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Our attorneys stay on top of changes in legislation, agency regulations, case law, and industry trends—then craft timely legal alerts to keep clients up to date on legal developments important to their business.

December 10, 2020

What Employers Can Expect Under the Biden Administration: Fair Labor Standards Act

This alert is the first in a series covering changes employers can expect to labor and employment policy from President-elect Joseph Biden’s administration.

The Trump administration made numerous changes in the employment and labor law space by rolling back Obama-era rules and by implementing new policies and enforcement priorities, all of which has largely favored employers.

President-elect Biden and Vice President–elect Kamala Harris have pledged to make significant changes to the American workplace, including an expansion of workers’ rights. Though there is still uncertainty, Barclay Damon’s alert series will shed light on what employers can likely expect to see under the Biden administration.

FAIR LABOR STANDARDS ACT

We expect the Biden administration will seek changes to the following areas under the Fair Labor Standards Act (FLSA):

Overtime

Under the FLSA, employers are not required to pay minimum wage and overtime to exempt employees, which the US Department of Labor (DOL) has long defined as those employees who are paid on a salary basis, earn above the salary threshold (currently $684 per week or $35,568 per year), and meet certain tests regarding their job duties. Recent administrations have sought to increase the salary threshold, and the Biden administration is expected to do the same.

The Bush administration’s DOL raised the salary threshold to $23,660, and the Obama administration’s DOL attempted but failed to increase the salary threshold to $47,476. The Trump administration’s DOL increased the salary threshold to $35,568, and it remains to be seen whether the Biden administration’s DOL will attempt to meet or exceed the salary threshold sought by the Obama administration’s DOL. If that happens, as expected, employers will have to decide whether to increase certain exempt employee salaries to meet the new threshold or to convert such employees to non-exempt status.  

The Biden administration’s DOL is also expected to seek to raise the federal minimum wage (currently $7.25, which has been unchanged for more than a decade) to $15 per hour.

Independent Contractors

Businesses with employees are subject to wage and hour laws, must register with the states in which they do business, must pay unemployment and social security taxes, must withhold state and federal income taxes, and must obtain workers’ compensation and disability insurance. Workers classified as employees receive a wide array of legal protections, including but not limited to eligibility for unemployment insurance if laid off, protections from anti-discrimination and anti-retaliation laws, eligibility for workers’ compensation benefits if injured on the job, safety protections, and, where applicable, the right to be paid minimum wage and overtime. Conversely, businesses that use independent contractors are not responsible for employment taxes and employee benefits, and, instead, merely provide independent contractors with a Form 1099 for tax reporting purposes. Independent contractors generally do not receive any of the aforementioned legal protections afforded to employees.  

In step with a number of Democratic-controlled states and cities that have passed local laws to this end, the Biden administration’s DOL will likely seek to broaden the definition of “employee” under the FLSA, which turns on a worker's economic dependence on the business. This is an important area to watch as many businesses rely heavily on independent contractors, and a broader definition or interpretation of “employee” under the FLSA will most certainly drive up the cost of doing business, among other things. Particularly, such a change may have substantial consequences for gig economy companies like Uber and Lyft that classify their workers as independent contractors.

The current administration rescinded Obama administration guidance that had held gig economy workers to be employees. The Biden administration will likely seek to revert to that position. Although DOL guidance is not binding in court, it is often persuasive. At any rate, we can, at least in the short term, expect increased litigation costs regarding misclassification if any change is made in this area.

Joint Employers

The Biden administration’s DOL may also seek to modify the Trump DOL’s newly adopted rule regarding joint employers, which became effective in March 2020. Under this rule, actions actually taken with respect to an employee’s terms and conditions of employment would help determine whether a company is a joint employer. This is in contrast to the situation in which a company has the contractual power to take such actions but does not. The rule permits larger companies that rely on subcontractors or franchisees to operate without expanded workforce costs and duties under the FLSA.

The Biden administration’s DOL may modify the rule in favor of workers by taking the position that a contractual ability to interfere with employment terms and conditions bestows joint employer status. The policy rationale for this would be that the Trump administration’s DOL position harms workers and exposes small subcontractors to liability while exempting large corporations.   

Barclay Damon will continue to monitor these and other anticipated changes to labor and employment policy under the Biden administration. Further alerts in this series will be forthcoming over the next several weeks.

If you have any questions regarding the content of this alert, please contact Shaleem Yaqoob, associate, at syaqoob@barclaydamon.com; Rob Thorpe, counsel, at rthorpe@barclaydamon.com; or another member of the firm’s Labor & Employment Practice Area.

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