Federal Corner – November 2024
Over the last few years, broad governmental overreach from Washington, D.C., has worked against the momentum of Florida’s economy and local businesses. The Florida Chamber finds it imperative to keep you up to speed on all that is happening as you continue to run your business day-to-day. The foundation of the Federal Corner is to provide a one stop shop to keep you apprised of all that is happening in Washington, D.C., that may impact your business – it is essential that if these federal provisions apply or potentially apply that you are aware and able to take the proper steps accordingly.
President-Elect Donald Trump will return to the White House in January, signaling the potential for significant changes in employment law and labor relations. Some shifts will occur quickly, such as replacing the General Counsel at the Equal Employment Opportunity Commission and the National Labor Relations Board. Others, like overturning Biden Administration collective bargaining regulations and revisiting worker classification standards, will take more time. While a return to the pro-employer policies of Trump’s first administration is anticipated—characterized by reduced regulation, enforcement, and litigation—challenges are also expected, such as around immigration policy, which could impact America’s workforce.
Significant developments out of Washington, D.C., this month could impact your business. The National Labor Relations Board issued a decision banning mandatory employee meetings—commonly referred to as “captive audience” meetings—for discussing union representation, overturning over 75 years of precedent, and imposing new restrictions on an employer’s ability to require attendance. Additionally, the U.S. District Court for the Eastern District of Texas struck down the Department of Labor’s (DOL’s) Fair Labor Standards Act Overtime Rule, just two months before its full implementation. Previously, the court had granted temporary relief to the State of Texas, but this ruling now provides nationwide relief, reinstating the salary threshold to approximately $35,000—its level before the DOL’s rulemaking earlier this year.
Stay apprised of recent court rulings and developments in Washington, D.C. that could impact your business by reading the Federal Corner below.
Occupation Safety and Health Administration Heat Rule (Published in Federal Register, Deadline for Public Comment 12/30/2024)
In August, the Occupational Safety and Health Administration (OSHA) proposed a first-ever national rule in an effort to create consistency across industry sectors and territories as it relates to safeguarding workers from heat illness and injury. The rule would require employers to enact robust heat illness preventative measures in the workplace. With many steps between now and a final rule being implemented, please take a look at the letter the Florida Chamber sent to our congressional delegation and one pager outlining resources available to your business through the Florida Chamber Safety Council.
Earlier this year, Governor Ron DeSantis signed Chamber-backed House Bill 433 into law, which prohibits local governments from adopting heat illness ordinances for outdoor workers. Until OSHA has finalized their rulemaking, the requirements of Florida businesses as it relates to heat-exposure prevention will remain the same under OSHA’s General Duty Clause, which requires employers to keep employees safe from known hazards, including heat, and OSHA’s National Emphasis Program.
With the change in administration, it is expected that OSHA’s proposed heat safety rule, originally expected to become final in early 2025, will be scaled back dramatically, delayed, or scrapped altogether. Regardless of expectations, the Florida Chamber continues to lead on heat safety efforts in the workplace, providing resources to businesses, and will be submitting comments on the OSHA rulemaking on behalf of Florida businesses.
Please find the essential resources available to Florida businesses on the Florida Chamber Heat Stress Prevention Platform.
Department of Labor Proposed Overtime Rule (Invalidated by Federal Court)
The United States Department of Labor (DOL) proposed overtime rule was finalized in April and took effect on July 1. In November, the U.S. District Court for the Eastern District of Texas struck down the overtime rule stating that the Department of Labor exceeded its authority by raising the threshold too high and allowing for automatic adjustments every three years. The implementation was set to 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 also struck down by the federal Texas court in 2017. The DOL rulemaking would have significantly raised the salary threshold for “white-collar” exemptions from overtime from approximately $35,000 to $59,000, nearly a 69 percent increase and resulting in approximately four million more Americans and hundreds of thousands of Floridians now becoming eligible for overtime pay.
The judge struck down both phases of the rule, setting the threshold back to roughly $35k, which was the threshold prior to the rule being implemented. While it is expected the DOL will appeal the ruling, it is unlikely the Trump Administration will pick up the legal battle when he takes office in January.
