Lake Effect HR & Law

DOL Formally Reinstates 2019 Salary Thresholds for Exempt Employees

admin — Tue, 26 May 2026 14:27:11 +0000

On May 15, 2026, the U.S. Department of Labor issued a final rule that immediately reinstates the minimum salary thresholds for exempt employees to the levels established in 2019 during the first Trump administration. This action explicitly rescinds the 2024 final rule that sought to raise the minimum salary levels in July 2024 and January 2025 (as reported in Lake Effect’s June 27, 2024, June 2, 2024, and April 24, 2024 blogs).

Under the new final rule, exempt employees must be paid on a salary basis, earn a minimum of $684 per week, equivalent to $35,565 annually, and perform duties that meet the specific requirements of the executive, professional or administrative white-collar exemptions. Highly compensated employees who earn at least $107,432 per year are exempt under a more relaxed duties test, if they regularly perform any exempt white-collar duties.

The Biden-era 2024 final rule sought to raise the salary threshold by 2021 to $1,128 per week or $58,656 annually for exempt employees, and $151,164 annually for highly compensated employees. That rule was challenged in federal court and vacated in November 2024. In publishing the new final rule, the DOL skipped the usual public notice and comment period and made the rule effective immediately, explaining that this final rule merely gives effect to the court’s prior ruling vacating the 2024 rule and updates the CFR to reflect the current status quo and existing practice for employers.

Even though the new final rule codifies existing practice, employers should take the opportunity to review their pay practices and confirm that jobs are classified correctly as exempt or non-exempt from FLSA overtime pay requirements. This review should consider all three tests: the salary basis test, the minimum salary of $684 per seek or $35,565 annually, and the applicable duties test for the role. Employees paid on a salary basis and earning at least $107,432 should regularly perform at least one of the stated exempt duties.

The attorneys and HR professionals at Lake Effect can provide guidance on employment-related agency and legislative actions, employment laws, regulations, and agency guidelines. We continue to monitor important legal and HR developments, as well as other information that could impact the workplace. Please watch our blogs and emails for these important updates, as well as discussions of how compliance meets culture. To dive into these issues, contact us at info@le-hrlaw.com or 1-844-333-5253.

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ICE Expands the Definition of “Substantive” Form I-9 Violations

admin — Thu, 30 Apr 2026 14:01:15 +0000

On March 16, the U.S. Immigration and Customs Enforcement (ICE) published a new Fact Sheet entitled “Form I-9 Inspection Under Immigration and Nationality Act § 274A,” that expands the types of violations that could result in employer fines. Of note, this is the first agency update of I-9 audit elements and penalties in years so employers should pay attention and recognize this is an area of focus for the current administration.

ICE has authority to inspect employers’ compliance with the I-9 employment verification system required by the Immigration Regulation and Control Act of 1986 (IRCA). Upon receiving a Notice of Inspection, employers must produce completed Form I-9s for all current and some former employees within three business days. Regular I-9 compliance self-audits can prepare employers for such inspections, making it more likely they will be able to provide records on such a short timeline.

If ICE finds “substantive” violations of the I-9 procedure during an inspection, they can issue either a Warning Notice, which will likely result in a subsequent inspection at a later date, or a Notice of Intent to Fine, which will result in a fine unless the employer successfully challenges ICE’s findings at a hearing conducted by the U.S. Department of Justice. Fines range from $288-$2,861 per form and are subject to adjustment up or down based factors such as the employer’s size, the seriousness of the violation, and the employer’s history of compliance. The law also recognizes that employers can have “technical or procedural” I-9 failures that will not be penalized if corrected within 10 business days of notice.

ICE’s new Fact Sheet specifies types of I-9 violations that will now be considered “substantive” failures to comply. Some of the listed substantive failures are consistent with past practice, such as failure to present a timely-completed I-9 for each employee. But the new list broadens the scope of substantive violations to include more, such as:

Using the Spanish language I-9 outside Puerto Rico
Using an electronic I-9 process that does not meet all the ICE standards
Omitting the employee’s full legal name, or the signature and date of signing for the employer representative
Omitting the employee’s date of birth, citizenship status, or employee’s signature and notation of the date of signing
For foreign nationals, omitting an employee’s Alien Registration Number, foreign passport number and country of issuance, and the expiration date for an employee’s work authorization
Failure to record information about the documents examined, disclose details of an authorized alternative procedure, or complete supplemental information
Failure to print the employer’s complete name and the employee representative’s title, and provide the date of hire.

