DOL Archives - Lake Effect HR & Law

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.

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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DOL Final Rule Blocked: No Salary Level Increase for January 1, 2025

admin — Mon, 18 Nov 2024 15:30:42 +0000

Late last week, a federal court in Texas struck down the U.S. Department of Labor’s Final Rule which was set to require a second increase in the salary level on January 1, 2025. Please see Lake Effect’s June 27, 2024, June 2, 2024, and April 24, 2024 blogs on the Final Rule which had already mandated an initial salary level increase effective July 1, 2024.

With this decision, the federal court rendered all elements of the Final Rule null and void: the July 1, 2024 salary level increase, the January 1, 2025 salary level increase, and planned future increases for both. In explaining the decision, the court noted that the DOL exceeded its authority by “effectively displac[ing] the FLSA’s [exemption] duties test with a predominate – if not exclusive – salary-level test.”

What does this mean for employers?

Employers no longer need to increase exempt employees’ salary levels to meet the second threshold increase to $1,128 per week ($58,656 per year) effective January 1, 2025. This decision is well-timed, as many organizations are finalizing their 2025 budgets right now. Of note, this also means that the July 1, 2024 increases were not required.

Lake Effect is here to answer questions you may have regarding this decision and its impact on your compensation structure and budget.

The attorneys and HR professionals at Lake Effect can provide guidance on all 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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Federal Court Vacates 2021 US Department of Labor Final Rule on Tipped Workers

admin — Tue, 03 Sep 2024 22:21:35 +0000

On August 23, 2024, the 5^th Circuit Court of Appeals in Texas vacated the US Department of Labor (DOL) 2021 Final Rule which had set strict guidance on the payment of tipped employees. As a reminder, the 2021 Rule had established three different categories of work that may be performed by tipped employees and specified the FLSA pay requirements for each when employers are utilizing the tip credit method of payment. Lake Effect’s prior blog on this issue provides additional information and history on this topic.

The 5^th Circuit Court vacated the Final Rule nationwide, holding that the DOL’s Rule was “contrary to the Fair Labor Standards Act’s clear statutory text” and “arbitrary and capricious.” The FLSA defines a “tipped employee” as “any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.” Based upon this definition, the 5^th Circuit found that a pay analysis should focus on the field of work and the job as a whole, rather than on attempts to apportion time to specific types of tasks. Individuals who meet the definition of a “tipped employee” based upon their overall job may be paid using the tip credit method of payment. The only exception is when a tipped employee is also truly performing another discrete job, in which case they cannot be paid by the tip credit method and instead must be paid at the relevant pay rate for the other job (i.e., working as a server and also as a maintenance person).

This simplified approach to assessing the status of tipped employees for purposes of the tip credit method of payment now stands as the law of the land. Employers utilizing this method of payment should review their current pay policies and practices in light of this development. Keep in mind that state wage and hour laws may impose different and/or more stringent requirements for the payment of tipped employees, and those laws must be taken into consideration, as well. Your partners at Lake Effect can help ensure that payment of your tipped employees complies with all applicable federal and state laws.

Lake Effect is here to answer all your questions about employment laws, regulations, and new 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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Employers Must Implement First FLSA Exempt Salary Increases on July 1, 2024

admin — Fri, 28 Jun 2024 01:12:43 +0000

Barring a last-minute, successful legal challenge, the Department of Labor’s final rule mandating higher salary levels for exempt employees will take effect Monday, July 1, 2024. On that date, employees whose job duties meet the test for the FLSA’s “white collar exemptions” must be paid a fixed salary of at least $844 per week, or $43,888 per year, in order to retain their exempt status (an increase from the current salary threshold of $684 per week, or $35,568 per year). As detailed in Lake Effect’s April 24, 2024 and June 2, 2024 blog posts, this is the first in a two-step mandatory increase to minimum salary levels for exempt employees under the FLSA. The second step will take effect on January 1, 2025, when employees will have to be paid a minimum of $1,128 per week, or $58,656 per year to remain exempt from the FLSA’s overtime requirements.

Lake Effect can answer remaining questions about exempt status requirements and implementation of the new FLSA minimum salary requirements.

Lake Effect provides guidance on all 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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Be Ready on July 1: Initial Increase in Salary Level for Exempt Employees to Take Effect

admin — Sun, 02 Jun 2024 22:17:47 +0000

As we previously reported, on April 23, 2024, the US Department of Labor (DOL) issued a final rule that substantially increases the minimum salary levels for exempt employees under the Fair Labor Standards Act (FLSA). As a reminder, the Final Rule called for a 2-pronged increase in salary level threshold for both the “white collar exemptions” and “highly compensated employees,” first on July 1, 2024 and then again on January 1, 2025 (please see our prior post for further details). Further updates are scheduled to occur every three years thereafter.

