Keeping up with compliance developments can be difficult and time-consuming. This quarterly update highlights recent legal developments to help your organization stay on top of new requirements and minimize compliance risks.
For more information on these topics, please contact MDG Benefit Solutions.
Recent Federal Developments
ACA’s Pay-or-Play Affordability Percentage Will Increase for 2025
On Sept. 6, 2024, the IRS released the affordability percentage threshold for 2025 plan years under the Affordable Care Act’s (ACA) pay-or-play rules. These rules require applicable large employers (ALEs) to offer affordable, mini- mum-value health coverage to their full-time employees or risk paying penalties. For plan years beginning in 2025, employer-sponsored coverage will be considered affordable under the ACA’s pay-or-play rules if the employee’s required contribution for self-only coverage does not exceed 9.02% of their household income for the year. This is an increase from the affordability percentage for 2024 plan years (8.39%). Due to this increase, ALEs may have more flexibility when setting employee contribution levels for the 2025 plan year.
5th Circuit Upholds DOL’s Authority to Set Minimum Salary Requirements under FLSA
On Sept. 11, 2024, the U.S. Court of Appeals for the 5th Circuit held that the U.S. Department of Labor’s (DOL) authority to define and delimit the terms of the executive, administrative and professional (EAP) exemptions includes the power to set a minimum salary for exemption under the Fair Labor Standards Act (FLSA). The 5th Circuit’s ruling is significant, as it provides support for the DOL’s authority to implement its 2024 final rule that amended current requirements employees in white-collar occupations must satisfy to qualify for an overtime exemption under the FLSA.
The 2024 final rule took effect on July 1, 2024, increasing the standard salary level from $684 to $844 per week ($35,568 to $43,888 per year) for EAP employees and from $107,432 to $132,964 per year for highly compensated employees (HCEs). On Jan. 1, 2025, the salary level will again increase from $844 to $1,128 per week ($43,888 to $58,656 per year) for EAP employees and from $132,964 to $151,164 per year for HCEs. Impacted employers should continue to monitor this situation, as other legal challenges may impact the DOL’s 2024 final rule.
Final Rule Strengthens Mental Health Parity Law
On Sept. 9, 2024, the DOL and the Departments of Health and Human Services and the Treasury released a final rule to strengthen the requirements of the Mental Health Parity and Addiction Equity Act. The final rule is designed to ensure that individuals do not face greater restrictions to obtaining mental health and substance use disorder benefits than they would face for medical and surgical benefits. The final rule adds protections against more restrictive nonquantitative treatment limitations (e.g., preauthorization requirements, network composition standards and other medical management techniques). Employer-sponsored health plans must comply with the new requirements for plan years beginning on or after Jan. 1, 2025, although the effective date for certain key requirements is delayed until plan years beginning on or after Jan. 1, 2026.
OSHA Proposes Heat Injury and Illness Prevention Standard
On Aug. 30, 2024, the DOL’s OSHA published a proposed rule to protect workers from heat injury and illness. The new standard would apply to all employers conducting indoor and outdoor work in all general industry, construction, maritime and agricultural sectors where OSHA has jurisdiction, subject to limited exceptions. If finalized, the new standard would require employers to create a plan to evaluate and control heat hazards in their workplaces.
DOL Confirms Cybersecurity Guidance Applies to Health and Welfare Plans
The DOL has confirmed that its cybersecurity guidance applies to all employee benefit plans, including health and welfare plans. Plan fiduciaries of ERISA-covered plans have an obligation to ensure proper mitigation of cybersecurity risks. Because employers often rely on service providers to maintain employee benefit plan records and keep participant data confidential and secure, they should ensure they use service providers that follow strong cybersecurity practices. The DOL’s cybersecurity guidance includes tips for hiring plan service providers, cybersecurity program best practices and online security tips.
Federal District Court Blocks the FTC’s Noncompete Ban
On Aug. 20, 2024, the U.S. District Court for the Northern District of Texas issued an order blocking the Federal Trade Commission’s (FTC) noncompete ban, which had a scheduled effective date of Sept. 4, 2024. The enforceability of noncompete clauses is generally determined by state and local legislatures and courts. The FTC rule would have instead governed the enforceability of noncompete clauses at the federal level and superseded any less restrictive state laws or judicial interpretations. The District Court’s ruling blocked the ban for all employers and prevented the ban from taking effect.
