In May 2024, I posted a blog on several recently issued federal regulations that could affect your business. Since posting the blog, there have been important developments, including a U.S. Supreme Court decision on agencies’ ability to issue regulations and various court actions directly aimed at the new regulations. Here’s where things stand.
DoL’s independent contractor rule
The U.S. Department of Labor (DoL) created a 6-factor test for determining whether a worker is an employee or independent contractor for purposes of laws under its authority, such as minimum wages. This rule took effect on March 11, 2024.
Developments:
A number of cases have been filed in various parts of the country, including Georgia, Louisiana, and Tennessee, challenging the rule on various technical grounds. The complaints are from freelancers, transportation workers, and construction workers. To date, there’ve been no decisions or any injunctions, so the rule is in effect now. But future court decisions could change this.
FTC’s rule banning non-compete agreements
The FTC’s final rule bans the use of non-compete agreements, other than for owners selling a business. The rule makes existing agreements, other than for senior executives, void as of September 4, 2024.
Developments:
One federal district court in Texas (Ryan LLC v. Federal Trade Commission) temporarily enjoined the rule. This case was brought by a tax firm and the FTC can’t enforce the rule against it for now. The court said it would issue a final decision before the rule’s effective date. Another case in Pennsylvania (ATS Tree Services LLC) hasn’t been decided yet. Nor has another Texas case filed there by the U.S. Chamber of Commerce. Tread lightly—and talk to an attorney—if you want to continue using non-compete agreements. Hopefully, there will be more guidance before September 4th.
DoL’s rule for overtime pay threshold
As of July 1, 2024, there are new overtime pay thresholds for determining exemption from the overtime pay rule under the Fail Labor Standards Act (FLSA).
Developments:
A federal district court in Texas (Texas v. U.S. Dep’t of Labor) granted a temporary injunction to the higher pay thresholds, but only for state employees. The reason: The DoL’s final rule is “likely unlawful.” But another district court in Texas (Flint Avenue v. U.S. Dep’t of Labor) refused to enjoin the rule, or issue a nationwide injunction for the second part of the rule set to take effect on January 1, 2025, for private-sector employees. The case will proceed, and a decision will be given based on the merits—but who knows when? Bottom line: You must use the new rule for your business unless and until there is a court decision saying otherwise.
NLRB’s co-employer position
The National Labor Relations Board (NLRB) issued a final rule last fall that requires a joint employer to collectively bargain with employees. Under the rule, an entity is considered a joint employer of another employer’s employees if the two share or codetermine the employees’ essential terms and conditions of employment. The rule had been scheduled to go into effect on December 26, 2023, but was postponed to March 11, 2024. Days before it went into effect, the the rule was vacated by a federal district court.
Development:
Initially, the NLRB appealed the district court’s decision. Now, it has withdrawn its appeal. The NLRB said: “it would like the opportunity to further consider the issues identified in the district court’s opinion.” Is the joint employer rule dead forever or just for the time being?
Looking ahead
So, this brings us to a really big development: the U.S. Supreme Court’s 6-3 decision (Loper Bright Enterprises v. Raimondo). This decision limits the “administrative state” (the ability of agencies to make law) that could affect future regulations and be brought into the discussion of existing regulations.
The decision runs 114 pages and overturns the holding in a prior decision—Chevron—that’s controlled administrative law since 1984. It’s not easy to explain what all of this means. Under Chevron, if Congress did not clearly settle a question in dispute before a court, that court was required to uphold an agency’s interpretation of the statute as long as it was “reasonable.” The Chevron decision effectively gave agencies free—or at least very loose—reign to interpret laws. But the new case “makes clear that agency interpretations of statutes — like agency interpretations of the Constitution — are not entitled to deference. Under the APA (Administrative Procedure Act), it thus remains the responsibility of the court to decide whether the law means what the agency says.”
So, what’s the bottom line here? Legal scholars are debating what the reach of Loper Bright will be. Can those challenging the new rules explained above cite Loper Bright to overturn the rules? Going forward, how constrained will federal departments and agencies, such as the DoL and the IRS, be in their rule making?
Final thought
Small businesses have an almost impossible task of staying up on new administrative rules—there are thousands issued each year. To better understand a handful of the recent rules likely to impact most small businesses, read my prior blog. I’ll continue to share regulatory developments through my Idea of the Day® and future blogs. But don’t hesitate to consult attorneys to know about the new regulations affecting you and what you need to do to stay compliant.