Employer and business groups have raised concerns about the nature and methodology of the Final Rule and have challenged the rule on several bases. A collection of business groups filed a lawsuit to block implementation of the Final Rule in the U.S. District Court for the Eastern District of Texas. They have asked for expedited consideration of their complaint. We will continue to keep you apprised of the status of this challenge.

Until then, employers should keep the impending July 1^st deadline in mind and make preparations. As we noted in our prior blog, employers should identify those exempt employees whose current salaries do not meet DOL’s new thresholds ($43,880/year or $844/week for white collar exempt employees and $132,964/year with a base of at least $844/week for highly compensated employees). Employers should then assess whether they can maintain employees’ exempt status by increasing their salaries or whether they must convert employees to non-exempt status and comply with applicable overtime pay requirements. These decisions will require careful consideration of financial and budgetary constraints, operational needs, parity among positions and between pay grades, employee morale, and the need to attract high quality candidates with competitive compensation packages.

As we quickly approach the first effective date of July 1, 2024, Lake Effect can help assess your workforce and review your compliance options consistent with your mission, culture, compensation philosophy, and commitment to your employees. Let us help you navigate this challenging new landscape.

Lake Effect is here to answer all your questions about employment laws, regulations, and new 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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US Department Of Labor Raises Salary Thresholds For Exempt Employees

admin — Thu, 25 Apr 2024 00:05:47 +0000

Employers wake up today to a daunting new landscape as they face higher salary requirements for their exempt employees. On April 23, 2024, the US Department of Labor (DOL) issued a final rule that substantially increases the minimum salary levels for exempt employees under the Fair Labor Standards Act (FLSA). If an employee’s job duties and fixed salary level meets specified requirements under the FLSA, they are deemed exempt, and employers are not required to pay them overtime under FLSA.

As set forth in the DOL’s final rule, the FLSA exempt salary thresholds will increase in two steps over the next 9 months. Effective July 1, 2024, employees whose job duties meet the test for the FLSA’s “white collar exemptions” must be paid a fixed salary of at least $844 per week, or $43,888 per year, in order to retain their exempt status (an increase from the current salary threshold of $684 per week, or $35,568 per year). Effective January 1, 2025, those employees must be paid a minimum of $1,128 per week, or $58,656 per year to remain exempt from the FLSA’s overtime requirements.

The DOL’s final rule also increases the minimum salary level for “highly compensated employees” under the FLSA. For this group of employees, the FLSA imposes a minimal, less detailed job duties test but a much higher compensation requirement to qualify for exempt status. Effective July 1, 2024, highly compensated employees must be paid a fixed salary of at least $132,964 per year, including at least $844 per week paid on a salary or fee basis in order to retain their exempt status (an increase from the current salary threshold of $107,432 per year, including at least $684 per week paid on a salary or fee basis). Effective January 1, 2025, these employees must be paid a minimum of $151,164 per year (including at least $1,128 per week paid on a salary or fee basis) to remain exempt.

In its final rule and accompanying FAQs, the DOL also specifies that beyond the increases specified at this time, it will continue to update minimum salary and compensation levels every three years based upon up-to-date wage data and methodologies. The first three-year-update will occur on July 1, 2027. Finally, the DOL confirms that it is not making any changes to the existing job duties tests for exempt employees under the FLSA.

Confronted with these new salary requirements, employers will face difficult choices. The first order of business will be to identify those exempt employees whose current salaries do not meet DOL’s new thresholds. Employers should then assess whether they can maintain employees’ exempt status by increasing their salaries or whether they must convert employees to non-exempt status and comply with applicable overtime pay requirements. These decisions will require careful consideration of financial and budgetary constraints, operational needs, parity among positions, employee morale, and the need to attract high quality candidates with competitive compensation packages.

As we quickly approach the first effective date of July 1, 2024, Lake Effect can help assess your workforce and review your compliance options consistent with your mission, culture, and commitment to your employees. Let us help you navigate this challenging new landscape.

Lake Effect is here to answer all your questions about employment laws, regulations, and new 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 US Department Of Labor Raises Salary Thresholds For Exempt Employees appeared first on Lake Effect HR & Law.

New Test for Employee vs. Independent Contractor

admin — Thu, 11 Jan 2024 16:50:03 +0000

On January 9, 2024, the US Department of Labor (DOL) released a rule setting forth the new standard for properly classifying workers as independent contractors. As a reminder, the classification of a worker as a W-2 employee or an independent contractor governs their eligibility for minimum wages, overtime pay, and other rights protected under the federal Fair Labor Standards Act (FLSA). There are also IRS tax implications and other consequences under federal and state laws. Employers who misclassify workers can face substantial liability for back pay, taxes, and other penalties.

