Understanding the FLSA’s New Salary Test

The Fair Labor Standards Act (FLSA) sets minimum wage and overtime requirements for employees. The overtime requirement requires employers to pay at least one-and-one-half times the hourly rate of the employee for each hour the employee works over 40 hours in a regular work week.

However, certain employees may be exempt from the overtime requirements if they qualify as meeting three tests:

1. Job Duties Test;
2. Salary Level Threshold Test, and
3. Salary Basis Test.

The FLSA does not define those tests. Instead, the U.S. Department of Labor (DOL) is directed to define the exemptions and modify criteria from time to time with regulations.

The Job Duties Test specifies certain duties that the employee must perform if the employee is to be classified as an executive, administrative, professional, outside salesperson, or a computer-related occupation. Additionally, highly compensated employees are also eligible if they fit within a specific job duty test. These employees must all meet the Salary Level Threshold Test and be paid a predetermined and fixed salary that is not subject to reduction (Salary Basis Test). Continue reading »

Changes in Missouri Law Regarding Restrictive Covenants in Business Sales

Authored by Ruth Binger with assistance from Kristina M. Stevenson, contributor

Recent changes in Missouri law have impacted the enforceability of restrictive covenants in the sale of businesses, particularly those involving business entities and owners. These modifications, detailed in Revised Statutes of Missouri (RSMo) 431.204, arguably reduce protections extended to business purchasers.

Effective August 28, 2023, a covenant prohibiting solicitation of employees between a business entity and an owner cannot extend beyond a two-year period following the termination of the owner’s affiliation with the entity. Essentially, this means that after two years from the sale of their business, an owner is permitted to solicit employees previously associated with the entity.

Moreover, the revisions have introduced more stringent conditions for covenants prohibiting the solicitation of customers. These non-solicitation covenants must now be limited to customers with whom the owner had prior dealings and cannot extend beyond five years after the owner’s termination of business ties with the entity. This adjustment opens the door for sellers to solicit customers they had not previously interacted with. Continue reading »

Employee or Independent Contractor Classification under the Fair Labor Standards Act Effective March 11, 2024

The U.S. Department of Labor (DOL) has modified the Wage and Hour Division Regulations to replace its 2021 analysis for determining whether a worker is an employee or independent contractor (Final Rule). The previous test gave greater weight to control and opportunities for profit and loss.

Effective March 11, 2024, under the Final Rule the employee or independent contractor classification determination will focus on the economic realities of the worker’s relationship and whether the worker is either economically dependent on the potential employer for work or is in business for himself. In short, is the worker dependent upon the business to which it renders services for work?

Economic dependence does not focus on the amount of income the worker earns, but rather whether the worker has other sources of income from other customers. To determine economic dependence, the DOL assesses seven factors and conducts a totality-of-the-circumstances analysis. No one factor carries more weight. The DOL looks at the working relationship, the workplace, and the particular industry.

Under the Final Rule, Section 795.105, DOL, uses the following tools and/or factors in its determination: Continue reading »

What to Do If You Might Have Been Ineligible for the Employee Retention Tax Credit Claim

The COVID-19 Pandemic was cause for many new programs to be created by the U.S. government to keep businesses afloat and employees retained in unprecedented times. One of these programs was the Employee Retention Tax Credit (“ERC”) which incentivized employers to retain employees while business was down. The program was available regardless of the size of the employer and included tax-exempt organizations.

To be eligible for the ERC, employers had to (1) be either fully or partially suspended by government order due to COVID during the calendar quarter or (2) have gross receipts below 50% of the comparable quarter in 2019.

The IRS began sending out letters in December 2023 to more than 20,000 taxpayers who received disallowed ERC claims. Letter 105 C, Claim Disallowed is being sent to a first group of taxpayers because the entities either (1) did not exist during the eligibility period (March 13, 2020, through December 31, 2021), or (2) did not have paid employees during the ERC’s applicable time period (ERC is a credit against qualified wages).

Letter 105 is being sent out to taxpayers prior to payment in an effort by the IRS to help ineligible taxpayers avoid audits, repayments, and penalties. Many employers were encouraged to file ERC claims by “promoters” who received monetary commissions based on approval. Issuance of a disallowance letter prevents promoters from receiving funds to which they are not entitled. Continue reading »

Planning for the Incapacity or Death of a Business Owner

As a business owner, you are used to making plans. You have had to make plans since day one – plans to get your business off the ground, plans to increase inventory, plans to take on employees. . . plans, plans, plans. One plan that some business owners don’t think about until it’s too late is what happens to their business at the death of one of the owners.