NLRB Voluntarily Withdraws Joint-employer Rule Appeal
On July 19, 2024, the National Labor Relations Board (NLRB) voluntarily dismissed its appeal of the U.S. District Court for the Eastern District of Texas decision vacating the NLRB’s 2023 joint-employer rule. As a result, the decision of the Eastern District of Texas will be final. The rule, which had been set to take effect on March 11, 2024, would have expanded the types of control over job terms and conditions that trigger joint employment. As a result of the Eastern District of Texas’ ruling and the NLRB’s decision to withdraw its appeal, the former President Donald Trump-era 2020 joint-employer rule remains in effect and calls into question the future status of the 2023 rule.
Recent State Law Developments
California Requires Large Health Plans to Cover Fertility Treatments
On Sept. 29, 2024, California enacted a law requiring large group health care service plans to cover infertility and fertility services, including in vitro fertilization (IVF), beginning July 1, 2025. Large group healthcare service plans generally cover over 100 people. This coverage mandate does not apply to health plans sponsored by religious employers or to Medi-Cal managed health care service plans.
CALIFORNIA EMPLOYERS LOSE OPTION TO REQUIRE VACATION LEAVE BEFORE PAID FAMILY LEAVE
Effective Jan. 1, 2025, California employers will no longer be allowed to require their employees to take two weeks of accrued vacation leave before taking paid family leave under the state’s family temporary disability insurance program. This change was brought about by a law enacted on Sept. 29, 2024. The change allows for the possibility of longer employee absences overall, as employees will be able to take their full amount of paid family leave without first using any accrued vacation time. At a later date, employees will be free to use their full vacation leave without having lost any of it for family leave.
CALIFORNIA ENACTS BROAD RANGE OF EMPLOYMENT LAWS
In late September 2024, California passed a series of bills that make several important changes to the state’s labor and employment laws. Each of these new laws will take effect on Jan. 1, 2025. In general, these laws will:
- Expand protections from discrimination for those with a combination of protected traits and traits associated with race, including hair texture and protective hairstyles;
- Prohibit requiring a driver’s license as a condition of employment;
- Prohibit employers from coercing employees to attend meetings or participate in communications regarding the employer’s opinion about religious and political matters;
- Impose minimum requirements for freelance contracts;
- Enhance paid family leave benefits and adjust the time frame for filing claims for disability and family leave benefits; and
- Expand sick and safe leave benefits.
New York Enacts Retail Workplace Violence Prevention Law
On Sept. 4, 2024, New York enacted the Retail Worker Safety Act to enhance worker safety and mitigate the risk of workplace violence in retail environments. It applies to employers that have 10 or more employees working in a retail store. Employers must have their workplace violence prevention policy and training implemented by March 3, 2025. The New York Department of Labor is developing a model policy and training program employers can use. By Jan. 1, 2027, employers with 500 or more retail employees nationwide must provide panic-button access to employees.
Illinois Grants Employees the Right to Inspect Pay Stubs
On Aug. 9, 2024, Illinois amended the Illinois Wage Payment and Collection Act to allow employees to inspect their pay stubs. The amendments also impose new recordkeeping requirements on employers, expand the information employers must provide to employees in their pay stubs, and create penalties for employers that fail to furnish current and former employees with pay stubs. These amendments become effective Jan. 1, 2025.
Illinois Enacts AI Employment Law
On Aug. 9, 2024, Illinois enacted an amendment to the Human Rights Act that bans employers from using artificial intelligence (AI) that results in discrimination based on an employee’s protected classes (e.g., age, race, sex, religion and disability). It also requires employers to notify employees that AI is being used. The law takes effect on Jan. 1, 2026.
While Illinois is only the second state to enact such legislation, similar AI laws have been proposed in other states.
Illinois Expands Protected Classes, Statute of Limitations and Penalties for Discrimination Claims
In August 2024, Illinois passed four amendments to its Human Rights Act. The amendments, which take effect on Jan. 1, 2025, prohibit employment discrimination on the basis of an individual’s reproductive health decisions and family responsibilities, extend the act’s statute of limitations to two years and increase penalties for violations of the act.
Massachusetts Enacts Pay Transparency Requirements and Pay Data Reporting Law
On July 31, 2024, Massachusetts enacted the Frances Perkins Workplace Equity Act. This law requires employers with 100 or more employees to provide pay data reports to the Massachusetts state secretary effective Feb. 1, 2025, and employers with 25 or more employees to disclose the pay range in job postings effective July 31, 2025.
This document is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. © 2024 Zywave, Inc. All rights reserved.