Welcome to the latest edition of AlphaStaff's Monthly Compliance Updates!
We are pleased to provide you with November's federal and state legal updates and highlighted resources provided by some of AlphaStaff’s trusted legal partners to guide and help keep you in compliance.
Federal Updates
Federal Court Strikes Down Department of Labor’s Overtime Rule
A federal judge recently invalidated the Department of Labor’s (DOL) rule that sought to significantly increase the salary threshold for the “white collar” overtime exemptions under the Fair Labor Standards Act (FLSA). The court ruled that the DOL overstepped its authority by elevating the threshold from $35,568 to $44,000 in July 2024, with a second phase increase to $59,000 set for January 2025, and by introducing automatic adjustments every three years. As a result, the federal salary threshold reverts to approximately $35,000.
The court’s decision reflects long-standing concerns that the rule placed too much emphasis on salary rather than job duties. Similar legal challenges were brought against a similar Obama-era regulation in 2016. This ruling also leveraged the Supreme Court’s recent rejection of Chevron deference, allowing courts to more readily overturn agency rules. While the DOL may appeal, the incoming Trump administration is unlikely to defend the rule vigorously, potentially leaving employers with greater flexibility.
Employers must now reevaluate their compliance strategies. If changes have already been implemented or communicated, employers should carefully weigh the legal and employee morale implications of rolling back those adjustments.
For further detail on the ruling and key considerations for employers, please click here to read more from Fisher Phillips.
U.S. Department of Labor Opinion Letter Addresses Expense Reimbursement and Regular Rate
On November 8, 2024, the U.S. Department of Labor (DOL) issued Opinion Letter FLSA2024-01, clarifying when daily expense reimbursements can be excluded from an employee’s regular rate of pay under the Fair Labor Standards Act (FLSA). The guidance emphasizes that reimbursements must represent legitimate expenses and not disguised compensation.
The letter addressed an oil and gas services company’s plan to increase daily reimbursements from $25 to $150-$200 without including these payments in employees’ regular rate of pay. The DOL explained that reimbursements must reflect actual or reasonably approximate expenses incurred during work. Simply labeling a payment as an expense reimbursement is insufficient if the payment does not align with bona fide expenses.
The DOL further elaborated two key points:
- Exclusion of Actual Expenses - Employers can exclude the actual or reasonably approximate amount of incurred expenses from the regular rate calculation. However, any excess reimbursement must be included. For example, if expenses total $25 but the reimbursement is $100, the additional $75 must be included in the regular rate.
- Reasonable Approximation Methodology - While the FLSA does not require a specific method to estimate expenses, the methodology must reasonably reflect actual costs. Unsupported or excessive reimbursements, such as a jump from $25 to $150-$200 without evidence of increased expenses, must be included in the regular rate.
Employers should review reimbursement practices to ensure compliance with the FLSA and avoid legal risks.
Click here to read more from JacksonLewis.
New Administration May Lead to Increased Form I-9 Audits
The incoming administration is expected to intensify immigration enforcement, particularly ICE Form I-9 audits and worksite raids, as seen during the Trump administration’s previous term. Between 2016 and 2020, ICE Form I-9 audits reached unprecedented levels, with as many as 6,450 audits in 2019, and targeted enforcement operations, such as raids, resumed after a decade-long hiatus. These enforcement actions can significantly disrupt business operations and result in substantial financial penalties for employers.
Form I-9 audits typically begin with a Notice of Inspection (NOI), giving employers three business days to provide Forms I-9 and supporting documentation for current and some former employees. Violations, including incomplete or missing forms, can lead to civil penalties of $281 to $27,894 per violation, depending on severity. Conversely, ICE raids involve unannounced visits, search warrants, and the potential detention of unauthorized workers, creating further challenges for employers.
To mitigate risks, employers should proactively ensure compliance by conducting internal Form I-9 audits, correcting errors, and training staff on the proper Form I-9 preparation and retention practices. Enrolling in E-Verify and maintaining robust documentation procedures are also recommended. If you are not currently enrolled in E-Verify, please contact your HR Account Manage for more information on our vendor, HR Workcycles.
Click here to read more from Littler.
