Federal Corner – May 2024
U.S. Department of Labor Independent Contractor Rule (In Effect)
On March 11th, the final U.S. Department of Labor (DOL) independent contractor rule took effect. The final rule tilts the playing field against businesses, resulting in many more workers being classified as employees as opposed to independent contractors. The rule replaces the business-friendly “core factors” approach of the Trump Administration and reimplements the pro-labor Obama Administration “totality of the circumstances” test, meaning that no single factor determines the worker’s status, and all aspects of the work relationship may be considered.
The rule is expected to increase costs on Florida businesses as some will have to reclassify some contractors as employees – leading to minimum wage, overtime pay, and benefit obligations. The rule also leads to increased compliance costs and liability concerns due to the misclassification of workers. The DOL’s final independent contractor rulemaking has significant implications for Florida businesses, especially small businesses that rely on the independent contractor model.
The final implications of the rule remain to be seen, but it is now in effect while the legal process unfolds.
U.S. Treasury Benefit Ownership Information Reporting Rule (In Effect)
Businesses may now have to report information to the U.S. Treasury’s Financial Crimes Enforcement, or FinCEN, following a final rule that took effect on January 1, 2024. FinCEN’s final rule requires many companies, limited liability companies, and other entities formed or registered in the United States to report information about themselves, and their beneficial owners – the individuals who own or control the company – to the U.S. Treasury. The rule aims to fight against illegal financial activities like money laundering and terrorist financing but comes with increased reporting and compliance costs for businesses.
Businesses formed on or before January 1, 2024, have one year to comply with the new requirements. You can learn more about the scope of the rule and the requirements for businesses by visiting FinCEN’s guide to beneficial ownership information reporting here.
Occupational Safety and Health Administration Union Walkthrough Rule (Takes Effect May 31, Pending Ongoing Litigation)
The Occupational Safety and Health Administration (OSHA) finalized a rule going into effect on Friday that will allow workers to select a union representative to accompany OSHA inspectors walking through employers’ workplaces – regardless of whether the workplace is unionized or the representative selected by the workers is an employee of the business being inspected. The new rule changes the regulatory requirement that the representative accompanying the OSHA inspector must be an employee and presents potentially significant challenges for employers.
The final rule is likely to increase union participation in the inspection process and is potentially problematic as representatives with unknown motives will now be allowed to participate in inspections of employer’s property. The rule also raises confidentiality concerns as sensitive information could potentially be shared with union representatives, even in non-union workplaces, which could lead to increased union participation. In addition, representatives of unions will now be allowed to participate in the inspection process and there has been concerns raised that representatives may be more focused on finding violations rather than working collaboratively to improve safety.
The rule will take effect on Friday, May 31. A coalition of business leaders have filed a lawsuit challenging the OSHA rule.
Department of Labor Proposed Overtime Rule (Takes Effect July 1, Pending Ongoing Litigation)
The United States Department of Labor (DOL) proposed overtime rule was finalized in April and will take effect on July 1. The implementation will come in two phases with the salary threshold for certain exempt employees increasing to approximately $44K on July 1, jumping to nearly $59K beginning in 2025.
The Florida Chamber submitted formal comments to the DOL in opposition to their overtime mandate in November 2023. An almost identical proposal by the Obama Administration, at the urging of the business community, was eventually struck down in federal court in 2017. The DOL rulemaking significantly raises the salary threshold for “white-collar” exemptions from overtime from approximately $35,000 to $59,000, nearly a 69 percent increase and results in approximately four million more Americans and hundreds of thousands of Floridians now becoming eligible for overtime pay.
This broad overreach by the federal government does not achieve the goal it purports to achieve and in reality, is likely to have the opposite effect as often happens when government bureaucrats inappropriately insert themselves in the employer-employee relationship.
On May 22, a coalition of business groups filed a lawsuit challenging the DOL’s authority to issue such a rule and pointing to the prior court’s decision during the Obama Administration.
Federal Trade Commission Finalizes Non-Compete Rule (Final Rule Published in Federal Register, Takes Effect September 4, Pending Ongoing Litigation)
The Federal Trade Commission (FTC) proposed a rule in January 2023 that would broadly ban non-compete clauses in employment contracts. On May 7, 2024, the FTC published their final rule in the Federal Register, imposing a national ban on all employers from using non-compete clauses in contracts with all workers at any level, with minimal exceptions. The U.S. Chamber and others have filed lawsuits in federal court challenging the FTC’s authority to issue the rule. Additionally, the Florida Chamber Litigation & Regulatory Reform Center signed on to a coalition letter asking the FTC to self-stay their rule while the non-compete rule is being litigated to provide certainty and lessen compliance costs for businesses who utilize non-compete agreements in employment contracts.
The Florida Chamber believes this rule is a drastic overreach of the federal government, negatively impacts Florida businesses, and is likely unconstitutional. Prior to the period for public comment closing in April 2023, the Florida Chamber submitted formal comments opposing the rule.
National Labor Relations Board Joint Employer Rule (Awaiting Further Action)
In September 2022, The Insider brought the then proposed joint employer rule to your attention and issued a survey to solicit feedback on the potential negative consequences to your business. The final rule makes it easier for workers to be considered employees of more than one entity for labor relations purposes, covering numerous commonplace business relationships, such as franchise-franchisee, that traditionally have not been considered joint employment, a legal situation where two or more employers control the work or working conditions of the same employee.
The controversial final rule looks to establish joint employer status not only when “substantial, direct, and immediate control” is exercised over terms and conditions of employment, but also when evidence exists of reserved, unexercised, or indirect control over any worker conditions. Replacing the current standard with the broadest definition ever seen under the National Labor Relations Act will lead to many more business relationships covered by the rule. Were the rule to take effect, it will ensure more workers are able to seek union membership and collective bargaining will increase across the country. It is also consequential as now employers can be held liable for each other’s unfair labor practices. Additionally, the National Labor Relations Board’s (NLRB) final rule is burdensome to businesses across Florida and the nation as the joint employer standard has flip-flopped continually over the last eight years – creating uncertainty for businesses that share a working relationship with other businesses.
On March 8th, the Eastern District of Texas issued a summary judgement striking down the NLRB final joint employer rule. The NLRB is likely to appeal the ruling, sending the issue to the U.S. Fifth Circuit Court of Appeals.