Royal

Changes to Employment

Nov 28, 2022

A 2022 Year-end Wrap Up and a Look Ahead to 2023



By Justin Goldberg, Esq.

Within the broad realm of employment law, this past year was marked by increased protections to employees through changes to independent-contractor classifications, raising of minimum and service wages, increasing benefits for family and medical leave, safeguarding hairstyles of protected classes, and other changes.


Looking ahead to 2023, it certainly appears to be headed down a similar path, with employee safeguards continuing to solidify. Employee security and compensation guarantees to be a highly litigated issue in the coming year.


Here is a look back — and ahead:

 

U.S. Department of Labor Publishes Independent Contractor Proposed Rule

On Oct. 11, the Biden administration, via the U.S. Department of Labor (DOL), proposed to modify Wage and Hour Division regulations so as to revise its analysis for determining employee or independent-contractor classification under the Fair Labor Standards Act.


This was done with the aim to be more consistent with judicial precedent and the act’s text and purpose. This will mark the administration’s second attempt at undoing the Trump-era standard, which it claims denies basic worker protections such as minimum wage and overtime pay.

Secretary of Labor Marty Walsh was quoted as saying, “while independent contractors have an important role in our economy, we have seen in many cases that employers misclassify their employees as independent contractors, particularly among our nation’s most vulnerable workers,” and that “misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages.”


Industries such as gig companies, construction, trucking, home care, janitorial services, delivery, personal services, hospitality, and restaurants that use independent contractors as staff should pay close attention to this anticipated development. Their operating costs will undoubtedly increase if they are required to reclassify their independent contractors as employees, due to the tax liabilities and minimum-wage, labor, safety, and other legal requirements that apply to employees.

The Trump-era rule outlined a multi-factor test (five total) to determine if the worker is an independent contractor or an employee; however, it gave far greater weight to two core factors: the nature and degree of the worker’s control over the work, and the worker’s opportunity for profit or loss based on personal initiative or investment.


The Biden administration’s proposal would consider those two factors, but include four others for a total of six: investments by the worker and the employer, the degree of permanence of the working relationship, the extent to which the work performed is an integral part of the employer’s business, and the degree of skill and initiative exhibited by the worker.


These six factors guide the analysis of whether the “economic realities of the working relationship” show a worker to be either dependent on the employer for work or in business for themselves based on a “totality of the circumstances.”


Under the proposed modification, no one factor or set of factors is presumed to carry more weight, and the DOL may also consider additional factors beyond those six, if they indicate the worker may be in business for themselves.

 

Increases in the Minimum Wage and Service Rate

Massachusetts employees making minimum wage are going to see a pay increase of 75 cents per hour, effective Jan. 1, 2023, bringing their pay to $15 per hour. This does not include agricultural workers, whose pay remains at $8 per hour. Workers under the service rate (those who provide services to customers and make more than $20 a month in tips) will see an increase of 60 cents per hour, beginning in 2023, as the service rate is now $6.75.

 

Changes to Massachusetts Paid Family and Medical Leave

In 2022, the maximum weekly benefit for Massachusetts Paid Family and Medical Leave is $1,084.31; however, in 2023, it will increase to $1,129.82. Also beginning in 2023, the contribution rate for employers with 25 or more covered individuals will decrease from 0.68% of eligible wages down to 0.63% of eligible wages. Employers should ensure that their wage deductions and contributions are adjusted accordingly. This is the second straight year the contribution rate has decreased.

Employees are still not permitted to use their accrued sick or vacation leave to ‘top off’ their weekly benefit. While there may have been rumors that Massachusetts was planning to change this in 2023, no such change appears forthcoming.

 

The CROWN Act

In 2022, Massachusetts enacted the Creating a Respectful and Open World for Natural Hair (CROWN) Act, making it the 18th state to pass similar legislation (see related story on page XX). This law is aimed at quashing discrimination on the basis of “traits historically associated with race, including, but not limited to, hair texture, hair type, hair length, and protective hairstyles.”

The law further defines “protective hairstyles” to include “braids, locks, twists, Bantu knots, hair coverings, and other formations.” Employers who violate the CROWN Act will be liable for compensatory damages, as well as possible punitive damages and attorneys’ fees.