Seventh Circuit: Travel Time During Normal Working Hours Is Compensable for Employees on Remote Assignment
The U.S. Court of Appeals for the Seventh Circuit (Illinois, Indiana, and Wisconsin) recently clarified compensation rules under the Fair Labor Standards Act (FLSA) for employees traveling on overnight assignments. In Walters v. Professional Labor Group, LLC, the court held that travel time during regular working hours is compensable when employees are required to stay away from home overnight. This includes travel on non-working days if it overlaps with what would normally be the employee’s working hours. Additionally, such travel time must be counted when calculating overtime pay.
The case in question involved an employer, Professional Labor Group, LLC (PLG), that assigns skilled tradespersons to remote job sites, where they stay for the duration of their assignments, often spanning several days or weeks. While PLG provides per diem payments and mileage reimbursement, it does not compensate employees for travel time or include this time in overtime calculations. A former employee argued that travel time to remote assignments should be compensable under the FLSA. The Seventh Circuit upheld the district court’s ruling in the employee’s favor.
Notably, the court distinguished travel for overnight assignments from routine commutes. Under FLSA regulations, commuting to a fixed location is non-compensable. However, travel requiring overnight stays is subject to different rules and must be compensated when it occurs during regular working hours.
Employers should review their travel policies and payroll practices to ensure compliance with the FLSA requirements and avoid potential liabilities.
Click here to read more from JacksonLewis.
Compliance Update: Employers and Vendors Must Address New AI Tool Guidance Under FCRA
The Consumer Financial Protection Bureau (CFPB) issued a Circular on October 24, 2024, clarifying that obligations under the federal Fair Credit Reporting Act (FCRA) may apply to the use of AI tools, employee monitoring, and assessment systems. This guidance serves as a reminder to employers and technology vendors to carefully evaluate their practices to ensure compliance.
Employers using third-party tools to monitor, assess, or make decisions about employees—such as tracking productivity, analyzing worker behavior, or issuing risk assessments—may fall under FCRA’s scope. If these tools generate “consumer reports” by evaluating employee data, employers must adhere to FCRA requirements. This includes providing clear disclosures, obtaining written consent from employees, and issuing pre-adverse and adverse action notices when employment decisions are based on such reports.
Employers should act promptly to audit practices and implement robust compliance measures in light of the CFPB’s expanded interpretations.
Click here to read more from Fisher Phillips.
State Updates
Workplace Law Issues on State Ballots
The recent election brought significant changes to workplace laws in several states, with voters deciding on key issues such as minimum wage increases, paid sick leave, cannabis legalization, and collective bargaining rights. States including Alaska, Arizona, California, Florida, Massachusetts, Missouri, Nebraska, New York, North Dakota, Oregon, and South Dakota were at the forefront of these developments, passing or rejecting measures that will shape employment policies in the years to come. Employers in these states should take note of the evolving legal landscape to ensure compliance with the new requirements.
Click here to read more from Fisher Phillips.
California Eliminates Employers’ Ability to Require Employees to Use Vacation Before They Receive State Paid Family Leave Benefits
California’s AB 2123, signed into law on September 29, 2024, will take effect on January 1, 2025, eliminating employers’ ability to require employees to use up to two weeks of company-provided vacation before receiving state-paid Paid Family Leave (PFL) benefits. This change impacts employers that either rely on the state’s PFL program or administer an approved voluntary plan.
Key compliance considerations include:
- Administrative Adjustments - Employers must revise leave policies and communication to reflect that employees can directly access state PFL benefits without first using vacation time.
- San Francisco Paid Parental Leave Ordinance (PPLO) - Employers in San Francisco may benefit from employees having unused vacation when state benefits begin. The PPLO allows up to two weeks of vacation to offset the employer’s supplemental pay obligations for new child bonding.
- Payroll Deductions - Employees on PFL may not receive paychecks from which to deduct benefit contributions (e.g., healthcare premiums). Employers can consider strategies such as collecting contributions upfront, during the leave, or via post-leave paycheck deductions. Alternatively, employees may opt to use vacation to “top off” partial PFL wage replacement, providing an opportunity for payroll deductions.
AB 2123 represents another significant adjustment to California’s evolving PFL program, requiring employers to adapt policies and processes to align with the updated law.
Click here to read more from Littler.
California Amends Workers' Compensation Notice Requirement, Adding New Information to Required Notice
California has updated its workers’ compensation statute, refining the requirements for employer notices regarding workers’ compensation coverage. Employers must post this notice in a conspicuous location accessible to employees during working hours. The notice must include detailed information, such as how to obtain emergency medical treatment, the scope of workers’ compensation coverage, and the rights of injured employees, including access to medical care, changing treating physicians, and receiving various benefits like disability indemnity, supplemental job displacement, and death benefits.
Additional mandated content includes the procedure for reporting injuries, timelines for notifying employers, anti-discrimination protections, and contact details for further assistance. A significant amendment to the statute now requires the notice to inform employees of their right to consult an attorney about their workers’ compensation rights, clarifying that attorney’s fees are typically paid from the employee’s recovery.
Employers in California should (i) review and update their workers’ compensation notices to ensure compliance with these new requirements, and (ii) confirm that the notice is displayed prominently in all worksites.
California Overtime Exemption Rates for Computer Software Employees and Physicians in 2025
Effective January 1, 2025, employers in California must ensure compliance with updated salary thresholds for specific overtime exemptions under state law. For employees to qualify as exempt from overtime, their roles must fall within recognized exempt categories and meet strict criteria, including minimum earnings requirements.
Certain exempt employees, such as computer software professionals and licensed physicians and surgeons, must meet salary thresholds tied to the California Consumer Price Index (CPI). Under Labor Code section 515.5, computer software employees performing highly skilled, intellectually focused duties, such as programming or software design, must earn at least $56.97 per hour, $9,888.13 monthly, or $118,657.43 annually. Similarly, under Labor Code section 515.6, licensed physicians and surgeons must earn a minimum of $103.75 per hour to qualify as exempt.
Employers should review compensation for these roles to ensure they meet the updated thresholds. Failure to comply could result in employees being entitled to overtime pay. Regularly auditing payroll practices and maintaining compliance with evolving wage laws is critical to avoiding penalties and ensuring proper classification.
Click here to read more from JacksonLewis.
Colorado Supreme Court Rules on Holiday Pay and Overtime Calculations
The Colorado Supreme Court has ruled that holiday incentive pay must be included in the regular rate of pay for calculating overtime under Colorado’s wage laws, specifically the Colorado Minimum Wage Order (COMPS Order 39). This decision in Hamilton v. Amazon.com Services LLC departs from the federal approach under the Fair Labor Standards Act (FLSA), which allows holiday incentive pay to be excluded from the regular rate if it qualifies as an overtime premium.
The Court made a key distinction between “holiday pay” and “holiday incentive pay.” “Holiday pay” refers to compensation for non-working hours on a holiday and can be excluded from the regular rate. In contrast, “holiday incentive pay” is compensation for hours worked on a holiday. The Court determined that holiday incentive pay qualifies as wages because it compensates employees for undesirable or irregular work schedules, much like a shift differential.
Employers in Colorado should review and revise their pay practices to ensure compliance with this ruling. Specifically, holiday incentive pay for work performed on a holiday must now be included in the regular rate of pay when calculating overtime for non-exempt employees. Employers should clearly distinguish between holiday pay (non-work compensation) and holiday incentive pay (work-based compensation) in their policies.
This decision underscores the importance of compliance with state-specific wage and hour laws, as Colorado’s law provides greater protection than federal standards. Employers operating in multiple states should ensure their policies align with both state and federal requirements.
Click here to read more from JacksonLewis.
What Illinois Employers Using E-Verify Should Know About the New Requirements Effective 2025
Effective January 1, 2025, amendments to the Illinois Right to Privacy in the Workplace Act introduce extensive requirements for employers using E-Verify, exceeding federal standards. The Illinois Department of Labor (IDOL) has issued guidance emphasizing that while E-Verify is permitted in Illinois, its use comes with strict responsibilities to prevent misuse and ensure compliance with state law.
Key employer obligations include:
- Mandatory Notifications and Attestations - Employers must file an attestation upon initial enrollment in E-Verify or within 30 days of the amendment’s effective date. The attestation must confirm receipt of training materials, completion of training, posting of required notices, and retention of certifications for inspection.
- Prohibition of E-Verify Misuse - Employers may not use E-Verify for pre-screening or screening current employees and must ensure all employees using the system complete the required training.
- Accuracy and Safeguarding - Employers must protect E-Verify information from unauthorized access and familiarize themselves with the system’s accuracy standards.
- Response to Agency Notifications - Employers must notify employees within 5 business days of agency-identified discrepancies, provide details, timelines to contest, and the original notice.
- Notice of I-9 Inspections - Employers must notify employees in relevant languages within 72 hours of receiving inspection notices including inspection details, agency information, and a copy of the notice. IDOL is expected to provide templates for such notifications.
Employers are prohibited from retaliating against employees who file complaints under the Act. Violations include failing to display the required notices, neglecting training obligations, misusing E-Verify, or failing to follow notification requirements.
Illinois employers should review IDOL guidance, update policies, and ensure compliance to avoid significant legal risks.
Click here to read more from JacksonLewis.
Illinois Amends Personnel Records Review Act
Effective January 1, 2025, Illinois employers must comply with significant amendments to the Personnel Records Review Act (the “Act”), introduced by HB 3763.
These changes impose new obligations on employers responding to personnel record requests from employees. Requests employees submit under the Act must now:
- be submitted in writing, including electronic formats like email or text, and
- clearly identify the desired records, the method of delivery (hard copy or electronic), and whether an authorized representative will act on the employee’s behalf.
If medical records are included, a signed waiver must accompany the request. Employees are entitled to at least two requests per calendar year and may access expanded categories of documents, including employee benefits records, legally binding agreements, employee handbooks, and employer policies affecting employment terms.
Employers must provide the documents included in properly submitted requests within seven working days, with a one-time extension of seven calendar days permitted if compliance within the original timeframe is impractical. Employers must also maintain historical copies of such records for compliance.
Non-compliance may lead to penalties, including actual damages, attorneys’ fees, and a $200 fine for willful violations. Employees may also pursue enforcement through Illinois circuit courts if administrative complaints remain unresolved for 180 days.
Employers should update personnel record request procedures, review document retention policies to ensure compliance, and train HR teams on the new requirements. Proactive adherence to these amendments will minimize risk and align operations with the updated Act.
Illinois Passes Worker Freedom of Speech Act
Illinois has enacted the Worker Freedom of Speech Act, which prohibits employers from requiring employees to attend or participate in meetings or communications that express the employer’s opinions on religious or political matters. Employers are barred from disciplining employees or taking adverse actions against them for declining such participation or for reporting violations in good faith.
Religious matters include beliefs, affiliations, practices, and decisions regarding joining or supporting religious organizations. Political matters cover elections, political parties, legislative proposals, regulatory changes, public policy, and affiliations with political or civic organizations.
The law allows employers to discuss religious or political matters as long as participation is voluntary. Mandatory training sessions intended to improve workplace collaboration or prevent harassment remain permissible. Communications required by law are also allowed, as are customary activities by higher education institutions, political organizations, not-for-profits, religious organizations, or government entities.
Employers must post notices about the law in common employee areas to ensure workers are informed of their rights. Employees who believe their rights have been violated can file complaints with the Illinois Department of Labor (IDOL). Remedies may include reinstatement, back pay, attorneys' fees, and penalties of $1,000 per violation.
Employers should review communication practices to ensure discussions on religious or political matters are entirely voluntary. Policies should be updated to comply with the new law, and notices must be posted in visible locations. Prompt action will help ensure compliance and maintain workplace harmony.
Click here to read more from JacksonLewis.
Illinois Amends Whistleblower Act
Effective January 1, 2025, amendments to the Illinois Whistleblower Act enhance protection for employees who disclose or threaten to disclose employer activities that may violate the law.
The amended Act defines adverse employment action as any materially adverse action that could deter a reasonable employee from whistleblowing. Retaliatory action includes not only adverse actions but also threats, such as reporting or threatening to report the immigration status of an employee or their family.
