Labor & Employment Insights — Lindabury, McCormick, Estabrook & Cooper, P.C. Firm News & Events

To Be Exempt or Not Exempt; That is the Question

Published on: December 20, 2024 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

When hiring, many employers do not give proper consideration to whether newly hired employees should be classified as “exempt” employees who by law are not entitled to overtime pay for hours worked in excess of 40 hours in any workweek, or “nonexempt” employees who are entitled to overtime pay. A failure to properly apply the legal criteria for employee classification can be a costly oversight for employers.

The federal Fair Labor Standards Act (FLSA) mandates that employees be paid on an hourly basis of at least the federal minimum wage, currently $7.25. States and municipalities are free to enact higher minimum wage rates. New Jersey recently passed legislation that will progressively increase the current $8.85 per hour minimum wage to $15.00.

The FLSA further mandates that employees be paid at an overtime rate of not less than 1.5 times the employee’s regular rate for each hour of work time in excess of 40 hours in any one workweek, unless the employee qualifies for one of the exemptions from these overtime requirements set forth in the statute. So how does an employer determine the proper classification of an employee as either nonexempt or exempt? Unfortunately, there are no bright-line rules an employer can rely upon in making these determinations, and the employee’s job responsibilities and the employer’s control over the employee largely dictate the proper classification under the FLSA.

What Employers Need to Know About Employee Privacy

Published on: December 18, 2024 | by Lisa Gingeleskie

In an age where anyone can look up almost anyone or anything online, the term “privacy” can be difficult to define. The meaning of the word becomes even more challenging when viewing privacy in the context of the workplace. Many employers struggle with not only identifying what is private protectable information, but also how to safeguard that information while also protecting the company’s own business interests. A rise in remote or hybrid work situations has added another layer of complexity to this challenge. Given the increased costs of litigation, it is critical that employers understand their obligations under the law and how to strike a legally compliant balance between these competing interests.

Employee Records

Neither federal nor New Jersey law specifically regulates an employer’s maintenance and handling of employee personnel records, although there are certain statutes that contain ancillary record-keeping provisions. For example, New Jersey’s Paid Sick Leave Law requires that employers maintain records of hours accrued, used, and carried over by employees for a five year period. Also, employee medical records are afforded separate and greater legal protections pursuant to various federal and state laws.

Avoiding Misclassification of New Jersey Workers

Published on: December 17, 2024 | by Joshua L. Weiner

When determining whether to classify a worker as an employee or an independent contractor, employers in New Jersey must follow the “ABC” test. Under this test, an individual receiving remuneration in return for rendering services is presumed to be an employee unless the employer can meet its burden of proving all three of the following elements:

The individual has been and will continue to be free from control or direction over the performance of work performed, both under contract of service and in fact.
The work is either outside the usual course of the business for which such service is performed, or the work is performed outside of all the places of business of the enterprise for which such service is performed.

Wrongful Discharge Suit Against Walmart for Failure to Hire Recreational Cannabis User Goes Up in Smoke

Published on: December 16, 2024 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

In a case of first impression, a split judicial panel of the Third Circuit Court of Appeals concluded that New Jersey job seekers do not have the right to sue employers who rescind job offers to applicants testing positive for cannabis, despite state legislation that bars employers from doing just that.

Background

The case was brought under New Jersey’s 2021 Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act (CREAMMA) that legalized recreational marijuana use. In pertinent part, CREAMMA expressly prohibits employers from refusing to hire applicants because of their use or non-use of marijuana. Less than a year after CREAMMA’s passage, Erik Zanetich was offered a job at Walmart, subject to passing a drug test. Walmart’s policy mandated that applicants were ineligible for employment if they tested positive for drugs. When Zanetich tested positive for cannabis, his job offer was rescinded. Zanetich filed a class action suit, arguing that Walmart’s retraction of his job offer was in violation of the protections accorded to marijuana users under CREAMMA.

Texas District Court Strikes Down DOL’s Regulation Increasing Minimum Salary Requirement for White Collar Overtime Exemption

Published on: November 22, 2024 | by Joshua L. Weiner and Gozde Celik

The U.S. Department of Labor’s (“DOL”) final regulation increasing the salary threshold for the “white collar” overtime exemption came to a halt on November 15, 2024, when the U.S. District Court for the Eastern District of Texas vacated and set aside the regulation as exceeding the DOL’s statutory rulemaking authority.

The regulation sought to increase the salary requirements established in 1975 for the executive, administrative, and professional (“EAP”) exemptions (commonly referred to as the “white collar” exemptions) to the overtime requirements under the Fair Labor Standards Act (“FLSA”). The FLSA generally requires overtime pay for employees who work over forty hours in a week. However, under the EAP exemptions, those overtime requirements do not apply to employees employed in a bona fide administrative, executive, or professional capacity. To be classified under one of the EAP exemptions, the employee must i) meet or exceed a minimum salary requirement, and ii) meet certain duties tests mandated by the FLSA.

The challenged rule issued by the DOL raised the previous minimum salary requirement of $684 per week, or $35,568 per year, in three stages. The initial stage was rolled out on July 1, 2024, and raised the minimum salary for EAP overtime exemption to $844 per week, or $43,880 per year, placing an estimated one million previously exempt employees into nonexempt status. The second rollout, which was set to take place on January 1, 2025, sought to raise the minimum salary requirement to $1,128 per week/$58,656 per year. Following these initial increases, the minimum salary requirement was set to be raised every three years based on contemporary earnings data.

