Buckle Up: The Roadmap to Wage and Hour Law Advancements in 2024

Ready or not, 2024 is already in full swing. With January in the books, employers should be informed and prepared for the wage and hour law changes that could be coming down the pipe this year.

The Department of Labor Publishes its Final Rule Regarding Independent Contractor Status

We recently published guidance on the Final Rule published by the U.S. Department of Labor (DOL) regarding the standard for distinguishing employees from independent contractors under the Fair Labor Standards Act (FLSA). The guidance is available here. In sum, the Final Rule, which goes into effect March 11, 2024, revises the analysis for employers in determining who is an employee and who is an independent contractor under the FLSA. The DOL believes “that this final rule will reduce the risk that employees are misclassified as independent contractors while at the same time providing greater consistency for businesses that engage (or wish to engage) with individuals who are in business for themselves.” For more information, refer to the General FAQs provided by the U.S. Department of Labor Wage and Hour Division.

Employers should review their internal processes for determining independent contractor status to ensure compliance with the Final Rule and ensure their employees are properly classified under the FLSA.

The Department of Labor’s Proposed Salary Threshold Increase

Many may remember that in August of 2023, the DOL issued a Notice of Proposed Rulemaking (NPRM) that sought to increase the salary threshold for overtime exemptions from $684 per week to $1059 per week (or $55,068 annually). The proposed rule also would increase the salary threshold for the highly compensated employee exemption from $107,432 to $143,988 annually. Moreover, the DOL’s proposal also provides for an automatic updating mechanism that would allow for the updating of thresholds year over year to reflect current earnings data.

Following its NPRM, the DOL opened a 60-day comment period that officially closed on November 7, 2023, after the receipt of more than 26,000 comments. The proposed rule faced scrutiny in the November 29 hearing before the members of the House Subcommittee on Workforce Productions, which could foretell a bleak future for the proposed rule. Nevertheless, if adopted, the proposed rule could become effective as early as the spring or summer of this year and would impose significant obligations on employers to review their employee exemption classifications and ensure they are properly classified under the higher thresholds.

The Department of Labor’s Investigation and Prosecution of Off-the-Clock Violations

2023 also proved to be a year filled with remote work-related investigations and prosecutions. As businesses worldwide embraced the flexibility and productivity gains offered by hybrid and fully remote work structures, the DOL focused on addressing potential violations stemming from these evolving work arrangements. To provide clarity and establish a framework for compliance, the DOL issued crucial guidance on compensable time for remote workers. Specifically, the DOL emphasized that certain activities, such as bathroom breaks, coffee breaks, and other similar short-duration activities that typically last 20 minutes or less, should be considered compensable time.

Employers should expect the DOL to remain focused on these off-the-clock claims in 2024. They should review their policies and practices to ensure remote workers are accurately compensated for all compensable time, including short-duration activities.

Minimum Wage Increases Across the Country

At the state level, multi-state employers should remain abreast of increased minimum wages in 2024. As of January 1, 2024, the minimum wage increased in 22 states. Among those states, California and New York increased the minimum wage to $16 per hour. In fact, workers in six states now have a guaranteed minimum wage of more than twice the federal minimum wage. There are some additional states, including Florida, Nevada, and Oregon, whose minimum wages will increase in the summer and fall of 2024.

Wage and Hour Claims Generally

The DOL and EEOC explicitly committed to increased interagency cooperation in the September 14, 2023 Memorandum of Understanding (MOU). See our previous guidance on this topic here.

Coming on the heels of a year that saw wage and hour claims as one of the most expensive employment law risks, the MOU, which empowered staff of both agencies to coordinate efforts both for individual matters and more large-scale operations, foreshadows an increase in compliance actions for wage and hour claims in 2024. Indeed, as we previously wrote, in light of the cross-training of investigators, information-sharing efforts, and increased potential for joint investigations, employers should anticipate an uptick in comprehensive investigations and a surge in enforcement actions throughout 2024, highlighting the need for proactive measures to ensure adherence to regulations and mitigate potential liabilities.

What Employers Should Do Now

Here are five key takeaways for employers:

1. Review Independent Contractor Classifications: Employers should review their internal processes for determining independent contractor status in light of the DOL's Final Rule. The new rule, effective March 11, 2024, revises the analysis and emphasizes the “totality of the circumstances” economic realities test. Employers should ensure compliance with the Final Rule and properly classify their workers under the FLSA.
2. Monitor Proposed Salary Threshold Increase: Employers should stay updated on the DOL’s proposed rule to increase the salary threshold for overtime exemptions and highly compensated employee exemptions. If adopted, this rule could impose significant obligations on employers to review employee exemption classifications and ensure compliance with the higher thresholds. Employers should monitor any developments and be prepared to make necessary adjustments.
3. Address Off-the-Clock Violations: With the rise of remote work, employers must be vigilant in addressing potential off-the-clock violations. The DOL has emphasized the importance of compensating remote workers for breaks that typically last 20 minutes or less. Employers should review their policies and practices to ensure proper compensation for remote workers’ compensable time, regardless of their work location.
4. Stay Informed on Minimum Wage Increases: Employers, especially multi-state employers, should stay informed about minimum wage increases across the country. As of January 1, 2024, the minimum wage increased in 22 states, with some states, like California and New York, reaching $16 per hour. Employers should be aware of these changes and adjust their pay practices accordingly.
5. Prepare for Increased Compliance Actions: The MOU between the DOL and EEOC signals increased interagency cooperation and coordination for wage and hour claims. Employers should anticipate an uptick in comprehensive investigations and enforcement actions throughout 2024. To mitigate potential liabilities, employers should take proactive measures to ensure adherence to regulations and maintain compliance with wage and hour laws. Consider reviewing your handbooks and internal policies for compliance with your federal, state, and local laws.

For guidance and assistance navigating the complexities of wage and hour law advancements in 2024, employers are encouraged to reach out to Buchanan’s experienced Labor and Employment attorneys, who are ready to provide comprehensive support.