Walsh Pizzi O'Reilly Falanga LLP

The Department of Labor (DOL or Department) promulgated a new rule that is to go into effect on July 1, 2024. The final rule updates and revises the regulations issued under section 13(a)(1) of the Fair Labor Standards Act (FLSA) implementing the exemption from minimum wage and overtime pay requirements for executive, administrative, and professional (EAP) employees. Revisions include increases to the standard salary level and the highly compensated employee total annual compensation threshold, and a mechanism that provides for the future updating of these earnings thresholds to reflect then-current earnings data.

Under the current law, salaried workers who are paid over $35,568 per year are exempt from the FLSA’s overtime regulations, meaning they are not entitled to overtime pay (one and one-half times their regular pay for working over 40 hours per week).  Under the new law, the salary threshold is increased to $43,888, meaning salaried workers who work over 40 hours per week and make less than $43,888 per year will be eligible for overtime pay. The Department will raise this threshold to $58,656 per year on January 1, 2025.

The rule will also increase the total annual compensation requirement for highly compensated employees (who are not entitled to overtime pay under the FLSA if certain requirements are met) from $107,432 per year to $132,964 per year on July 1, 2024, and then set it equal to $151,164 per year on January 1, 2025.

These thresholds will be automatically updated every three years to reflect earnings data and other market implications. The current duties tests or salary basis requirements as to how overtime should be calculated – time and a half in excess of 40 hours per week – have not been changed.

Potential Legal Challenges:
Two challenges to the DOL’s new rule have been filed in Texas federal courts. The nature of the challenges include:

1. 1. The rule is invalid because the salary increase is too large;
   2. The DOL lacks the authority to impose a threshold at all;
   3. Automatic updates to the salary thresholds are invalid because a notice and comment rule-making period must occur prior to each change;
   4. The DOL’s rulemaking does not comply with the Administrative Procedure Act (APA), which governs the process by which federal agencies develop and issue regulations; and
   5. Enforcing these rules infringes on states’ sovereignty.

How Employers Should Address This New Rule by Formatting a Plan:
At this time, the rule remains set to go into effect. Therefore, employers should consider compliance plans that include the following steps:

1. Identify which employees are impacted by the rule to determine the total amount of employees that will be exempt
2. Once it has been determined who is impacted, determine a response
   • Potential Response 1: Increase salaries to ensure employees remain exempt
     • Consideration: convert non-salary employment benefits into salaried pay to reach the salary threshold
   • Potential Response 2: Reclassify employees as non-exempt and pay those employees overtime
   • Potential Response 3: Implement an organization restructuring plan by increasing salaried pay for others while terminating employment of non-exempt employees to offset costs

Plan Considerations For Employers:
When considering options for addressing the new rule, employers should keep in mind that increasing salaries for a portion of employees may result in salary compression.  Additionally, reclassification of employment across an organization may lower overall employee morale.  Employers should always consider state laws during planning.  Given the pending challenges to the new rule, employers should think about implementing salary increases close to or on July 1 in the event this rule is placed on hold.

Department of Labor Recommendations for Communication to Employees on Changes:
The DOL recommends certain strategies for communicating these rule changes to employees.  For example, the DOL indicates that organizations should train newly non-exempt employees on internal time keeping systems. Organizations also should provide information on time keeping with respect to mealtimes, breaks, work hours, and use of personal devices while on the clock.  The DOL also recommends that organizations coordinate with their Human Resources teams to prepare materials such as FAQs to address employee questions and concerns related to the new rule.

For any questions on the new DOL rule or to discuss strategies for addressing the salary thresholds, please contact Walsh’s Labor & Employment law practice group.

This article was authored by Walsh Pizzi O’Reilly Falanga LLP Summer Associate and Fordham University School of Law J.D. Candidate,  Alexandra Arleo.

The Pregnant Workers Fairness Act (PWFA) requires the federal government, as well as certain private, state, and local employers, to provide “reasonable accommodations” to a qualified employee’s or applicant’s known limitations related to, affected by, or arising out of pregnancy, childbirth, or related medical conditions, unless the accommodation would cause the employer an “undue hardship.” The PWFA went into effect on June 27, 2023. After a notice and comment period, the EEOC issued its final regulations to carry out the law and provide clarity on its broad interpretation of the PWFA.  The regulations went into effect on June 18, 2024.  Under the new regulations, employers’ obligations are expansive and go beyond what the Americans with Disabilities Act (ADA) requires for disabilities.

