The Federal Trade Commission’s (FTC) final rule ban on non-compete agreements was set to take effect on September 4, 2024. However, its future is now uncertain following significant legal challenges.
On August 20, 2024, Judge Ada Brown of the U.S. District Court for the Northern District of Texas issued a permanent injunction against the FTC’s rule, halting its enforcement nationwide. The court ruled that the FTC overstepped its authority and criticized the rule as overly broad and unjustified.
This decision, which follows earlier legal actions, including a preliminary injunction in the Middle District of Florida and a conflicting ruling in the Eastern District of Pennsylvania, underscores the complexity of the legal situation and the varying interpretations of the FTC’s authority.
Despite the setback, the FTC is likely to appeal the Texas ruling. However, a resolution is unlikely before the original effective date, even if an appeal is filed. Employers currently face legal uncertainty regarding the use of non-compete agreements. Although they remain permissible, the legal landscape could shift based on the outcomes of ongoing litigation and potential appeals.
Over the summer, the New Jersey Department of Labor and Workforce Development (NJDOL) focused on the responsibilities of local governments and school boards under the New Jersey Prevailing Wage Act and the Public Works Contractor Registration Act. These laws ensure fair wages for workers on public works projects, protecting against unfair competition and wage theft.
Effective August 15, public works contractors must report certified payroll records through the NJ Wage Hub. This requirement is crucial to NJDOL’s efforts to enhance transparency and compliance with prevailing wage laws. NJDOL strongly encourages public works contractors and contracting public bodies to create accounts on this platform before the deadline. Contractors in the NJ region should be particularly mindful of this requirement to avoid penalties and ensure adherence to the law.
NJDOL has collaborated with various state departments and organizations throughout the summer to promote compliance, offering guidance and support to public bodies and contractors. This outreach aims to raise awareness about the importance of adhering to prevailing wage standards, ensuring workers are fairly compensated, and maintaining the integrity of public projects. For more information, visit myworkrights.nj.gov.
In August, the U.S. Department of Labor’s Wage and Hour Division (WHD) will host an online seminar for contracting agencies, contractors, unions, workers, and other stakeholders to learn about federal requirements for paying prevailing wages and benefits on federally funded construction and service contracts.
This day-long seminar aims to increase awareness and compliance with labor standards under the Davis-Bacon Act and the Service Contract Act. The seminar will cover how prevailing wages are set and administered, among other topics, and will be held on August 29 from 11 a.m. to 5:30 p.m. EDT.
WHD’s Administrator Jessica Looman emphasized the importance of prevailing wage laws in ensuring fair wages and benefits for workers on federally funded projects, especially in light of the Biden-Harris administration’s infrastructure investments.
Participation is free, but registration is required.
Last week, Michigan Governor Gretchen Whitmer signed an expansion of the State’s prevailing wage law to include construction for solar and wind energy projects. Senate Bill 571 extends prevailing wage requirements to clean energy facility construction, which includes solar, wind, and energy storage plants.
The bill mandates contractors bidding on these projects to register with the Department of Labor and Economic Opportunity and submit payroll and benefits information for workers. Supporters believe this will ensure better pay and support Michigan’s transition to clean energy, aligned to achieve 100% carbon emission-free energy by 2040. Opponents argue that it increases project costs and burdens nonunion laborers.
The bill passed along party lines in both legislative houses. Last year, Whitmer signed legislation reinstating Michigan’s prevailing wage law for state-funded construction projects, which had been repealed in 2018.
On July 1, 2024, the U.S. Department of Labor (DOL) implemented an increase in the minimum salary threshold for the Fair Labor Standards Act’s (FLSA) white-collar exemption, raising it from $35,568 to $43,888 annually. This threshold is set to increase further to $58,656 on January 1, 2025. Since the new rule became active, it has elicited mixed reactions and has faced legal challenges.
The impact of the increase in the salary threshold is not limited to non-government contracts. FLSA overtime requirements can apply to contracts covered by the Davis-Bacon Act and Service Contract Act and work in conjunction with the Contract Work Hours and Safety Standards Act.
In particular, the state of Texas recently filed for a preliminary injunction against the new rule, arguing that it would significantly raise payroll costs and strain budgets. In response, on June 28, 2024, a federal judge in Texas granted a preliminary injunction, suspending the DOL’s ability to enforce the new rule against Texas as an employer. Despite this injunction, private sector employers and other states must comply with the updated threshold.
While Texas state employers are temporarily exempt from the new salary threshold, employers in other states must comply and adjust their payroll practices. Further legal developments could influence the enforcement of the rule in the future.
On July 16, 2024, the U.S. Department of Labor (DOL) issued All Agency Memorandum 246 (AAM 246), updating the 2024 Service Contract Act (SCA) Health and Welfare fringe rate. This annual update, which accounts for current economic conditions and inflation, is vital for employers and government-contracting employees.
All invitations for bids opened and service contracts awarded on or after July 2, 2024, must include the updated SCA Wage Determination (WD) that reflects the new fringe benefit rates. The fringe rate for non-EO 13706 contracts has increased to $5.36 per hour, up from $4.98. For contracts under Executive Order (EO) 13706, which established paid sick leave for federal contractor employees, the rate has risen to $4.93 per hour from $4.57. Additionally, employees covered by the Hawaii Prepaid Healthcare Act (HPHCA) will see an increase to $2.36 per hour and $1.93 per hour for those performing EO 13706 contracts.
Revised WDs with the updated rates will be available on SAM.gov and the DOL’s Wage and Hour Division website. For existing contracts with option years, the new rates will generally take effect on the contract anniversary date and require a contract modification. Employers should contact their contracting officer to implement these changes.