All these are items that would likely be flagged in an employer’s I-9 self-audit.
The attorneys and HR professionals at Lake Effect can assist employers with conducting proactive I-9 compliance self-audits to ensure their readiness for a formal government inspection. We also provide guidance on employment-related administrative agency actions, as well as employment laws, regulations, and agency guidelines. We continue to monitor important legal and HR developments, as well as other information that could impact the workplace. Please watch our blogs and emails for these important updates, as well as discussions of how compliance meets culture. To dive into these issues, contact us at info@le-hrlaw.com or 1-844-333-5253.

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DOL Proposes New FLSA Independent Contractor Analysis

admin — Wed, 11 Mar 2026 02:37:16 +0000

On February 26, 2026, the U.S. Department of Labor (DOL) issued a proposed rule that would make it easier for employers to classify certain workers as independent contractors rather than employees for purposes of federal wage and hour laws (FLSA) and the Family and Medical Leave Act (FMLA). In a change from the current approach, the proposed rule emphasizes an “economic realities” test focusing on whether the worker is operating their own business or is dependent on the employer for work. The DOL frames the change as a chance to streamline the analysis, focusing first on two “core factors” to help determine if a worker is economically dependent on an employer for work or is in business for themself: (a) the nature and degree of control over the work; and (b) the worker’s opportunity for profit or loss based on initiative and/or investment.

If the core factors are not definitive, the analysis would then consider “other factors,” including the amount of skill required for the work, degree of permanence of the working relationship, and whether the work is part of an integrated unit of production in the employer’s business. The proposed rule emphasizes that the parties’ actual practice is more relevant than what may be contractually or theoretically possible. The proposed rule also includes eight fact-specific examples to help parties understand how the analysis could work.

The distinction between an independent contractor and an employee is key for purposes of applying a number of federal laws. The FLSA generally requires employers to pay employees a minimum hourly wage for their compensable work hours, and to pay nonexempt employees one-and-one-half times their regular hourly rate for hours worked over 40 in a week. Independent contractors are not covered by the FLSA. The federal FMLA requires covered employers to provide eligible employees with up to 12 weeks of protected, unpaid leave from work for qualifying reasons, and prohibits employers from interfering with employees’ exercise of their rights under the law. Employers have no duty to provide independent contractors with any FMLA leave.

The DOL is soliciting comments on the proposed rule from interested parties within 60 days of publication. Comments are due by 11:58 p.m. EDT on April 28, 2026. After this, the DOL will review the comments, and then publish a final rule which takes effect and is enforceable 30 days thereafter; until then, the 2024 standard remains in effect. We will continue to keep you apprised of its status.

Employers should keep in mind that state laws also apply on this issue and should ensure compliance with state law, as well.

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Emily Gnam Joins the team!

admin — Tue, 03 Mar 2026 14:54:12 +0000

Lake Effect HR & Law, LLC, is pleased to announce that Emily R. Gnam has joined our team, furthering our mission to maximize each client’s workplace potential with a commitment to kindness, true partnership and exceptional service.

Emily has over 27 years of experience in the private sector and brings a wealth of expertise in management-side employment law, traditional labor law, and human resources strategies. As a collaborative team builder, thoughtful advisor, and creative problem solver, Emily reflects Lake Effect’s core mission, vision, and values.

Prior to joining Lake Effect, Emily was with TruStage (formerly CUNA Mutual Group), where she worked closely with the human resources team and provided practical legal and HR advice to leaders across the company. In her role, Emily also conducted and managed workplace investigations and complex employee relations, benefits, and leave matters. Emily is committed to helping employers explore practical solutions that mitigate legal risk while advancing an organization’s strategic goals and unique culture.

Before joining TruStage, Emily practiced at Foley and Lardner, where she advised clients on labor and employment law and handled general corporate litigation. Emily has represented employers before federal, state and local administrative agencies, arbitrators, and in state and federal trial and appellate courts.

“I am very excited to be joining the incredible team at Lake Effect,” Gnam said. “The firm has distinguished itself as thought leaders in all facets of HR and employment law and are committed community partners. I look forward to applying my background to help Lake Effect’s clients in the care of their employees.”

