Amendments to the Fair Labor Standards Act
As of January 1, 2020, a final rule issued on September 24, 2019, by the US Department of Labor (DOL) has updated the Fair Labor Standards Act (FLSA) regulations to provide for the following:
- An increase in the minimum annual salary for most exempt employees paid on a salary basis from the 2019 level of $455 per week (or $23,660 per year) to $684 per week (or $35,568 per year). This update will make all employees who earn less than $35,568 annually eligible for overtime pay of at least time-and-a-half under the FLSA. The salary threshold hasn’t been raised in more than 15 years. The DOL estimates an additional 1.3 million workers who are currently overtime-exempt are projected to become eligible for overtime unless their employers reorganize to avoid payment of overtime pay.
- Employers are now able to count nondiscretionary bonuses and incentive payments, including commissions, to count up to 10% of the standard salary level test, as long as they are paid annually or more frequently.
- A 7% boost from $100,000 to $107,432 to the minimum annual salary for highly compensated employees who face a looser duties test.
Paid Leave Policy Changes at the Federal and Local Levels
The federal Family and Medical Leave Act (FMLA) now requires qualified employers to grant up to 12 weeks per year of unpaid leave to eligible employees who need to care for family members or for themselves. States and local governments are encouraged to require more benefits than the federal minimums for paid leave, and the states of New York, Nevada, Massachusetts, California, and Arizona have responded with improvements. Interestingly, so has the city of Dallas.
The City of Dallas Earned Paid Sick Time (Paid Sick Leave) Ordinance took effect on August 1, 2019 for employers with 6 or more employees. The city will not enforce the ordinance, except for violations of the anti-retaliation provision, until April 1, 2020. No part of the ordinance goes into effect for employers with 5 or fewer employees until August 1, 2021. The ordinance covers employees who work at least 80 hours per year within the geographic boundaries of the City of Dallas.
Defined Contribution Health Plans
Effective for plan years beginning on January 1, 2020, the Affordable Care Act (ACA) prohibition of defined contribution health plans has been partially reversed by a rule that allows health reimbursement arrangements (HRAs) to be integrated with individual coverage under certain circumstances. The rule also classifies certain other HRAs as “excepted benefits” exempt from many health plan requirements.
Funds in the new “individual coverage HRA” (ICHRA) can be used to reimburse premiums for individual health insurance, whether offered on or off an ACA exchange, as well as Medicare coverage. A separate “excepted benefit HRA” (EBHRA) can be used to help cover copayments and deductibles, as well as dental, vision, and short-term coverage.
For any portion of the ICHRA premium not covered, employers may offer a pretax salary reduction through a cafeteria plan. This allowance applies only to off-exchange coverage because the cafeteria plan rules prohibit the use of funds for exchange coverage.
Telehealth and Data Protection Law Changes in Texas
New for 2020, health plans issued or renewed on or after January 1 must cover telehealth services on the same basis as the plans cover the service or procedure in an in-person setting.
As a response to concerns about data privacy and cyberattacks, businesses that own or license computerized data that include sensitive personal information must disclose any security breach after discovering the breach to any Texas resident whose sensitive personal information was, or is reasonably believed to have been, acquired by an unauthorized person. If a breach requires notification of 250 or more Texas residents, businesses must notify the attorney general within 60 days after determining that the breach occurred.
As we move forward, changes to look out for in the coming years include new pay equity laws to address the underpayment of women and minorities (several states are addressing this in 2020) and anti-harassment and anti-discrimination laws (NY and IL have expanded protections for 2020). As we enter an election season, these possible changes are likely to garner increasing political and media attention.