May 2024 - MPL Law Firm

I Just Want To Run My Business!

Last month, the Department of Labor issued its final rule related to exempt versus non-exempt employees. As a refresher or for those that don’t know the difference, exempt employees essentially include positions that perform executive, administrative, professional and/or sales roles for an organization (i.e., they are not subject to minimum wage or overtime).

The big threshold for determining the difference was the salary test (FYI, there are actually three tests, but salary is the “hot button topic” for most employers). Currently, if an employee is paid $684 or more per week ($35,568/year), they would likely be considered exempt. If they are paid less, they are non-exempt (unless they are in outside sales or some type of professional occupation like doctors, lawyers and teachers). Moving forward there are new salary thresholds that will apply (see below):

Standard Salary Threshold:

July 1, 2024-December 31, 2024 – $884/week ($43,888 per year)
January 1, 2025 – June 30, 2027 – $1,128/week ($58,656 per year)
July 1, 2027 and every three years thereafter – Automatically updated based on the then current data

Highly Compensated Employee Threshold:

July 1, 2024-December 31, 2024 – $132,964 per year
January 1, 2025 – June 30, 2027 – $151,164 per year
July 1, 2027 and every three years thereafter – Automatically updated based on the then current data

Like other recently enacted business regulations, this rule will likely trigger legal challenges. However, until one is successful, you may want to review your employee’s current classification. Ignoring these new rules could put your organization at risk for overtime claims and related penalties and fines. Your professional business advisors can help you through this process. Ah yes, the joys of business ownership and leadership!

A few things that may be of interest:

Bill Introduced to Repeal Small Business Ownership Registry (nfib.com)
Final FTC Non-Compete Rule a Compliance Nightmare (nfib.com)
Lenders that Pay Lip Service to Non-Sponsored Deals (youtube.com) (thanks to David Barnitt from Attract Capital for sharing)

As always, please don’t hesitate to email myself (jsanders@mpl-law.com), Andy Miller (amiller@mpl-law.com), Christian Miller (cmiller@mpl-law.com), Erik Spurlin (espurlin@mpl-law.com), Brad Leber (bleber@mpl-law.com) or anyone in our office with questions or comments.  

Please see all of our prior updates at this link or if you would like to be added to our email list, please click here.

Don’t Worry, You Will Get Your Goldfish!

I was catching up on news this week and saw the Third Circuit ruled Pepperidge Farms Drivers (yes, they deliver the Goldfish crackers) in Pennsylvania were considered contractors, not employees. The background of the case dealt with three drivers, who were all classified as independent contractors. They brought a class action claiming they were employees and that Pepperidge Farms violated Pennsylvania’s Wage Payment and Collection Laws. Based on a ten (yes, 10) factor test, the Court ruled that they were contractors. Talk about confusing if you are an employer!

As a business owner, I am worried about how to grow my business in the most profitable manner. With an already tight, albeit softening, labor market, employers look for ways to meet their staffing needs, while trying to control their expenses. It is important to understand that onboarding 1099 contractors, hourly staff, salary staff and so on each come with specific rules and regulations. If you are over 50 employees, you have a different set of rules from those with less than 50 employees and each State has its own nuances. To shed some light on the situation, below are some helpful articles:

If you need help, I’d recommend reaching out to an HR professional or a Business/Labor Attorney. Unfortunately, classifying a staff member the wrong way can have some serious consequences if an issue arises.

A few things that may be of interest:

As always, please don’t hesitate to email myself (jsanders@mpl-law.com), Andy Miller (amiller@mpl-law.com), Christian Miller (cmiller@mpl-law.com), Erik Spurlin (espurlin@mpl-law.com), Brad Leber (bleber@mpl-law.com) or anyone in our office with questions or comments.  
Please see all of our prior updates at this link or if you would like to be added to our email list, please click here.

Freedom! – FTC Votes To Ban Non-Competes

As promised, this week’s MPL GCC will provide an overview of the FTC’s decision to ban non-competes. I am not certain if this decision was much of a surprise. For employers, it was like the steamroller scene in Austin Powers. For employees and contractors (current and former), maybe they let out a collective Braveheart inspired scream of “Freedom”. Regardless, it will be finalized and enforceable 120 days after publication (FYI, the publication date is May 7th, 2024…which means September 4, 2024 is the effective date) in the Federal Register.

We thought it might be easier to provide some of the key components, unless you wanted to read 570 pages:

An employer cannot impose a non-compete clause on a “worker” (This term is used because it includes employees and independent contractors).
Employer’s can maintain existing non-compete agreements with “senior executives” (i.e., those making over $151,164/year or who have a policy making position for the organization). However, new non-competes for “Senior Executives” are barred.
Non-competes related to a business sale are permitted.
Non-compete causes of action (i.e. lawsuits) for issues that arose prior to this rule are still allowed.
If a State law currently permits non-competes, this rule supersedes it.
An employer must provide notice to workers who are subject to a prohibited non-compete clause that it is no longer enforceable (FYI, it must be an individualized communication; hand-delivery – by mail at the worker’s last known street address, by email, or by text message).

As you may expect, the lawsuits have been initiated. Also, I suspect the pending Supreme Court decision related to the Chevron case may come into play here. It will be interesting to watch.

Please reach out to your professional business advisors (namely business legal counsel) with any questions.

A few things that may be of interest:

Please see all of our prior updates at this link or if you would like to be added to our email list, please click here.

Solar Fight – Hommrich v. PUC

This saga begins in 2004 when the Pennsylvania Legislature enacted the Alternative Energy Portfolio Standards Act, 73 P.S.§§ 1648.1-1648.8. [the “AEPS”]. To provide incentive for nonutility owners called “customer-generators” to build alternative energy generating systems, the AEPS mandated that an electric distribution company [‘EDC”] buy back excess electricity generated by an alternative energy generating system called “net metering.” The AEPS authorized the Pennsylvania Public Utility Commission [“PUC”] to enact regulations to impose “technical and net metering interconnection rules.” The PUC promulgated regulations in 2006 and amendments in 2016 that dealt specifically with net metering. That is when the trouble began.

David M. Hommrich was the president of a solar power development company located in Pittsburgh. Hommrich wanted to develop alternative energy generating systems for his own and his family’s use. The systems would have a nameplate capacity of 3,000 kilowatts. The projects were separate and apart from his solar energy company.

In 2017, Hommrich filed a petition against the PUC challenging its 2016 regulations on the grounds that the regulations exceeded the authority given to the PUC under the AEPS. Hommrich v. PUC, 2017 WL 3203437 (2017)[“Hommrich I”]. Hommrich raised three issues: (1) the challenged PUC regulations are unenforceable under the AEPS; (2) the regulations cannot be applied retroactively to projects that had received approval prior to promulgation of the regulations; and (3) his proposed solar projects qualify for customer-generated status and are eligible for net metering. The PUC filed numerous objections to the petition. While the Commonwealth Court found that Hommrich could challenge the PUC regulations as unenforceable under the AEPS, Hommrich did not exhaust all of his administrative remedies by first filing an interconnection application with an EDC. [Sometime after Hommrich I was decided, Hommrich purchased a renewable energy project that had already received PUC approval for net metering.]

Hommrich and the PUC then filed motions for summary relief on the enforceability of PUC’s regulations, and the Commonwealth issued a decision in 2020. Hommrich v. PUC, 231 A.3d 1027 (Pa. Cmwlth. 5/12/2020), affirmed at 664 Pa. 567 (2/17/2021). [“Hommrich II”].

In Hommrich II, the Commonwealth Court dealt with these issues:

Definition of “customer-generator.” Under the AEPS definition, a “customer-generator” may utilize net metering so long as “any portion” of the electricity generated by the customer-generator is used to offset part of the customer-generator’s electrical requirement. The PUC changed the definition to add that a customer-generator must be a “retail electric customer,” i.e. a customer-generator must be an entity that has a need for electricity from an EDC independent from its need for electricity needed to power its generation facilities. Hommrich argued that this change in the definition disqualified him from being a customer-generator and using net metering. The Commonwealth Court agreed holding that the PUC change was overreach and contradictory to the AEPS.

The PUC regulation regarding “virtual meter aggregation” was unenforceable because it required a customer-generator to have a “measurable electric load independent” of the customer-generated system, and must have a purpose other than to support the customer-generator’s alternative energy system. The Commonwealth Court held that the independent load requirement is not found in the AEPS.

The Commonwealth Court upheld the PUC’s regulations concerning the regulatory application process to obtain customer-generator status. Hommrich argued that the AEPS gave exclusive authority to DEP to determine compliance with the AEPS. The Commonwealth Court found that the AEPS only gave DEP authority over environmental standards. The rules promulgated by the PUC to obtain customer-generated status were within the power granted to it under the AEPS and were reasonable.

The Commonwealth Court upheld the PUC’s regulations concerning what “large “customer-generators” such as Hommrich (i.e. capacity between three to five megawatts) must do to operate in parallel with the grid during grid emergencies. Hommrich argued that the AEPS only requires that the customer-generator’s system be “available.” The Commonwealth Court held that the AEPS requires more than just availability – the system must be physically capable of operating in parallel during a grid emergency. The PUC regulations reasonably provide technical guidance for what is required to be able to operate in parallel during a grid emergency.

The saga continues with Hommrich v. PUC, 463 M.D. 2022 (Pa. Cmwlth. 3/1/2024) [“Hommrich III”]. Hommrich filed an amended petition to challenge more regulations promulgated by the PUC concerning: (1) alternative energy cost-recovery; (2) Level 2 interconnection review; and (3) Level 3 interconnection review. Hommrich also challenged any PUC regulation that allows an EDC to charge a customer-generator for distribution system improvement costs associated with the interconnection of a customer-generator’s renewable energy system. The PUC regulations permit an EDC to recover its connection costs only from the customer-generator, and not the ratepayers of the default electric service utility.

The Commonwealth Court referred back to Hommrich I to hold that Hommrich does adequately alleged direct harm since he does not qualify for net metering under the PUC regulations, which interferes with his ability to obtain financing. Second, the Commonwealth Court found that Hommrich has standing to pursue his claims since under the PUC regulations, Hommrich would incur costs in excess of one million dollars for distribution system improvements. Third, EDC’s do not have to be made parties to the action, since EDCs do not have a right or interest regarding the validity of regulations or who qualifies as a customer-generator. An EDC only applies the law in effect when ruling on an application for interconnection. Finally, the Commonwealth Court held that the exhaustion of an administrative remedy objection no longer applied since Hommrich had purchased a renewable energy project that already received PUC approval. The PUC did not point to any authority that requires Hommrich to seek another round of approval for a project simply because of a change in ownership. The Commonwealth Court noted that an administrative agency, like the PUC, cannot rule on the legality of its own regulations or the power to issue them.

Stay tuned for Hommrich IV.