Jane Clark, Lake Effect CEO and Managing Partner, remarked on how fortunate the firm was to recruit Emily, “I have known Emily for years, both personally and professionally, and have always been impressed with her intellect, problem-solving skills, and compassion—all essential to serving our clients well.”

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EEOC Rescinds Harassment Guidance

admin — Wed, 28 Jan 2026 14:47:24 +0000

On January 22, 2026, the Equal Employment Opportunity Commission (EEOC) voted 2-1 to rescind its “Enforcement Guidance on Harassment in the Workplace” (Harassment Guidance), a 190-page document which had been approved in 2024.

Although the Harassment Guidance did not have the force of law, it aimed to help employers identify and prevent activities that could constitute unlawful harassment based upon race, color, religion, sex, national origin, age, disability, and genetic information. It specifically included guidance relating to gender identity discrimination and harassment of LGBTQ+ individuals.

The withdrawal of the Harassment Guidance is consistent with the Trump Administration’s prior Executive Order directing executive agencies to enforce federal laws based upon a recognition of two sexes, male and female, specifically excluding any concept of gender identify. It signals the EEOC’s intent to investigate and litigate a much narrower scope of sex discrimination claims.

The rescission of the Harassment Guidance does not alter Title VII or any other federal anti-discrimination statute. Employers should continue to comply with those statutes as written and as previously interpreted by courts. Employers are also bound by applicable state laws prohibiting discrimination and harassment, and they should take careful note of how those terms are defined under each state’s law. This also does not alter an employer’s responsibility to educate their employees on their organization’s respectful workplace policy through periodic training.

The attorneys and HR professionals at Lake Effect can provide guidance on agency guidelines, employment laws, and regulations. We continue to monitor important legal and HR developments, as well as other information that could impact the workplace. Please watch our blogs and emails for these important updates, as well as discussions of how compliance meets culture. To dive into these issues, contact us at info@le-hrlaw.com or 1-844-333-5253.

The post EEOC Rescinds Harassment Guidance appeared first on Lake Effect HR & Law.

Benefits Limits for 2026

admin — Wed, 19 Nov 2025 02:28:07 +0000

Each year, the IRS sets new limits for ACA high deductible plans, employee benefits plans, flex plans, QSEHRAs, and retirement plans. Below is Lake Effect’s ready reference chart showing the Benefits Limits for the 2026 tax year.

	2025	2026
Flexible Spending Accounts (FSAs)
Healthcare FSA max election (per year) (incl. LTD FSA)	$3,300	$3,400
Healthcare FSA max rollover	$660	$680
Dependent Care FSA max election (per year) (Single or Married Filing Jointly)	$5,000	$7,500
Dependent Care FSA max election (per year) (Married Filing Separately)	$2,500	$3,750

Transportation Benefits
Parking Account	$325/mo	$340/mo
Transit Account	$325/mo	$340/mo

High Deductible Health Plan Requirements to Contribute to an HSA
HDHP min annual deductible – Self-only	$1,650	$1,700
HDHP min annual deductible – Family	$3,300	$3,400
HDHP out-of-pocket max – Self-only	$8,300	$8,500
HDHP out-of-pocket max – Family	$16,600	$17,000
HSA max contribution limit – Self-only	$4,300	$4,400
HSA max contribution limit – Family	$8,550	$8,750
HSA catch up contribution limit (age 55+)	$1,000	$1,000
HRA max employer contribution limit	$2,150	$2,200

ACA Plan Limits
Maximum Out-of-Pocket (Self-only or Individual in a Family)	$9,200	$10,600
Maximum Out-of-Pocket (Family)	$18,400	$21,200

QSEHRA (Qualified Small Employer Health Reimbursement Arrangement) – Max Employer contribution
To Individual	$6,350	$6,450
To Family	$12,800	$13,100

Salary Thresholds for Non-discrimination Testing
Highly compensated employees	$160,000	$160,000
Key employees	$230,000	$235,000

Retirement Plans (401(k), 403(b))
Max employee elective contributions for those 49 and younger	$23,500	$24,500
Max employer + employee contributions for those 49 and younger	$70,000	$72,000
Max employee catch-up contributions for those 50+	$7,500	$8,000
Max employee elective contribution plus catch-up for those 50+	$30,500	$32,500
Max employer + employee contributions for those 50+	$76,500	$80,000
Max employee catch-up contributions for those 60-63	$11,250	$11,250