Basel III Endgame Rule (Federal Reserve in Process of Making Changes, Re-Proposing)
The Federal Reserve’s proposed “Basel III Endgame” rule would significantly increase capital requirements for U.S. banks, driving up the cost of capital and credit for businesses of all sizes. Small and mid-size businesses, which are vital to economic growth, are particularly vulnerable, as they rely more heavily on bank financing to support operations and growth. If enacted, this rule could make financing prohibitively expensive for businesses already facing a challenging economic environment.
While intended to strengthen financial stability, the rule risks tightening credit availability and increasing borrowing costs for small businesses. Smaller, privately held companies, which represent the vast majority of U.S. businesses, could be hit hardest by higher risk weights on loans. This would limit their ability to hire, invest, and grow, ultimately affecting economic growth and employment.
In September 2024, following advocacy from the Florida Chamber and the broader business community, the Federal Reserve announced plans to revise and re-propose the rule. With potential changes in the administration, further adjustments to the proposal could lead to a more balanced framework that better supports small businesses.
Department of Labor 80/20/30 Rule (Invalidated by Federal Court)
In December 2021, the Department of Labor’s Wage and Hour Division reinstated the 80/20/30 rule, amending tip credit (allows employers to pay tipped employees less than the federal minimum wage, provided that the employees earn enough in tips to make up the difference) provisions for hospitality employers with tipped employees. This rule governs when and how employers can apply the tip credit for workers who receive tips, particularly regarding non-tipped tasks.
Under the 80/20/30 rule, employers lose the ability to claim a tip credit if an employee spends more than 20 percent of their total working hours on non-tipped, directly supporting tasks—such as rolling silverware, setting and clearing tables, or making coffee. These tasks are considered part of the job but are not directly tipped, and exceeding this 20 percent threshold results in the loss of the tip credit for that time.
The 30 percent comes in where the employer loses the tipped credit for the time a tipped employee performs directly supporting work for a continuous period that exceeds 30 minutes – regardless of if this work amounts to less than 20 percent of the employees total work hours for the week.
Restaurant industry groups sought to halt the rule on the grounds that the rule was “arbitrary, capricious, and contrary to the Fair Labor Standards Act, a violation of separation of powers and against the Administrative Procedures Act. Following a friendly ruling by the district court, the U.S. Fifth Circuit Court of Appeals overturned the ruling, granting a win to hospitality employers by vacating the regulation. The ruling could be overturned by the U.S. Supreme Court if successfully appealed by the Department of Labor, but is null and void for now.
Federal Trade Commission Non-Compete Rule (Invalidated by Federal Court, Under Appeal)
The Federal Trade Commission (FTC) proposed a rule last year that would broadly ban non-compete clauses in employment contracts. Earlier this year, 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 Florda businesses, and is likely unconstitutional. Prior to the period for public comment closing, the Florida Chamber submitted formal comments opposing the rule.
In August, a federal judge in Texas struck down the FTC’s near complete ban on non-competes nationwide following a partial block to the rule earlier this year, citing concerns over the FTC’s lack of statutory authority to issue substantive rules regulating unfair methods of competition. Citing different conclusions, a Florida judge also prevented the FTC from enforcing the ban based on the “major questions” doctrine, stating that the FTC had to show it had “clear congressional authorization” to issue the ban since the rule was of “extraordinary” economic and political significance. The Florida court held that the FTC failed to make that showing. The FTC has appealed both the Texas and Florida decisions to the 5th and 11th Circuit Court of Appeals respectively.
U.S. Department of Labor Independent Contractor Rule (In Effect)
Earlier this year, the 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.
Multiple business groups have filed suit against the Department of Labor’s authority to issue this ruling. The final impact remains to be seen, but it is now in effect while the legal process unfolds. Regardless of the outcome of the litigation, it is expected the next Trump administration will reverse President Biden’s efforts that made it harder for businesses to classify independent contractors.
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. Businesses 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. You will also find a guide for small businesses to comply from the U.S. Chamber HERE.
Due to a recent court decision, this rule does not apply to members of the National Small Business Administration at this time.
Occupational Safety and Health Administration Union Walkthrough Rule (In Effect, Pending Ongoing Litigation)
The Occupational Safety and Health Administration (OSHA) finalized a rule allowing 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 took effect on May 31. A coalition of business leaders have filed a lawsuit challenging the OSHA rule. It is expected the Trump administration will review this rule and could potentially overturn the rule in the coming years through the rulemaking process.