As of March 11, 2024, the US Department of Labor (DOL) will return to the analysis it has historically used to classify workers, employing a six-factor balancing test to assess the relationship between employer and worker. The DOL’s new rule specifically rescinds a modified independent contractor test issued under the Trump Administration in 2021.

Under the DOL rule, the classification of a worker will be determined by evaluating the following six-factors:

opportunity for profit or loss depending on managerial skill;
investments by the worker and the potential employer;
degree of permanence of the work relationship;
nature and degree of potential employer’s control over the work being performed (considering issues such as scheduling, supervision, setting prices or rates, worker’s ability to work for others, etc.);
extent to which the work performed is an integral part of potential employer’s business; and
whether the worker uses specialized skills to perform the work and whether those skills contribute to business-like initiative.

These factors will be assessed under a “totality of the circumstances” approach, each one viewed equally, with no factor(s) afforded more weight than others. Furthermore, the DOL will consider additional, unspecified factors if they indicate in some way whether the worker is in business for themself, as opposed to being economically dependent on the employer for work.

With the effective date of the DOL’s new test on the horizon, now is a good time to review your workforce and the status of any independent contractors. Your partners at Lake Effect can help evaluate whether your workers are classified properly, minimizing your future exposure to hefty back pay awards and other penalties.

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Employers: Heed Recent Guidance on PUMP Act

admin — Tue, 23 May 2023 13:12:52 +0000

On May 17, the U.S. Department of Labor’s Wage and Hour Division (WHD) issued guidance on the Providing Urgent Maternal Protections for Nursing Mothers Act (PUMP Act), originally enacted in 2010, and amended in December 2022. For a complete discussion of the 2022 amendments, please see Lake Effect’s prior blog on the PUMP Act. WHD’s recent guidance provides further details about breaktime, space, and compensation requirements, as well as potential remedies for violation of the Act. Employers should note some key WHD guidelines that specify:

Employers must provide a nursing employee reasonable break time each time the employee needs to pump breast milk at work for one year after the child’s birth. The frequency, duration, and timing of the breaks needed will vary for each nursing employee. Employers must be flexible in meeting each employee’s needs and adjust as those needs may change over time.
Employees need not be compensated for breaktime necessary to pump breast milk unless otherwise required under applicable law. However, non-exempt employees must be compensated for such time if they are not completely relieved of all work duties. Furthermore, the salaries of exempt employees may not be reduced to reflect pump breaks, as they must be paid full salary for any week in which they perform work.
Nursing employees must have access to a place to pump breast milk that is shielded from view, free from intrusion by others, available each time it is needed by the employee, and not a bathroom. A space that is temporarily created or converted into a space for pumping when needed by a nursing employee is sufficient as long as it meets the other above requirements. This could be a vacant office or storage room.
The pumping space should contain a space for the employee to sit (other than the floor); ideally it should also include access to a sink and electricity. Employees must be able to safely store milk while at work in an insulated food container, personal container, or refrigerator.
Employers with fewer than 50 employees may claim exemption from the PUMP Act requirements if they can demonstrate that compliance would impose an undue hardship. The requirements do not apply to crewmembers on aircrafts, and their application is delayed for certain employees of rail carriers and motorcoach service operators.
Employees may file a complaint with the WHD or a private right of action to enforce PUMP Act requirements. Remedies may include employment, reinstatement, promotions, lost wages, liquidated damages, compensatory damages, and punitive damages, where appropriate. Employers cannot retaliate against an employee who files a complaint.

Employers are advised to review practices and policies regarding nursing employees to ensure that they are consistent with WHD’s recent guidance. Your partners at Lake Effect can answer specific questions relating to break time, compensation, and functional space requirements as they relate to your worksite.

Lake Effect is here to answer all of your questions about 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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US Department of Labor Issues Final Rule on Tipped Workers

admin — Wed, 03 Nov 2021 12:22:10 +0000

On October 28, 2021, the US Department of Labor (DOL) issued its Final Rule on tipped workers, establishing when tipped employees can be paid less than the federal minimum wage, an issue that has been in a state of flux over the last several years. The Final Rule will take effect on December 28, 2021. Lake Effect’s prior blog on this issue provides additional information and history on this topic.