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Updated W-2 Tax Form: Tax Deductions on Qualified Tips and a Portion of Overtime Pay

admin — Tue, 18 Nov 2025 14:34:00 +0000

UPDATE TO LAKE EFFECT’S AUGUST 27, 2025 BLOG ON THIS TOPIC

In July 2025, the Trump Administration’s signature budget bill became law as Public Law 119-21. Of note for employers and employees, the bill permits tax deductions for “qualified tips” and a portion of overtime pay, as detailed in this IRS Fact Sheet.

In August, IRS released a draft updated W-2 (see prior blog) and pledged to provide guidance on the “reasonable method” that employers should use to “approximate” the amount of “qualified tips,” that employee can deduct.
To date, the IRS has not released that guidance and has not issued a final updated W-2 for 2025.

Last week, the IRS announced that employers will not face penalties for failing to comply with the Act’s reporting requirements and that it would not publish a final updated W-2 for tax year 2025.

Employers are advised to consult with their payroll administrators to ensure that employee tips and overtime are adequately tracked and reported.

The attorneys and HR professionals at Lake Effect can provide guidance on employment-related executive actions, employment laws, regulations, and agency guidelines. We continue to monitor important legal and HR developments, as well as other information that could impact the workplace. Please watch our blogs and emails for these important updates, as well as discussions of how compliance meets culture. To dive into these issues, contact us at info@le-hrlaw.com or 1-844-333-5253.

The post Updated W-2 Tax Form: Tax Deductions on Qualified Tips and a Portion of Overtime Pay appeared first on Lake Effect HR & Law.

Tax Deductions on Qualified Tips and a Portion of Overtime Pay

admin — Wed, 27 Aug 2025 12:06:00 +0000

8/27/2025 UPDATE:

The IRS has released a new “early release draft” Form W-2 to reflect the new employee and employer reporting requirements related to “qualified tips” and “qualified overtime pay” that can be deducted, pursuant to the 2025 Trump Administration bill. The new Form W-2 instructions direct employers to use Box 12 to report the employee’s “qualified tips” using code “TP” and “qualified overtime compensation” using code “TT.” Further, the new form also includes a new Box 14b for employers to report the employee’s qualifying occupation (referred to as the “Treasury tipped occupation code”). See below for a snapshot of the new Form W-2. Employers should communicate with their payroll provider to ensure their systems will be updated to reflect the new reporting requirements and the ability to report on the new Form W-2 in time for Form W-2 distribution in January 2026. Please see below and this link to our August 12, 2025 blog which explains this issue more fully.

Originally published 8/12/2025:

Tax Deduction on Qualified Tips: Retroactive to January 1, 2025, and through 2028, employees and self-employed workers may deduct “qualified tips” that are received in the course of jobs that “customarily and regularly receive tips on or before December 31, 2024 and that are reported on Form W-2 by their employer, Form 1099 by the contracting company, or other tax reporting statement provided by the individual. To encourage employers to report all received tips, there is a requirement that employers must report the “qualified tips” on a Form W-2 or similar reporting form for employees to be able to deduct the tips. “Qualified tips” are those cash or charged tips received voluntarily from customers or through tip sharing; they do not include mandatory or preset tips for larger tables or service charges. The maximum annual deduction is $25,000 for employees and, for self-employed workers, may not exceed their net income from the work in which the tips were earned. The deduction phases out for taxpayers with a modified gross income over $150,000 ($300,000 for joint filers).

Tax Deduction on a Portion of Overtime Pay: Retroactive to January 1, 2025, and through 2028, individuals who receive “qualified overtime pay” may deduct the portion that exceeds their regular rate of pay as required by the Fair Labor Standards Act and that are reported on Form W-2 by their employer, Form 1099 by the contracting company, or other tax reporting statement provided by the individual. Thus, when an employee receives time-and-a-half for overtime, only the “half” portion may be deducted. Further, overtime pay not required under the FLSA, such as overtime required only by state law, an employee handbook policy, or a collective bargaining agreement may not be deducted. The maximum annual deduction is $12,500 ($25,000 for joint filers). The deduction phases out for taxpayers with a modified gross income over $150,000 ($300,000 for joint filers).

