For New York Employers: Two New Laws On The Horizon

Employers, especially in New York, should be aware of the two legal updates outlined below:

New Salary Thresholds for White Collar Exemptions

On April 26, 2024, the U.S. Department of Labor published a final rule (the “Final Rule”) concerning the salary thresholds for the executive, administrative, and professional (“EAP”) exemptions under the Fair Labor Standards Act (“FLSA”). The EAP exemptions are important because most employees are eligible for overtime any time they work over 40 hours a week, unless they fit into a specific FLSA exemption. Therefore, understanding the requirements of these EAP exemptions at both the State and Federal level is critical to employers seeking to avoid overtime claims. Importantly, and as explained further below, some states, like New York, have their own salary thresholds that must be met and are higher than the FLSA thresholds, so the Final Rule will have far less significant impact in those states.

To be exempt from the overtime requirements under the EAP exemptions of the FLSA, employees must satisfy the following three tests:

1. The salary basis test (i.e., they must be paid a fixed, predetermined salary that is not reduced because of variations in the quality or quantity of work performed);
2. The duties test (i.e., their job duties must primarily involve EAP duties as defined by the FLSA regulations); and
3. The salary threshold test (i.e., the amount of salary they are paid must meet or exceed the standard salary level).

Highly compensated employees (“HCEs”) will be exempt from the FLSA overtime requirements if they customarily and regularly perform one or more EAP duties, and their total annual compensation meets or exceeds the minimum threshold.¹ The changes discussed herein are about the third test, the salary threshold test.

Effective July 1, 2024, the standard salary threshold for the EAP exemptions will increase from $684 per week, or $35,568 per year, to $844 per week, or $43,888 per year. The total compensation threshold for HCEs will also increase from $107,432 to $132,964.

Effective July 1, 2025, both thresholds will increase again – the salary threshold for the EAP exemptions will increase to $1,128 per week, or $58,656 per year, and the HCE total compensation threshold will increase to $151,164. The Final Rule indicates that the salary threshold and the HCE total compensation threshold will increase every three years thereafter.

Note that where state law imposes different and/or more protective requirements for overtime exemption, employers in those jurisdictions must comply with both the FLSA and applicable state law. For example, New York law generally follows the FLSA duties and salary basis tests for the EAP exemptions but imposes a higher salary threshold for the executive and administrative exemptions. Currently, employees in executive and administrative positions in NYC, Nassau, Suffolk, and Westchester (“Downstate NY”) must be paid at least $1,200 per week, or $62,400 per year, and employees in said positions in the remainder of the state must be paid at least $1,124.20 per week, or $58,458.40 per year.

Effective January 1, 2025, the salary threshold for the executive and administrative exemptions will increase to $1,237.50 per week, or $64,350 per year, in Downstate NY, and $1,161.65 per week, or $60,405.80 per year, in the remainder of the state. NY does not currently have a separate salary threshold for the professional exemption, so employees in professional positions need only be compensated at the applicable FLSA salary threshold. There are also certain exemptions available under the FLSA that are not available under NY law, including, but not limited to, the HCE exemption.

While the Final Rule may be subject to legal challenges in the near future, employers across the country, especially those operating in states that do not have their own salary threshold test, should begin reviewing the salaries of employees under EAP and HCE exemptions and prepare to comply with the Final Rule in the event that it becomes effective and remains in effect. For NY employers, given that NY's current and projected salary threshold exceeds the FLSA's salary threshold, the Final Rule will not have an immediate effect on employees under the executive and administrative exemptions. However, if implemented, the Final Rule will affect employees under the professional exemption, who are required to receive at least the salary set by the FLSA.

For further reading:

• The Final Rule may be accessed here:  https://www.federalregister.gov/documents/2024/04/26/2024-08038/defining-and-delimiting-the-exemptions-for-executive-administrative-professional-outside-sales-and
• The NY Minimum Wage Order for Miscellaneous Industries and Occupations, which provides the minimum salary requirements for the EAP exemptions, may be accessed here: https://dol.ny.gov/system/files/documents/2024/01/cr142.pdf

Paid Prenatal Leave

Effective January 1, 2025, New York State will require private sector employers to provide twenty (20) hours of paid sick leave for prenatal care for employees who are pregnant.

The new law amends New York State Labor Law Section 196-b, which already requires employers to provide employees with at least forty (40) hours of paid safe and sick leave. The new provision requires private employers of all sizes to provide an additional twenty (20) hours of paid prenatal personal leave during a fifty-two (52) week period for the employee to receive health services during or related to the employees' pregnancy, including physical examinations, medical procedures, monitoring and testing, and discussions with a healthcare provider related to the pregnancy.

The new provision provides that pregnant employees may take the leave in hourly increments, which are paid at the employee's regular rate of pay. There is no waiting period for the usage/accrual of paid prenatal leave time, which is to be available immediately upon beginning employment. There is also no requirement that employers pay employees for unused paid prenatal leave upon separation from employment.

This law is the first of its kind in the country to require paid prenatal leave benefits to employees. Employers should consider how to revise their leave policies and/or employee handbooks to include paid prenatal leave benefits before January 1, 2025.

Footnote

1 Total annual compensation includes payment meeting or exceeding the standard salary level and any commissions, non-discretionary bonuses and other non-discretionary compensation earned per year.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.