The CROWN ACT was inspired by two teenage twin sisters’ alleged violation of a school hair and makeup policy that prohibited extensions.

 

Bottom Line

Given the changes that have taken place — and the changes to come — it is a good idea to have your business schedule a check-in with an employment-law firm as we approach 2023.

 

This article was published in the most recent edition of BusinessWest.

Non-Compete Agreements Are in Jeopardy

26 Apr, 2024
On April 23, 2024, the Federal Trade Commission (“FTC”) issued a final rule banning non-competition agreements for all employees except for very narrow exceptions. The FTC’s Final Rule banning all non-competition agreements is effective 120 days after its publication in the Federal Register, which is expected in the next few days.  As of the effective date, all non-competition agreements are banned, except for franchisor/franchisee relationships and for sales of a business between buyer and seller. The FTC’s Rule is retroactive, prohibiting certain non-competition agreements before the effective date of the Rule as well. Existing non-competition agreements can remain in effect as to senior executives, which are defined in the Rule as employees in “policy-making positions” making at least $151,164 annually. The FTC’s Final Rule is already being challenged through the court system and a challenge from the Chamber of Commerce will most likely follow suit. Therefore, if an employer has existing non-competition agreements, the employer may not need to rescind them just yet. Stay tuned for updates as these challenges take their due course.

ALERT: US Department of Labor Increases Salary Threshold for White Collar Overtime and Minimum Wage Exemptions

26 Apr, 2024
By: Trevor Brice, Esq. On April 23, 2024, the U.S. Department of Labor (“DOL”) announced a Final Rule updating regulations governing Executive, Administrative and Professional exemptions (“EAP exemptions”) from the minimum wage and overtime rules. This Final Rule significantly increases the salary threshold for workers to qualify for EAP exemptions. In general, to qualify for EAP exemptions, an employee must 1) be paid on a salary basis, 2) at a threshold level, and 3) primarily perform EAP duties as defined by the DOL. The Final Rule does not impose any changes on the salary basis or job duties relevant in determining EAP exemptions. After issuance of a proposed rule that received approximately 33,000 comments, the DOL in the Final Rule is increasing the salary thresholds in waves. As of July 1, 2024, the salary threshold for EAP exemptions applies to employees making $844 per week ($43,888 annually) on a salary basis. As of January 1, 2025, the threshold increases to $1,128 per week ($58,656 annually). This means that employees making under these amounts on a salary basis as of these dates are no longer exempt from overtime, as long as the other criteria for determining EAP exemptions by the DOL are met. Additionally, the rule increases the salary threshold for the “highly compensated” employee exemption. This exemption applies when an employee meets the greater salary threshold, their primary duty includes performing office or non-manual work and the employee customarily and regularly performs at least one of the duties or responsibilities defined in the EAP exemptions. The DOL also issued the increased salary threshold for the highly compensated exemption in waves. As of July 1, 2024, the salary threshold for the highly compensated employee exemption applies to employees making $132,964 annually, including at least $844 per week paid on a salary or fee basis. As of January 1, 2025, the salary threshold for the highly compensated employee exemption raises to $151, 164 annually, including at least $1,128 per week on a salary or fee basis. The DOL estimates that under the Final Rule, there will be four million workers newly entitled to overtime protection as of 2025. As with the FTC’s Final Rule passed on the same day, the DOL’s Final Rule will most likely be subject to challenge through the court system. However, for employers concerned with this new rule, it would be prudent to identify those positions below or close to the new salary thresholds, consider whether to change salaries given the new thresholds and conduct training as to who will now be exempt under the DOL’s final rule. If there is any gray area as to the DOL’s final rule, reach out to the local employment and labor counsel to determine if there is potential liability. Trevor Brice is an attorney who specializes in labor and employment-law matters at the Royal Law Firm LLP, a woman-owned, women-managed corporate law firm that is certified as a women’s business enterprise with the Massachusetts Supplier Diversity Office, the National Assoc. of Minority and Women Owned Law Firms, and the Women’s Business Enterprise National Council.
Share by: