It's Time for Your Employment Law Annual Checkup

Staying on top of employment law is a continuing and crucial aspect of business management that helps safeguard both company interests and employee rights. Tackling the constantly evolving laws and regulations across federal, state, and local levels can feel stressful and overwhelming for business owners and HR professionals.

To that end, a recent ADP webcast, Employment Law Annual Checkup, offered expert insight and guidance for employers. Presenters Samantha Monro and Kevin Skelly, both Senior Counsel at ADP, explored the latest developments and best practices in several areas, some of which are highlighted below. Launch the one-demand webcast anytime for a more comprehensive update on these and related topics.

Key employer compliance challenges

Employers face several critical compliance issues, including overtime exemptions, pay statement legislation, income tax exemptions, restrictive covenants, labor law, pay transparency, and paid leave policies.

FLSA overtime exemptions

Overtime exemptions are a key concern, as the Fair Labor Standards Act (FLSA) mandates minimum wage and overtime pay for non-exempt employees. However, there are exemptions for certain employees, including but not limited to those that meet the executive, administrative, professional and highly compensated employee exemption requirements. Although the salary thresholds for the executive, administrative, professional and highly compensated employees were set to increase starting January 1, 2025, a federal court put a halt to these increases.

"For now, the federal salary minimum threshold, to be classified as an exempt employee under the executive, administrative and professional exemptions, remains at $684 per week and $107,432 for highly compensated employees, but states can require a higher salary threshold requirement," said Munro.

Employers need to stay informed and collaborate with HR and legal counsel to ensure compliance. Penalties for non-compliance are substantial, with the Wage and Hour Division collecting over $274 million in back wages in fiscal year 2023.

Pay statement legislation

Pay statement legislation is another critical area. States like Maryland, Ohio, and Rhode Island have enacted or proposed changes specifying required information on pay statements. Employers should review their pay statements to meet state requirements and include comprehensive information to avoid litigation and ensure transparency.

Pay transparency regulation

Pay transparency promotes fairness and equity in the workplace. Many states and localities require employers to disclose pay ranges for positions to current employees and job applicants. Employers must comply by including required information in job postings and reviewing compensation decisions to maintain internal pay equity. Organizations must decide whether to adopt a nationwide pay transparency policy or tailor their approach to meet local requirements.

Stay up-to-date on rapidly changing employment legislation -- subscribe to receive SPARK Legislation/Eye on Washington updates.

Income tax exemption for certain wage types, in effect and proposed

Efforts to exempt certain wages from income tax are gaining traction. Alabama excludes overtime wages from state income tax for full-time hourly wage-paid employees until June 30, 2025. Other states, including Mississippi, Connecticut, Illinois, Iowa, Virginia, and New Jersey, are considering similar proposals. Some states propose excluding tips or minimum wage earnings from state income tax. Employers should monitor these developments and conduct self-reviews for compliance.

Non-compete agreement compliance

Restrictive covenants, such as non-compete, non-solicitation, and confidentiality restrictions, protect confidential information and client relationships.

Skelly reminded employers, "Non-compete agreements are generally matters of state law. Each state has its own standards and case law to enforce them. Many states still enforce non-compete restrictions so long as those restrictions are narrowly tailored. But if the non-compete restriction is overly broad in time and geographic scope, there's a good chance the courts will not enforce it as written."

Recent federal and state efforts to limit or ban non-compete agreements have attracted attention, but a federal judge blocked the Federal Trade Commission's rule to ban them.

Employers should review non-compete agreements for reasonable scope and duration. Non-solicitation agreements are more likely to be enforced by courts, and confidentiality agreements are crucial for safeguarding trade secrets. Employers should ensure these agreements are enforceable and include carve-outs for reporting unlawful conduct to government agencies.

Paid leave updates

Paid leave policies are evolving, with new state laws mandating paid family and medical leave. These laws vary by state and often require employer contributions to a fund providing wage replacement benefits during leave. Employers must stay updated on these requirements and ensure compliance to avoid penalties.

The interplay between federal Family and Medical Leave Act (FMLA) leave, state paid leave, and employer-provided paid leave can be complex, and recent Department of Labor guidance clarifies management of these different types of leave.

Paid leave programs in states like Delaware, Maine, Maryland, and Minnesota were discussed, including IRS taxation guidance and interplay with FMLA.

Next steps

To effectively navigate employment law compliance complexities, employers and human resources professionals should confer with legal counsel and implement policies that align with current regulations and industry standards. This approach helps mitigate risks, avoid penalties, and promote a transparent and compliant workplace.

Launch this one-hour webcast any time, Employment Law Annual Checkup

And don't miss the following companion webcasts in June. They'll offer in-depth expert insights on three employment law and regulation compliance challenges.

Beyond the clock: Navigating overtime requirements
Understanding the labor law landscape: Implications and considerations
Navigating the paid leave maze: Insights and strategies in a changing landscape