Background: Under the Fair Labor Standards Act (FLSA), employers must pay employees no less than the current minimum wage of $7.25/hour. However, the FLSA allows employers to take a “tip credit” for employees who normally earn at least $30/month in customer tips. This means that employers may pay tipped employees a reduced minimum wage of $2.13/hour, instead of $7.25/hour, if they make sure that the employees earn at least $5.12/hour in tips, thus reaching the statutory minimum of $7.25/hour.

The Issue: Although this seems a straight-forward rule, its application becomes challenging when a tipped employee like a waiter spends some work time completing non-tipped work, like wiping down tables or folding napkins. Because the employee does not earn customer tips while performing such duties, the DOL has historically scrutinized an employer’s ability to take the tip credit (i.e., pay the lower hourly rate of $2.13/hour) for all of the employee’s work hours. The question has lingered, “When does an employee’s non-tipped work becomes so time consuming that the employer should lose the tip credit and pay the full federal minimum wage to that employee?”

DOL’s Answer: The DOL’s Final Rule identifies three categories of work that may be performed by tipped employees and specifies the FLSA pay requirements for each:

tip producing work that provides service to customers and for which tips are normally received (i.e., a server provides table service, or a bartender makes and serves drinks): an employer may take the full tip credit and pay an employee $2.13/hour for this work, assuming the employee’s tips make up the remainder of the minimum wage requirement.
directly supporting work performed by a tipped employee in preparation for tip-producing work (i.e., a server refills condiments and rolls silverware, or a bartender slices fruit for drinks): the “80/20 principle” applies. If a tipped employee spends more than 20% of their work week performing directly supporting work, the employer must pay them the full minimum hourly wage of $7.25/hour for that work. In addition, if an employee spends more than 30 continuous minutes performing directly supporting work, the employer must pay full minimum wage for any time that exceeds 30 minutes. This rule applies regardless of whether the 80/20 rule applies to the employee’s overall work week.
- Directly supporting work” includes idle time spent waiting to serve customers.
- If an employee performs dual jobs for an employer, one that normally produces tips and one that does not, only time spent performing the tipped job is considered in applying the 80/20 work week principle.
work that is not part of or supportive of the employee’s tipped occupation (i.e., server prepares food and cleans bathrooms, or bartender cleans the dining room): an employer must pay the employee the full minimum wage of $7.25/hour for all time spent on this work.

Challenges Ahead: Although intended to provide clarity on the issue of tipped employees, DOL’s Final Rule will require many employers to revamp their employee scheduling, timekeeping, and task-tracking processes. It will be especially important for employers to closely monitor employee time spent on “directly supporting work” so that they can properly apply the 80/20 and 30-minute continuous duration rules. To avoid uncertainty and minimize administrative burdens, some employers might consider foregoing the tip credit altogether. Your partners at Lake Effect can help assess your pay practices and navigate the new FLSA rules for tipped employees.

Lake Effect is here to answer your questions about federal and state wage and hour laws that impact employers across all industries. We continue to monitor important legal and HR developments, as well as COVID-related updates from federal, state, and local authorities. 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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Provisions of Final Tip Pool Rule Effective November 23, 2021

admin — Wed, 13 Oct 2021 18:09:08 +0000

The U.S. Department of Labor’s latest final tip pool rule provisions will take effect on November 23, 2021. For further discussion on other provisions of the final rule that were implemented in April 2021, please see Lake Effect’s prior blog on this topic.

The following provisions of the final tip pool rule will take effect on November 23, 2021:

Managers and supervisors may keep tips they receive for services provided “solely” by the manager or supervisor and “directly” to customers. This clarification to the traditional prohibition on managers and supervisors receiving tips in a tip pool or tip sharing arrangement recognizes the reality that managers and supervisors are often called upon to perform tipped duties in the course of their workday. This means, for example, when a bar manager is working as a bartender to fill in for an absent bartender or during a slow shift, the bar manager may keep tips received directly from patrons at the bar. Similarly, when a salon manager receives tips from a client for a haircut done by the salon manager, the salon manager may keep the tips.
Managers and supervisors may contribute some of their tips received from their “sole” and “direct” work into mandatory tip pools or sharing, but they may not receive any tips from a tip pooling or tip sharing arrangement. Further, an employer may require (or may allow) managers and supervisors to contribute part of their “sole” and “direct” tips into tip pooling or sharing arrangements, but, again, managers and supervisors may not keep or receive employees’ tips, or other managers’ and supervisors’ tips, in any arrangement.
Employers may face fines up to $1,100 for each instance that the Department of Labor finds an employer took an employee’s tips, regardless of whether the violation was repeated or willful. This now encompasses employer behavior that is in “reckless disregard” of the FLSA regulations and situations when an employer should have explored if its behavior was compliant but failed to do so.

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