Key Federal and State Labor Law Updates for 2021

Employment law evolves constantly at the federal, state, and local levels. Staying current is essential for compliance. Here are the most significant labor law changes that took effect or were enacted during 2021 and their practical implications for employers.

Federal Developments

American Rescue Plan Act (ARPA)

Signed into law on March 11, 2021, ARPA included several employer-relevant provisions:

• COBRA subsidy: From April 1 through September 30, 2021, eligible individuals who lost group health coverage due to an involuntary termination or reduction in hours received a 100% COBRA premium subsidy. Employers were reimbursed through a tax credit against Medicare taxes.
• FFCRA leave credits extended: While FFCRA mandatory paid leave expired December 31, 2020, ARPA extended the voluntary tax credits through September 30, 2021. The qualifying reasons for leave were expanded to include vaccination and recovery from vaccination side effects.
• Employee Retention Credit expansion: The ERC was extended through December 31, 2021 (later terminated retroactively as of September 30 for most employers by the Infrastructure Investment and Jobs Act). The credit rate increased to 70% of qualified wages up to $10,000 per employee per quarter.

OSHA COVID-19 Enforcement

OSHA issued its first industry-specific COVID-19 standard, the Healthcare Emergency Temporary Standard (ETS), in June 2021, establishing detailed requirements for healthcare employers. OSHA also proposed a broader Vaccination and Testing ETS for employers with 100 or more employees, which was ultimately stayed by the Supreme Court in January 2022.

Independent Contractor Classification

The Department of Labor withdrew a Trump-era rule that would have made it easier to classify workers as independent contractors under the FLSA. The withdrawal signaled a return to more worker-friendly enforcement of classification standards. Employers relying on independent contractors should review their arrangements against the economic reality test factors.

State Minimum Wage Increases

Numerous states increased their minimum wages, many as part of previously enacted phase-in schedules moving toward $15 per hour:

• Multiple states including California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, and Virginia implemented scheduled increases
• Several cities and counties enacted local minimum wages higher than their state rates
• Employers operating in multiple jurisdictions must comply with the highest applicable rate for each location

Action step: Review minimum wage rates in every jurisdiction where you have employees at least annually and adjust pay as needed.

Paid Leave Expansions

Several states expanded or enacted new paid leave requirements:

• Colorado: The Healthy Families and Workplaces Act took effect January 1, 2021, requiring employers with 16 or more employees to provide up to 48 hours of paid sick leave per year (all employers covered starting January 1, 2022)
• New Mexico: The Healthy Workplaces Act, effective July 1, 2022, requires all employers to provide one hour of paid sick leave for every 30 hours worked
• New York: Expanded paid family leave benefits to 12 weeks at 67% of the statewide average weekly wage
• Multiple states continued to implement or expand paid family and medical leave insurance programs, with employer contribution requirements

Non-Compete and Restrictive Covenant Changes

The trend toward limiting non-compete agreements continued:

• The District of Columbia enacted one of the broadest non-compete bans in the nation, prohibiting non-compete agreements for nearly all employees
• Several states increased the minimum salary thresholds below which non-compete agreements are unenforceable
• Oregon limited non-compete agreements to 12 months and restricted them to employees earning above a specified income threshold

Action step: Review your non-compete and restrictive covenant agreements against current law in each state where you use them.

Anti-Discrimination and Harassment

• Expanded protected categories: Several states added or clarified protected categories including hairstyle discrimination (CROWN Act adoptions), gender identity, and off-duty cannabis use
• Salary history bans: Additional jurisdictions enacted laws prohibiting employers from asking about or relying on candidates' salary history in making compensation decisions
• Mandatory training: Several states expanded or enacted mandatory anti-harassment training requirements with specific content and frequency mandates

Practical Compliance Steps

1. Conduct a multi-state audit. If you employ workers in multiple states, review each state's current requirements at least annually.
2. Update your handbook. Revise policies to reflect new leave requirements, classification standards, and anti-discrimination protections.
3. Train managers. Ensure supervisors understand new leave entitlements, accommodation obligations, and classification rules.
4. Review independent contractor relationships. With increased scrutiny, audit your contractor classifications against applicable tests.
5. Update job postings. Remove salary history questions and comply with any new pay transparency requirements.
6. Consult legal counsel. Employment law changes are frequent and jurisdiction-specific. Regular consultation with an employment attorney is a worthwhile compliance investment.

Staying ahead of legal changes is more efficient than reacting to complaints or enforcement actions. Build a compliance calendar that flags effective dates for new laws in your operating jurisdictions.