Not planning is, in fact, a plan. If no documents are in place to transfer ownership at death, the deceased owner’s probate estate is the recipient of the business interests and the business is tied up in probate court. How can you avoid this happening to your business?

First, check your corporate governance documents. Depending on the type of entity you own, this could be your operating agreement, shareholder agreement, bylaws, or a buy-sell agreement. These documents could outline any restrictions on the transfer of ownership interests. Some of the more common transfer restrictions are to other members or shareholders, revocable trusts, or family members.

Typically, two of the simpler ways to transfer ownership interest in an entity is to assign the interest during the owner’s life to a revocable trust or, alternatively, assign the interest at the death of the owner to the owner’s trust. The terms of the trust can then control where the ownership goes, how it gets to the desired beneficiaries, and who is in charge. Make sure to update operating agreements or bylaws to reflect those changes any time an assignment of ownership occurs. Assignments of ownership interests at death can also be made to other individuals provided the terms of the entity’s operating agreement or bylaws allow for this transfer. Continue reading »

Your Business and the ADA: Ensuring Accessibility and Inclusion

Part 2 of 2-Part Series on Accessibility and Accommodation

It is important for small businesses to be aware of and comply with the requirements of the Americans with Disabilities Act (ADA). The ADA has two sections that can potentially impact small businesses: Title I and Title III.

Title I of the ADA applies to businesses with 15 or more employees (or 6 or more employees under the Missouri Human Rights Act) and requires employers to provide reasonable accommodations for employees with disabilities. This means making modifications or adjustments to the work environment that enable employees to perform their job duties which could include providing assistive devices, modifying work schedules, or allowing telecommuting.

Title III applies to all businesses, regardless of their size, and requires them to make their physical premises accessible to individuals with disabilities. A key aspect is the removal of architectural barriers that may hinder accessibility and ensuring that physical structures are designed and constructed in a way that accommodates individuals with disabilities. Elements such as entrances, parking spaces, ramps, doorways, hallways, and restrooms must be accessible to people with mobility impairments.

When constructing a new building or making alterations or renovations to an existing building, businesses are generally required to comply with the ADA Standards for Accessible Design adopted by the Department of Justice in 2010. However, even if a business is not engaged in construction or renovation, they still have an obligation to make alterations to their premises to provide access if it is “reasonably achievable.” The term “reasonably achievable” has not been precisely defined, but courts consider factors such as the nature and cost of barrier removal, the business’ financial resources, technical difficulties, the number of employees and visitors, safety requirements, and the impact on business operations. Continue reading »

Clicking Towards Disaster: The Cost of ADA Non-Compliant Websites

Authored by David R. Bohm with assistance from Sarah L. Ayers, contributor

Part 1 of 2-Part Series on Accessibility and Accommodation (Updated July 2023)

Business websites are an invaluable tool for businesses to reach and grow their customer base. Entire businesses now operate completely online. Interactive websites that conduct transactions with consumers must be accessible by anyone, including those with hearing or vision disabilities. Non-compliant websites violate Title III of the Americans with Disabilities Act (ADA), which prohibits discrimination in public accommodations. A business could be found liable if its website is not accessible.

To be ADA compliant, the website should comply with the Web Content Accessibility Guidelines (WCAG). WCAG addresses accessibility issues such as contrasts, subtitles, and compatibility with screen reader equipment. This area of law is still developing. Federal courts are split as to whether Title III applies to businesses with no physical location. The Justice Department has not developed exact criteria for accessibility but has released various settlement agreements giving business owners some insights into ADA requirements.

