Biden Administration Promises Changes in Labor and Employment Law

Biden Administration Promises Changes in Labor and Employment Law

There were a number of controversial rules introduced by former President Barack Obama’s
administration that may well resurface with a Biden administration. Here is a recap.

Changes to overtime rules:  

Rules proposed by  the Obama administration would have doubled the salary threshold above which employees could be classified as exempt from overtime pay under federal law. In 2016, before the rule became effective, a judge ruled that the administration exceeded its authority due to the magnitude of the planned increase. Effective Jan. 1, 2020, the Trump administration raised the salary threshold to
$35,568 from $23,660, whereas the Obama administration’s blocked rule would have made the cutoff $47,476.

If the Biden administration revisits overtime regulations it may well also amend the duties tests with potential changes to roles, managerial scope and current exemptions.

Several states already have higher salary thresholds for exempt workers. In California, for example, the salary threshold for the executive, administrative and professional exemptions is calculated by doubling  the state minimum wage. California’s cutoff will rise on Jan. 1, 2021, to $58,240 (annualized) for businesses with at least 26 employees and $54,080 for those with fewer.

Alaska’s salary threshold is also double the minimum hourly wage. In New York, the state’s minimum salary threshold for executive and administrative employees has been increased in phases, and the actual rate depends on location.

States may also have different thresholds for computer professionals and other job categories.

Federal Minimum Wage:  

President elect Biden has repeatedly stated that he intends to prioritize the federal minimum wage from $7.25 to $15 an hour. This action would also serve to raise overtime compensation which is calculated as 1.5 times their regular hourly rate for the period.

Many states have regulations that tie the State minimum wage to the Federal Rate. Many states have declared a state specific minimum wage that is higher than the current Federal rate of $7.25. In addition, there are local jurisdictions that have local minimum wage laws. Employers should always pay the highest rate of the Federal, State and local rates that apply within each jurisdiction.

Independent Contractor Rules:

The position in the Biden plan on independent contractors seems to be designed to be purposefully confusing with conflicting messages in order to be appeal to all and avoid defections by the contingent workforce in the election. 

The Biden plan first speaks to independent contractors stating the administration should vigorously enforce existing laws against employers that intentionally misclassify employees as independent contractors. On the other hand, the Biden plan goes on to specifically endorse the recent California law A.B. 5 that establishes a new test for independent contractor status that effectively eliminates the ability of existing independent contractors to continue to legally offer their services. Many expect the Biden administration to use CA A.B 5 as a model for a national plan.

“Joint Employer” Liability:

The Trump administration recently finalized a rule narrowing the definition of “joint employer” under the FLSA, but a NY federal judge invalidated substantial portions of the rule, prompting the Trump DOL to appeal the decision.

Biden has pledged his administration to codify the broad definition of joint employment applied in the Browning-Ferris decision, which would expand the definition of a joint employer to include companies that do not have direct control over employees and capture organizations with indirect control or even the mere potential to control employees. This expanded definition of “employer” will be particularly disruptive in staffing and franchise organizations as it potentially blurs the lines between franchisor and franchisee or staffing organization and client.

Employers should evaluate how these potential changes could impact their operation especially in light of changes that the Covid-19 pandemic has made necessary to staffing levels and currently exempt employees working remotely who may be reclassified as non-exempt and subject to overtime.

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