Prohibited retaliatory actions now extend to employees who threaten to disclose unlawful or unsafe employer activities. Protections also cover disclosures of practices that pose substantial danger to health or safety or violate laws. Employees must act with a good faith belief that the employer’s activity is unlawful or dangerous, replacing the previous “reasonable cause to believe” standard.
Remedies for employees include reinstatement, back pay with interest, liquidated damages up to $10,000, and injunctive relief. The amendment authorizes the Illinois Attorney General to investigate violations and initiate civil actions. Civil penalties can be as much as $10,000 per violation.
Employers should update policies and training to reflect these changes, ensuring clear reporting mechanisms and fostering a culture that supports lawful disclosures.
Minnesota Omnibus Bill Includes Pay Transparency Provisions
Effective January 1, 2025, Minnesota employers with 30 or more total employees must comply with new pay transparency requirements. Under the law, all job postings must include either a starting salary range (with both minimum and maximum amounts based on a good-faith estimate) or a fixed pay rate. Open-ended ranges or vague terms such as “starting at $15/hr” will not suffice. Additionally, postings must detail all associated benefits and other compensation, such as health or retirement benefits. General statements like “competitive benefits” are inadequate.
The law applies to any job solicitation intended to recruit applicants for specific positions, whether posted directly by the employer or through a third party, and regardless of whether the postings are electronic or printed. However, it remains unclear if these requirements apply solely to positions physically located in Minnesota or also to remote roles.
This legislation builds on Minnesota’s existing prohibition on asking applicants about salary history and is part of ongoing efforts to eliminate pay disparities tied to protected characteristics like sex. Employers should review their job posting practices to ensure compliance, including the development of clear, specific pay ranges and benefit descriptions.
Click here to read more from Littler.
New York Enacts Clean Slate Act to Seal Criminal Records and Prohibit Discrimination
As highlighted in the June 2023 edition of the AlphaAdvisor, New York enacted the Clean Slate Act, which will become effective January 1, 2025, introducing measures to automatically seal certain state criminal conviction records and amending the New York State Human Rights Law to safeguard against employment discrimination based on these sealed records.
The Act outlines specific timelines for sealing: traffic infractions involving impaired driving are sealed after three years, misdemeanors after three years from release or sentencing (if no incarceration occurred), and felonies after eight years from release. Class A-I felonies and convictions requiring sex offender registration are not eligible for sealing.
Employers are prohibited from making inquiries about or discriminating against individuals based on sealed conviction records. However, exceptions exist for positions requiring fingerprint-based background checks under state or federal law or roles involving work with children, the elderly, or vulnerable adults. It is important to note that the Clean Slate Act applies only to convictions under New York law and does not extend to federal or out-of-state convictions.
Employers should update their hiring practices and policies to comply with these new requirements and ensure HR staff and hiring managers are trained on the updated protocols. For roles involving fingerprint-based checks, employers should confirm compliance with the law’s exceptions.
Click here to read more from Littler.
New York Mandates Paid Prenatal Leave for Employees
As highlighted in the July 2024 edition of the AlphaAdvisor, effective January 1, 2025, New York will become the first state to mandate paid prenatal leave, requiring employers to provide up to 20 hours of paid leave in a 52-week period for pregnant employees to attend prenatal medical appointments. This new “paid prenatal personal leave” is separate from existing paid leave entitlements such as paid sick and safe leave, paid family leave, and FMLA-protected unpaid leave.
Key provisions include:
- Policy and Notice Requirements: Employers must maintain a written policy outlining the new rights of nursing employees and provide the updated New York State Department of Labor Policy on Breast Milk Expression in the Workplace. This information must be communicated at hiring, annually, and upon an employee's return to work post-childbirth.
- Leave Eligibility: The 20 hours of leave must be made fully available to employees at the time of hire and can be taken in hourly increments.
- Compensation: Employees will be paid at their regular rate or the applicable minimum wage, whichever is higher.
- Non-Accrued Benefit: Unused leave does not carry over or require payout upon separation from employment.
Employers should update their leave policies, notify HR and benefits teams, and ensure compliance with this new requirement by January 2025. This development highlights New York’s leadership in expanding workplace protections for pregnant employees.
Click here to read more from Fisher Phillips.