When Rite Aid’s vaccine appointment portal was found to be inaccessible to individuals with disabilities, the company settled with the Justice Department. The issues were: (1) images, buttons, links, headings, and form fields that were either unlabeled or inaccurate, (2) pop-up windows and error messages that were not reported to screen readers, (3) tables that were missing information and proper mark-ups, (4) screen contrasts, and (5) navigation of the screen without a mouse. According to the settlement agreement, compliance is determined by “…whether individuals with disabilities have full and equal enjoyment of the goods, services, facilities, privileges, advantages, and accommodations offered.” Rite Aid agreed to continuously use an accessibility testing tool, address any barriers found within 15 days, provide annual training to employees on how to make its website accessible, and retain an outside website accessibility consultant. Continue reading »

Why Your Business Needs Trademarks: Protecting Your Intellectual Property

Authored by Ruth Binger with assistance from Sarah L. Ayers, contributor

Trademarks are a vital aspect of intellectual property, offering unique proprietary rights with several advantages. Unlike other forms of property, a brand or trademark can remain valuable indefinitely with proper care. In fact, trademarks tend to increase in value with use. They can be sold or licensed, making them reasonably liquid assets. Additionally, trademarks serve as powerful marketing shortcuts, influencing consumer purchasing decisions for a company’s goods or services.

However, there are misconceptions surrounding the protection trademarks provide. Incorporating, qualifying to do business, or reserving the business name with various Secretary of State offices provides limited brand name protection. The right to exclude others from using a similar name on goods and services is not automatically granted. Conduct a thorough trademark search of any new corporation or LLC name used to identify a product or service to determine the availability of a mark for your specific purposes and ensure the name does not infringe on another entity’s trademark.

Trademark registration is not mandatory to establish a protectable and exclusive right to a mark. Registered trademark remedies are injunctions and damages, but often the only remedy for an unregistered mark is an injunction. Under common law, trademark rights can be obtained within a specific geographic area of use. State trademark registration does not offer protection beyond these rights. Continue reading »

NLRB Decision Places Limits on Non-Disparagement Provisions in Severance Agreements

Authored by Katherine M. Flett with assistance from Kristina M. Stevenson, contributor

Non-disparagement clauses have historically been a common element of severance agreements and aim to protect an employer’s name from negative commentary by a former employee to others. The severance agreement is a contract that outlines the compensation and benefits an employee will receive in exchange for the release of any and all employee claims against the employer arising out of the employment relationship.

Confidentiality clauses limiting an employee’s right to disclose the terms of a severance agreement have also been a common element of severance agreements.

A recent National Labor Relations Board (NLRB) decision has placed a warning sign on all employment severance agreements. Retroactively, the NLRB’s decision in McLaren Macomb may invalidate non-disparagement and confidentiality clauses in severance agreements both before and after February 21, 2023. Generally, employers are now prohibited from proffering severance agreements that require non-supervisory employees to broadly waive their rights under Section 7 of the National Labor Relations Act (NLRA) in exchange for severance benefits.

Under the NLRA, Section 7 and Section 8(a)(1) work together to protect an employee’s right to unionize, assist labor organizations, and engage in concerted activities. Employers may not interfere with the Section 7 rights of their employees. To assist in understanding how non-disparagement and confidentiality clauses interfere with Section 7 rights, NLRB General Counsel Jennifer Abruzzo issued a memorandum providing guidance for the applicability of the McLaren Macomb decision.

Five Major Takeaways from the McLaren Macomb Decision Continue reading »

Contracts: The Basics

Understanding contracts is essential for a small business. Contracts are the basic building block of our economy and the legal principles of contract formation and enforcement go back centuries but are still in effect today.

Contracts require a “meeting of the minds” between the contracting parties and are enforceable in our courts. Contracts need to be clear and unambiguous and should be in writing and signed by the parties. In certain cases, oral contracts are enforceable but without a writing the terms are very hard to prove. For this reason, business contracts should always be in writing. The basic principle of contract interpretation by the courts is to determine what is the intention of the parties as determined by the four corners of the written document. Deals may be sealed with a handshake but fade away without a written document.

Contracts also require consideration to be enforceable. Consideration means that the parties exchange mutual promises or that one party agrees to provide a benefit to the other party or agrees to accept a detriment in consideration for the contract. A promise to make a gift is not enforceable because the receiving party has made no promise, payment or other consideration to the gifting party.

Under the Uniform Electronic Transactions Act (UETA), contracts can be signed electronically by using systems such as DocuSign as long as the parties intend to sign and do business electronically and keep a record that can be stored and reproduced as a copy. All states have adopted the UETA, including Missouri (codified at Section 432.200 RS MO 2003). Electronic contracts are just as enforceable as traditional signed contracts. Thus, it is important to note that the same basic principles of contract formation, interpretation and rules of enforcement apply to contracts in electronic or digital form. Continue reading »