Heat Stress: OSHA’s Proposed New Rule and What it Means for Employers

Published on: September 9, 2024 | by James K. Estabrook and Gozde Celik

On August 30, 2024, the Occupational Safety and Health Administration (OSHA) published in the Federal Register its proposed regulations for Heat Injury and Illness Prevention in Outdoor and Indoor Settings, delivering on the Biden administration’s three-year long promise to have the agency put forward a rule to protect workers from heat related injuries and deaths. The proposed measure would be the first comprehensive federal regulation to address the recent increase in heat related emergencies occurring across a large swath of workplaces, including farms, construction sites, warehouses, and commercial kitchens.

Industry Backlash and Legal Uncertainty

Although many states have adopted or proposed their own heat safety regulations, OSHA’s proposed rules, due to their wide application and extensive requirements, have received more backlash than their state counterparts, indicating that the implementation of the rules is likely to face many challenges. The proposed regulations come in during the tail end of President Biden’s first term and are also vulnerable to an administration change where Former President Donald Trump has expressed a contrary intent to roll back on OSHA’s regulations on private industry, thereby indicating that his administration could block the rule’s implementation. Additionally, the extent of OSHA’s, as well as other federal agencies’, ability to rule make and enforce their regulations has been questioned by the Supreme Court in its decision overturning the Chevron deference in Loper Bright Enterprises v. Raimondo and Relentless Inc. v. Department of Commerce, which places the proposed rule into even more uncertainty.

Not So Fast: Texas District Court Blocks FTC’s Ban on Noncompete Agreements

Published on: August 22, 2024 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

On August 20, 2024, the U.S. District Court for the Northern District of Texas invalidated the Federal Trade Commission’s (FTC’s) final rule that effectively banned the use of noncompete agreements by U.S. employers. The ruling comes just in time for employers facing the inability to enter into or enforce noncompete agreements when the rule was slated to go into effect on September 4, 2024.

The Texas court reasoned that the FTC exceeded its constitutional authority by proposing “arbitrary and capricious” sweeping prohibitions against noncompete agreements rather than a more targeted ban on specific noncompete provisions that are deemed unfair competitive practices. In addition, the court noted that only Congress is authorized to issue substantive rules banning non-competes, whereas the FTC’s authority is limited to procedural rules aimed at implementing legislation passed by Congress, adding “[t]he role of an administrative agency is to do as told by Congress, not to do what the agency thinks it should do.”

Prior Judicial Proceedings:

Employers Should Audit Exempt Classifications in Response to USDOL’s Increased Salary Requirements to Qualify For Overtime Exemption

Published on: May 17, 2024 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

On April 24, 2024, the U.S. Department of Labor (DOL) announced a long anticipated final rule increasing the minimum salary requirements that “white collar” and highly compensated employees must meet to qualify for exemption from the overtime requirements of the Fair Labor Standards Act (FLSA). It is estimated that the rule could impact up to 4 million employees who may now be eligible for overtime pay unless employers increase their salaries to meet the new requirements.

Two-Phased Increase for White Collar Exceptions

The DOL’s rule announced a phased-in increase in the salary basis test applicable to the white collar exemptions for executive, administrative and learned professional employees.

NJ Supreme Court Limits Use of Non-Disparagement Provisions in Employment Settlement Agreements

Published on: May 9, 2024 | by Joshua L. Weiner

In a unanimous opinion, the New Jersey Supreme Court recently held that a non-disparagement provision in a settlement agreement that prevented a former employee from revealing details about allegations of sexual harassment, sex discrimination and retaliation was against public policy and cannot be enforced.

The plaintiff, a former police sergeant, appealed a trial court order enforcing a non-disparagement provision in a 2020 settlement agreement reached in her employment discrimination case. Under the non-disparagement clause, the plaintiff was barred from making any statements “regarding the past behavior of the parties” that would “tend to disparage or impugn the reputation of any party.” The agreement clearly stated that the provision extended to statements to the media, government offices and the general public. After the settlement was reached, the plaintiff was interviewed by a reporter for NBC’s Channel 4 News, where she stated that the police department had not changed because “it’s the good ol’ boy system,” among other things. The department and various officers then filed a motion to enforce the non-disparagement provisions of the agreement.

The trial court granted the defendants’ motion, ordering the plaintiff not to give further interviews or to make disparaging statements. The judge declined to award the roughly $23,000 in damages sought by the defendants but awarded counsel fees of $4,917.50 for the plaintiff’s breach of the clause. The Appellate Division affirmed in part and reversed in part, holding that while the terms of the non-disparagement provision were enforceable, the plaintiff did not break them during the television interview.

FTC Issues Final Rule Banning Non-Compete Agreements in the U.S.

Published on: April 26, 2024 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

On April 23rd, 2024, the Federal Trade Commission (FTC) approved a final rule that effectively bans the use of non-compete agreements by U.S. based employers. The final rule is substantially similar to the proposed rule announced in January 2023, and represents a sweeping change in the ability of employers to rely upon preexisting as well as future non-compete clauses to protect against unfair competitive practices. The final rule will go into effect 120 days after its publication in the Federal Register, which is expected shortly.

The final rule defines a non-compete clause as any agreement that prohibits, penalizes or functions to prevent a worker from (1) seeking or accepting work in the U.S. with another employer or (2) operating a business in the U.S., after a separation of employment.

The Scope of the FTC Ban