan.

You can contact Michael by calling 574.232.3538 or by email at mhays@thklaw.com

Disclaimer: The THK Legal Blog is for informational purposes only and should not be relied upon as legal advice. In no case does the published material constitute an exhaustive legal study, and applicability to a particular situation depends upon an investigation of specific facts. You should consult an attorney for advice regarding your individual situation. All THK blogs are considered advertising material by the Indiana Bar Association.