Employers are advised to consult with their payroll administrators to ensure that employee tips and overtime are adequately tracked and reported.

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SCOTUS Clarifies Standard in “Reverse Discrimination” Lawsuits

admin — Tue, 08 Jul 2025 15:06:44 +0000

On June 5, 2025, the U.S. Supreme Court unanimously affirmed the legal burden of proof required to establish a “reverse discrimination” claim. In “reverse discrimination” cases, a member of a majority group alleges they were discriminated against based on their membership in that majority group. The question before the Court was whether majority-group plaintiffs claiming discrimination had to meet a higher burden of proof than minority-group plaintiffs. Specifically, whether they had to demonstrate “background circumstances” to support that the defendant was an “unusual” employer that discriminated against the majority, as some lower courts had ruled. The Supreme Court unanimously responded, “No” and confirmed that the burden of proof is the same for every plaintiff who alleges discrimination, regardless of their majority or minority group status. Ames v. Ohio Dep’t of Youth Servs., No. 23-1039 (U.S. June 5, 2025).

In Ames, a heterosexual woman claimed she was discriminated against when she was passed up for promotion in favor of a lesbian woman and later demoted in favor of a gay man. Her case was initially dismissed because she did not offer evidence of “background circumstances” showing the defendant was a rare employer that discriminated against majority employees. The U.S. Supreme Court, however, reversed the lower court’s ruling, reasoning that the text of Title VII, which bars discrimination “against any individual…because of such individual’s race, color, religion, sex, or national origin,” focuses on individuals rather than groups. Therefore, courts should not apply special evidentiary burdens to majority-group plaintiffs. The Court clarified that “this additional ‘background circumstances’ requirement is not consistent with Title VII’s text or our case law construing the statute.” This decision reinforces the notion that Title VII protects all employees from discrimination, regardless of whether the individual is part of a minority or majority group.

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Trump Executive Order Vows to Eliminate Disparate Impact Liability

admin — Mon, 23 Jun 2025 14:18:03 +0000

The Trump Administration has directed a sweeping change to employment discrimination liability under Title VII in its recent executive order titled, “Restoring Equality of Opportunity and Meritocracy.” The EO announces a new policy to “eliminate the use of disparate-impact liability in all contexts to the maximum degree possible to avoid violating the Constitution, Federal civil rights laws, and basic American ideals.”

Under current law, established by the Supreme Court in 1971 and codified by Congress through a 1991 amendment to Title VII, plaintiffs can pursue employment discrimination claims under one of two theories: (1) disparate treatment, by claiming that an employer intentionally treats an individual differently based on membership in a protected class; or (2) disparate impact, by claiming that an employer has a facially neutral policy or practice that nevertheless has a disproportionately negative impact on individuals in a protected class. In the latter case, a plaintiff need not present evidence that the employer intended to adversely affect the plaintiff or the protected group. Disparate impact theory has historically been used to challenge such policies as minimum height requirements, education or degree requirements not closely tied to job-related skills, and aptitude/personality tests.

The Trump executive order announces that disparate impact liability “is wholly inconsistent with the Constitution and threatens the commitment to merit and equality of opportunity that forms the foundation of the American Dream.” The EO therefore directs that:

Federal departments and agencies deprioritize enforcement of all statutes and regulations to the extent that they include disparate impact liability.
The Attorney General (AG) and EEOC assess pending investigations and suits that rely on disparate impact theory and take action consistent with the EO.
Federal agencies review any consent judgments or permanent injunctions that rely on the disparate impact theory and take appropriate action;
The AG assess whether the new federal policy preempts state laws or regulations that impose disparate impact liability;
The AG and EEOC jointly issue new guidance or technical assistance to employers on appropriate methods to promote equal access to employment.

The practical implications of the executive order remain to be seen. The EO is not law, and it cannot override Supreme Court precedent or existing statutory regulations. While private plaintiffs may continue to pursue disparate impact discrimination claims, employers can assume that the EEOC will not investigate or pursue disparate impact claims moving forward. We may also see challenges to state and local laws that permit disparate impact claims on the basis that those laws are preempted by new federal policy. For now, employers should act consistent with current applicable federal and state laws, carefully reviewing neutral employment policies and practices to ensure that they do not have a disproportionately negative impact on members of any protected group.

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