Important Policy Updates from the U.S. Department of Labor

The U.S. Department of Labor (DOL) recently made important policy updates addressing how it will enforce two key statutes under its domain, the Family and Medical Leave Act (FMLA) and the Fair Labor Standards Act (FLSA). These policy adjustments will affect all employers and are still relevant even in situations involving an employee located in a state offering more generous paid leave laws or stricter independent contractor requirements, such as Massachusetts, California, New York, and New Jersey.

New Fact Sheets on FMLA Requirements

• Fact Sheet 28D: sets forth in clear terms an employer’s notice obligations when informed that an employee may need FMLA qualifying leave, and the consequences for not providing the required notices. This fact sheet reiterates what we have always told clients: regardless of the reason for a covered leave, even if the employer has already decided to give the leave, the employer must follow the notice requirement or risk not having the leave be credited against their statutory obligations. An employer should provide detailed notice letters with links to the required documentation each and every time an employee requests a leave of absence, in all situations, including intermittent leave, and including in cases where the employee is not actually eligible for the leave (in such cases the notice informs the employee that they are not eligible and why).
• Fact Sheet 28E: sets forth how an employee must provide their employer with notice of FMLA leave. Although this fact sheet reiterates what we have long known—that an employee need not specifically request an “FMLA Leave”—the employee must provide sufficient information to allow the employer to determine that the requested leave may be covered by the FMLA. For example, an employee who tells their employer that they need to quit their job to care for a terminally ill family member must be alerted that their situation may qualify for leave under the FMLA.
• Fact Sheet 28H: an employee is entitled to twelve weeks of leave per year. This fact sheet reminds the employer of the four methods available for defining a 12-month FMLA “leave year.” With a limited exception, the employer may select any one of the four methods to establish the 12-month period, so long as they use the same 12-month period for all employees, and if the employer fails to select one of the four methods discussed above, the employer must use the 12-month period that is the most beneficial to the employee.
• Fact sheet 28I: an eligible employee has the right to use up to 12 workweeks of FMLA leave in a 12-month period. This fact sheet sets forth in detail how to count the amount of leave available and amount of leave used under the FMLA.
• Fact Sheet 28L: addresses the rarely applicable rules for situations where both spouses work for the same employer and how those circumstances may reduce available eligibility.

Final Rule on Independent Contractor Classification

The DOL rescinded its previous rule on classifying workers as independent contractors and published a new, final rule effective March 11, 2024.  The final rule sets forth how to determine whether a worker is an employee or an independent contractor under the FLSA and may significantly impact business operations and personnel policies.

Nuts and Bolts of the Final Rule:

• Economic Reality Test: The final rule reaffirms the use of the longstanding “economic reality” test to determine a worker’s status under federal law. The ultimate inquiry is whether the worker is economically dependent on the employer for work (and is therefore an employee) or is in business for themself (and is therefore an independent contractor).
• Six Relevant Factors: Unlike the previous iteration, the final rule does not assign degrees of importance to the relevant factors. Instead, employers should consider all of the following:
  • Control: The nature and degree of employer’s control over the work.
  • Opportunity for Profit or Loss: The worker’s opportunity for profit or loss depending on managerial skill.
  • Skill and Initiative: The amount of skill required for the work.
  • Permanence: The degree of permanence of the working relationship between the worker and the potential employer.
  • Importance to the Business: Extent to which the work performed is an integral part of the employer’s business.
  • Investments: Investments (usually capital or entrepreneurial in nature) by the worker and the potential employer.
• Totality of the Circumstances: This is a departure from previous guidance because employers are now required to conduct a “totality of the circumstances” analysis of a worker’s economic reality. No single factor is determinative, and all factors must be considered in the context of the particular employment relationship.  The list of factors is also non-exhaustive—other factors may be considered where relevant to an assessment of economic dependence.

Implications for Employers:

The final rule reflects the DOL’s more pro-employee approach to worker classification and employers should review their current classification practices in light of the final rule to ensure they are properly classifying independent contractors under the FLSA.  Misclassification of workers can lead to legal challenges, including claims for unpaid wages, overtime, and benefits. Employers should take proactive steps to mitigate the risk of misclassification and may need to review and potentially revise their agreements with workers to accurately reflect their classification status.

Employers with workers in states utilizing the so called “ABC Test” for independent contractors, such as Massachusetts, California, Illinois, and New Jersey, must continue to abide by the even stricter requirements. 

For Questions / Compliance

If you have any questions about the U.S. Department of Labor policy updates, please contact:

• Samantha Halem (shalem@hrwlawyers.com / 781-235-4878);
• Sam Gates (sgates@hrwlawyers.com / 617-348-4346); or
• Any member of the HRW Team.

The U.S. Department of Labor (DOL) recently issued its long anticipated proposal to update the regulations on overtime exemptions for certain “white collar” employees.

Under the Fair Labor Standards Act, workers are entitled to overtime pay of 1 ½ times their regular rate of pay for hours worked over 40 in a workweek, but there are exemptions for executive, administrative, and professional employees (among other exemptions). In order to qualify for one of these three exemptions, an employee must meet both a “duties” test and a “salary” test. The new proposed regulations would modify the salary test by increasing the minimum required salary from $455/wk. ($23,660 annually) to $921 per week ($47,892 annually). In 2016, the minimum would be further raised to $970 per week ($50, 540 annually). The salary levels were last updated in 2004.

Check out our newest HRW Alert for more information about how these regulatory changes can affect your company as well as how to submit comments to the Department of Labor. Please click here to download your copy of the full HRW Alert.