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Compliance Update

By Accounting Resources May 13, 2024

In recent weeks, several important developments on the employment law front have occurred, which if implemented, have the potential to impact our clients in different ways. Please read through this bulletin for additional information, including timeframes and next steps.

Connecticut Paid Sick Leave 

HB 5005 

On April 25, 2024, the Connecticut State Legislature passed an expansion of the state’s paid sick leave mandate, with potential implications for small businesses. Currently, only employers with more than 50 employees in designated service occupations must provide paid sick leave to employees. The expansion provides that all Connecticut employers provide 40 hours of annual paid sick leave, to accrue at a rate of 1 hour for every 30 hours worked. The bill provides for a phased implementation:

  • Jan. 1, 2025, for employers with 25 or more employees
  • Jan. 1, 2026, for employers with 11 or more employees
  • Jan. 1, 2027, for employers with one or more employees

Seasonal workers, who work fewer than 120 hours per year are exempted. In its current form, employers are not permitted to ask for verifying documentation (for example, a doctor’s note) if employees use this paid sick leave.

Businesses that already provide 40 hours of paid time off in the form of vacation, personal time, or other leave are considered to be in compliance with this regulation.

Next Steps: On May 7, 2024, the CT Senate passed HB 5005 in its current form. Governor Lamont will be signing imminently. For employers, if you currently do not offer at least 40 hours of annual time off, you must begin to think about how to implement this requirement.  In addition, if you have over 25 employees, we suggest that you contact your payroll provider to discuss setting up this accrual for 1/1/25 and also re-visit your existing policies for possible revisions to accommodate this new requirement.

Please contact ARI HR for any questions about HB 5005, setting up your time off structure, and implications for your business.

US Department of Labor

Increase in the FLSA Salary Exemption Threshold

On April 23, 2024, the US Department of Labor (DOL) published its final rule which raises the salary threshold under which employees are exempt from overtime requirements within the Fair Labor Standards Act (FLSA). Currently, if an employee earns less than $35,568 ($684 per week) they are eligible for overtime payments (the “salary basis” under the FLSA).

Effective July 1, 2024, any employee who is classified as “exempt” will now be eligible for overtime payments (equal to 1.5x their normal hourly pay rate) if they earn less than $43,888 annually ($844 per week), which then increases to $58,656 annually ($1,128 per week) after January 1, 2025. This increase to the salary basis for the exemption threshold could have financial impacts on employers throughout the country.

Action Required: With the anticipated legal challenges to this rule, there is the potential that this increase will not go into effect on July 1, 2024. If the rule is upheld, employers will need to review each salaried employee to ensure they meet the threshold, and for those that do not, determine the strategy that works for them moving forward, including reclassification.

ARI HR is monitoring the status of this rule and the legal challenges. We will communicate further with all of our clients as the status of this bill changes. ARI HR is here to assist all of our clients with their assessment of options and the reclassification of certain positions should this rule be upheld. Please contact us for further discussion.

U.S. Federal Trade Commission

Ban on Non-Compete Agreements

Also on April 23, 2024, the US Federal Trade Commission (FTC) banned for-profit employers throughout the country from using Non-Compete Agreements. This rule makes existing Non-Compete Agreements unenforceable after it becomes effective (which date is currently nebulous, set at 120 days after publication in the Federal Register). The FTC provided an exception for Non-Compete Agreements for Senior Executives, defined as individuals in a policy-making position for the business who earn more than $151,164 annually. Should this rule become effective, employers must provide a notice to all employees who are bound by Non-Compete Agreements that their Agreement is no longer enforceable.

As noted above, this rule was created by the FTC, not the federal Department of Labor or a legislative body. Legal challenges to this rule are imminent, with the U.S. Chamber of Commerce already preparing its suit. Whether the FTC has the authority to make this rule is the subject of that challenge, with the Chamber arguing that it does not.

Action Required: All employers should await further guidance on the enforceability of this rule and refrain from taking action at this time regarding any Non-Compete Agreements in place. ARI HR is monitoring the status of these legal challenges and will update all clients as they are adjudicated.

 

As these changes takes effect, the ARI Human Resources Team is here to help you interpret guidelines and regulations, to review your current polices, revise polices as necessary, and to any questions you may have. If you would like to learn more about how we can help support your business, contact us.

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