It’s a New Year! Are you ready? Significant changes in federal employment laws for 2025 encompass critical aspects of workplace regulations, including new guidelines on harassment, revised rules on employee classification, and evolving interpretations of existing statutes. Understanding these changes is crucial for maintaining compliance and fostering a fair and equitable work environment. Highlighted below are some of the latest developments impacting employers issued by the Equal Employment Opportunity Commission (EEOC) and the Department of Labor (DOL). 

Enforcement Guidance on Harassment in the Workplace (Equal Employment Opportunity Commission’s (“EEOC”)) 

Issued April 29, 2024, the EEOC’s enforcement guidance ‘Guidelines on Harassment in the Workplace’ offers guidance on the standards for harassment and employer liability applicable to claims of harassment under the EEO statutes enforced by the Commission (e.g., Title VII, ADA). The guidance highlights the EEOC’s position on “protected characteristics” and identifies workplace behaviors that rise to the level of harassment. These include prohibitions on work-related harassment based on protected classifications such as race, color, religion, sex (including pregnancy, childbirth, or related medical conditions; sexual orientation; and gender identity), national origin, disability, genetic information, and age (40 or over). 

The updated guidelines provide specific factual examples of what constitutes unlawful harassment in the modern workplace. Examples include common scenarios involving sexual advances at holiday parties and comments regarding an employee’s natural hair. 

While non-binding, the guidelines provide useful insight into EEOC enforcement parameters and serve as a ‘how to’ tool for employers seeking to address and prevent unlawful conduct in the workplace.  

Final Rule on Employee/Independent Contractor Classification (Fair Labor Standards Act) 

Federal law governing the classification of independent contractors under the Fair Labor Standards Act (FLSA) has been in flux for several years, with classification rules being issued, rescinded and replaced on an ongoing basis. Effective March 24, 2024, the U.S. Department of Labor (DOL) published a new final rule revising the Department’s guidance on how employers should analyze whom is an independent contractor under the FLSA.  

The new final rule rescinds the Independent Contractor Status Under the Fair Labor Standards Act (2021 IC Rule), published January 7, 2021, and restores the prior multifactor analysis used by courts for decades. The new rule addresses six factors that guide the analysis of a worker’s relationship with an employer, including: 1) any opportunity for profit or loss a worker might have; 2) the financial stake and nature of any resources a worker has invested in the work; 3) the degree of permanence of the work relationship; 4) the degree of control an employer has over the person’s work; 5) whether the work the person does is essential to the employer’s business; and 6) a factor regarding the worker’s skill and initiative. 

When an employer hires an independent contractor, it avoids many employment and tax requirements inherent to the employer/employee relationship. For this reason, independent contractor relationships are highly scrutinized. Misclassification can result in the employer being responsible for back wages, overtime, tax and insurance, employee benefits and employment law compliance. Employers should consult legal counsel before classifying workers—especially those hired to perform work similar to its current employees—as independent contractors. More information on the new final rule can be found on the DOL’s Final Rule webpage.  

NOTE: California’s independent contractors’ laws are not impacted by the DOL’s new final rule. 

Federal Minimum Salary Requirement for the White-Collar Exemptions (Fair Labor Standards Act) 

On April 23, 2024, the Department of Labor (DOL) announced a significant update to the overtime exemption criteria under the Fair Labor Standards Act (FLSA).  

The new rule was intended to increase minimum salary thresholds needed for certain employees to qualify for overtime exemptions. Increases were to be rolled out in two phases, with the first increase occurring on July 1 and a second on January 1, 2025. However, in late November 2024, the rule was vacated by a Texas federal district court judge.  

This means that employers subject to FLSA overtime rules will not be required to comply with the January 1, 2025, increase and that the salary level in effect prior to July 1 ($684 per week, $35,568 per year) is restored and the salary level for the highly compensated employee exemption, $107,432 per year, is reinstated. It also means that, at their discretion, employers may roll back any increases initiated in accordance with the July 1, 2024, deadline. Employers should consult with legal counsel before deciding what changes to make or pull back because of the court’s ruling. 

NOTE: California overtime laws are not impacted by the court’s ruling.  

Noncompete Ban Blocked (Federal Trade Commission (“FTC”)) 

On August 20, 2024, a federal judge blocked the Federal Trade Commission’s (FTC) rule banning nearly all noncompete agreements, which was set to take effect on September 4, 2024. The U.S. District Court for the Northern District of Texas ruled, in Ryan, LLC v. FTC, that the rule is unlawful. The court’s decision not only prevents enforcement of the rule against any company nationwide but also concludes that the FTC lacks substantive rulemaking authority over unfair methods of competition. 

This ruling followed an earlier preliminary injunction that applied specifically to the Plaintiff-Intervenors. The court’s judgment effectively halts the FTC from implementing the noncompete ban across the board. However, it is important to note that this decision does not affect state law bans on noncompete agreements, such as California’s, which remain in place regardless of federal rulings. 

The FTC may still appeal this decision, but any appeal would likely face an uphill battle in the U.S. Court of Appeals for the Fifth Circuit and potentially the U.S. Supreme Court, both of which have issued decisions in recent years limiting federal agencies’ regulatory powers. 

As a result of the court’s ruling, employers are no longer subject to compliance measures related to the FTC’s noncompete rule, though it is important to stay updated on the appellate process in the Ryan case.