Who Is Covered?
The PWFA covers employers (as well as unions and employment agencies), employees, applicants, and former employees who are currently covered by: (1) Title VII of the Civil Rights Act of 1964; (2) the Congressional Accountability Act of 1995 and 3 U.S.C. § 411(c); (3) the Government Employee Rights Act of 1991 (GERA); or (4) section 717(a) of Title VII, which covers federal employees. Whoever satisfies the definition of an “employer” or “employee” under any of these laws is an employer or employee for purposes of the PWFA.

What Limitations Must Be Accommodated?
Employees or applicants may seek reasonable accommodations regarding limitations and medical conditions, such as miscarriage or stillbirth, migraines, lactation, and other pregnancy-related conditions.  Pregnancy and childbirth are defined broadly to include a current or past pregnancy, potential or intended pregnancy (such as infertility, fertility treatments, and the use of contraception), labor, and childbirth. An employee’s limitations need not be major or ongoing; minor and episodic needs and limitations must also be accommodated.

Examples of possible reasonable accommodations include:

• Additional breaks to drink water, eat, or use the restroom to accommodate fatigue or breastfeeding needs
• Time off for health care or prenatal care appointments
• Time off to recover from childbirth or a miscarriage
• Temporary reassignment to alternate locations to reduce work commute
• Temporary suspension of certain job duties
• Telework to minimize risk of diseases
• Modification of equipment, uniforms, or devices

When Does an Employer Become Obligated to Offer Accommodations?
Once an employee makes “known” to their supervisor that they have a limitation related to pregnancy, childbirth, or a related medical condition and need a change in how they work, the employer is obligated to either provide an effective accommodation or communicate with the employee to identify one. An employee does not have to mention the law by name. Rather, an employee may simply voice a concern to trigger the obligation to accommodate. When considering the potential accommodations that can be provided, the new regulations only allow employers to request “reasonable documentation” for such requests when it is “reasonable under the circumstances.”

What Constitutes an “Undue Hardship”?
An employer may consider multiple factors to determine whether an accommodation would impose an undue hardship on an employer and its business.  According to the EEOC’s regulations, these factors can include:

• The length of time that the employee will be unable to perform the essential function(s)
• Whether there is work for the employee to accomplish
• The nature of the essential function, including its frequency
• Whether the employer has provided other employees in similar positions who are unable to perform the essential function(s) of their positions with temporary suspensions of those functions and other duties
• Whether there are other employees, temporary employees, or third parties who can perform or be temporarily hired to perform the essential function(s) in question
• Whether the essential function(s) can be postponed or remain unperformed for any length of time and, if so, for how long

If an employer concludes the requested accommodation is unduly difficult or expensive, then that employer must work with the employee to try to reach an alternate solution.

What Should Employers Do Now?
Employers should ensure their workplace policies and procedures comply with the PWFA and the EEOC’s new guidance:

1. 1. Employers should ensure that supervisors and managers are properly trained on the PWFA and the interactive process so that they know how to respond to a request for an accommodation.
   2. Managers should be prepared to understand the rights of applicants and workers who are pregnant, trying to become pregnant, recently gave birth, or who have miscarried.
   3. Employers must avoid retaliating against those who request a reasonable accommodation. The PWFA retaliation provision shares the protections and damages provisions under the Americans with Disabilities Act and Title VII.
   4. Management should also be made aware that the PWFA does not replace federal, state, or local laws that are more protective of workers affected by pregnancy, childbirth, or related medical conditions. For example, New York recently implemented paid leave for pregnant employees to attend doctors’ appointments, thereby expanding its paid sick time requirements up to an additional 20 hours.  And New Jersey employers are already subject to the provisions and obligations of N.J.S.A. 10:5-12(s).

For any questions on the new pregnancy-related laws and regulations, or to discuss strategies for accommodating pregnant workers, please contact Walsh’s Labor & Employment law practice group.

This article was authored by Walsh Pizzi O’Reilly Falanga LLP Summer Associate and Fordham University School of Law J.D. Candidate,  Alexandra Arleo.