On June 24, 2024, the U.S. District Court for the Northern District of Texas issued a preliminary injunction against key sections of the U.S. Department of Labor (DOL) amendments to the Davis-Bacon Act (DBA) regulations that apply nationwide. This ruling temporarily halts the enforcement of specific provisions within the DOL final rule, “Updating the Davis-Bacon and Related Acts Regulations,” which became effective on October 23, 2023.
The Court found several final rule provisions violate the DBA’s statutory language, congressional intent, and the Regulatory Flexibility Act (RFA). The blocked provisions include those within 29 CFR 5.2, which codify distinctions between material suppliers and contractors/subcontractors and require contractors to pay prevailing wages to delivery truck drivers for onsite work exceeding a significant minimal amount. Additionally, the provision within 29 CFR 5.5(e), which imposes DBA requirements by operation of law even if omitted from covered contracts, was also blocked.
The Court found that the DOL overstepped its authority by including an operation-of-law provision contradicting the DBA’s express statutory language. This provision would mandate that DBA labor standards and wage determinations apply even if erroneously omitted from contracts, which the Court found inconsistent with the principles of due process and basic contract law. The DBA explicitly requires federal contracts to outline minimum wages for “laborers and mechanics employed directly on the site of the work.” The Court emphasized that the DBA is not self-implementing. Thus, DOL lacks the authority to enforce this provision.
Furthermore, the Court determined that DOL improperly expanded DBA coverage to workers beyond mechanics and laborers and included work not performed directly onsite. The DBA’s language limits its application to construction, alteration, or repair, which does not encompass activities like trucking or material supply.
The Court also highlighted DOL’s failure to comply with the RFA. The DOL did not adequately assess the economic impact on small businesses, including costs associated with compliance, such as producing certified wage reports and bearing interest costs on restitution wages. This oversight led the Court to conclude that the final rule violates the RFA.
This preliminary injunction will remain active indefinitely as the litigation progresses, and the Court will later determine whether to make the injunction permanent. The developments in this case will continue to be monitored closely.
On June 18, the U.S. Department of the Treasury and the Internal Revenue Service issued final regulations on the prevailing wage and apprenticeship (PWA) requirements for increased credits or deductions under the Inflation Reduction Act (IRA), which pertain to clean energy incentives. The IRA offers increased credit or deduction amounts for taxpayers who meet specific PWA requirements for clean energy projects, potentially increasing the base amount by five times.
To qualify for the increased credits or deductions, taxpayers must pay laborers and mechanics at prevailing wage rates during construction, alteration, or repair of clean energy facilities, employ apprentices from registered apprenticeship programs, and adhere to specific recordkeeping and reporting standards. Taxpayers are responsible for ensuring that all contractors and subcontractors meet these requirements.
The IRS underscores the importance of compliance with PWA requirements, dedicating resources to enforce these regulations through taxpayer education and outreach supported by IRA funding. Efforts include updated publications and FAQs to help taxpayers understand PWA requirements and report suspected violations, which the IRS may use in audits. IRS Commissioner Danny Werfel highlighted that these incentives benefit both workers and employers, emphasizing the IRS’s commitment to ensuring compliance with PWA requirements through enhanced taxpayer service and enforcement resources.
Significant penalties are imposed for non-compliance with PWA requirements, emphasizing the necessity of real-time adherence to these standards. To ensure compliance, taxpayers should conduct regular payroll reviews, mandate PWA adherence in contracts, post prevailing wage rates visibly, establish procedures for reporting non-compliance without retaliation, and consult the Department of Labor (DOL) for apprenticeship program assistance.
The DOL, responsible for setting prevailing wage rates, will collaborate with the IRS through a Memorandum of Understanding (MOU) to enhance compliance efforts, including shared training and information exchange.
More information can be found on the Inflation Reduction Act of 2022 page on IRS.gov.
On April 30, 2024, the Chicago Department of Business Affairs and Consumer Protection (BACP) published the final rule implementing the Chicago Paid Leave and Paid Sick and Safe Leave Ordinance. This ordinance, passed by the Chicago City Council on November 9, 2023, with amendments on December 13, 2023, is set to take effect on July 1, 2024.
The new ordinance says that employees are entitled to up to 40 hours of paid leave and 40 hours of paid sick leave annually, accruing at a rate of one hour for every 35 hours worked. Employers can define the benefit year based on an employee’s anniversary date, or synchronize it for all employees based on a calendar or fiscal year. Paid unused sick leave can be carried over into the following year, up to 80 hours, while up to 16 hours of paid leave can be carried over unless it is front-loaded.
Employees can use paid sick leave for illness, medical appointments, or caring for a family member. Employers must notify employees of their leave balances each pay period and maintain records for at least five years. Notices must be posted in workplaces, and policies must be communicated annually upon hiring.
In addition, employers can deny leave based on a pre-established policy rationale, but must do so in writing. They can also require reasonable pre-approval for leave to ensure business continuity. These measures are part of a broader effort by the City of Chicago to enhance worker protections and ensure fair labor practices. The BACP, through its Office of Labor Standards, will oversee the ordinance’s implementation.
The U.S. Small Business Administration (SBA) has issued a direct final rule to eliminate self-certification for Service-Disabled Veteran-Owned Small Businesses (SDVOSBs). Effective August 5, 2024, this rule requires SDVOSBs seeking federal contracts or subcontracts that count towards agency or subcontracting goals to be certified through the SBA’s Veteran Small Business Certification (VetCert) Program.
Key points of the rule include:
The SBA estimates that around 20,408 currently self-certified firms might need to apply for certification. This rule shifts the responsibility of verifying SDVOSB eligibility from contracting officers to the SBA. This rule was expedited due to statutory requirements, eliminating the need for prior public comment to implement the changes swiftly.