by Kris Simmons | Business Resource, HR News, Human Resources, Legal Compliance, Payroll, Servant HR
NOTE: The requirements and timeline for the ban on Non-Competes by the FTC may be affected by pending litigation. Until we learn otherwise, the current effective date is September 4, 2024.
April was a busy month for both the Federal Trade Commission and the Department of Labor. The FTC rolled out a long-anticipated ban on non-competes between employers and employees. The DOL also had a long-awaited rule published increasing the salary threshold for “white-collar” exempt employees. Both changes may affect you and your team so here are the highlights and implications:
FTC’s Intent to Ban Non-competes
The FTC argues that non-compete agreements have been overused by employers preventing employees from being able to leave a position to work for a competitor or start a competing business. Originally, non-compete agreements and clause language were used to deter executive-level employees from leaving an organization to work for a direct competitor or start a business that would be considered a direct competitor. Over time, companies expanded their non-compete agreements to the rest of the employee population with fewer exceptions than before.
The ban will affect all businesses that use non-compete language in their employment agreements with employees. Now that the Final Rule has been published in the Federal Register on May 5, 2024, companies will have 120 days (until September 4, 2024) to notify employees that the non-competes they once agreed to are now unenforceable. Some Senior Executives may still have non-compete agreements that will remain enforceable, but that is only the case if they made no less than $151,164 in the preceding year and have policymaking powers within their role at the company (this if fewer than 0.75% of all workers). Going forward no new non-competes are allowed to be written and enforced between employers and employees, even if the employees are Senior Executives as defined by the Final Rule.
DOL’s Phasing Approach to Increasing White Collar Exempt Salary Thresholds
The DOL announced that income thresholds for the 5 recognized “white collar” exempt classifications will be increased in two phases. On July 1, 2024, the minimum salary will increase from $35,568 annually to $43,888 annually. On January 1, 2025, the minimum salary threshold will increase a second time to $58,656 annually.
What is next for employers is to take a closer look at the pay practices to ensure compliance with these changes. Generally speaking, to qualify for these exemptions employees must (1) be paid on a salary basis, (2) be paid at least the designated minimum weekly salary, and (3) perform certain duties.
There are a few ways employers can adjust to remain compliant without simply increasing wages.
For starters, it is a much easier shift to make when reclassifying an exempt employee as a non-exempt employee. This would mean the only “threshold” the employer would need to meet would be paying the individual at least minimum wage. That said, should the individual work any hours over 40 within a given work week, they should be paid a premium of 1.5 times their wage per hour for those hours in excess of 40. Lastly, when making that adjustment, employers can decide to pay that person a set salary assuming for at least 40 hours worked in a given workweek or they can require the employee to begin tracking their time to only be paid for hours worked.
Other facts to note per the DOL’s announcement pertaining to the salary threshold increase:
- Starting on July 1, 2027, the salary threshold will be automatically updated every three years.
- The Highly Compensated Employee (HCE) exemption annual salary will increase from $107,432 to $132,964 on July 1, 2024, and then to $151,164 on January 1, 2025.
- Employees exempt from overtime as they serve as bona fide teachers or outside sales representatives remain unaffected by these increased salary levels.
Servant HR is here to serve you and your team!
Leading up to these announcements, Servant HR has already begun the process of evaluating who will be affected by both of these major changes. For clients who have non-compete language involved at all in the employment relationship, Servant HR is reviewing the agreements that have been made up to now and will provide affected clients with recommendations on how to move forward that is compliant with the requirements set forth by the FTC. As the FTC’s Final Rule was published on May 7, 2024, we have 120 days, or up until September 4, 2024, to set a new pathway forward and execute on notifying affected employees, pending further litigation as mentioned above.
For clients who have employees currently classified as exempt, Servant HR will inform clients of the affected employees and chart potential paths forward. This will also be an excellent opportunity to revisit the FLSA’s duties and responsibilities tests to make sure that employees have been properly classified as exempt aside from the salary threshold increases.
by Mike Yoder | HR Tips, Human Resources, Legal Compliance
For employers considering a return to on-site operations, a new challenge awaits – navigating the uncharted waters of employee vaccination. Should employers mandate vaccinations, strongly suggest them, or remain neutral? Should vaccinations be provided by the employer or contracted out? What are the liability issues facing employers in both situations?
Every business will have a different regulatory puzzle to piece together, so we are listing a few of the biggest factors you’ll want to consider in the creation of a vaccination policy.
Laws
If considering a mandatory vaccine, there are four main major areas of law affected.
The ADA permits employers to require vaccinations under certain circumstances. However, mandatory vaccines implicate two portions of the ADA:
- Medical Examinations and Disability-Related Inquiries: The ADA restricts an employer’s ability to conduct “medical examinations” and make inquiries into an employee’s disabilities. The pre-screening questions asked in administering the vaccine qualify as a medical examination or disability-related inquiry.
- Reasonable Accommodations: The EEOC has addressed vaccines directly and identified a remote-work policy, wearing masks, gloves, social distancing etc. as reasonable accommodations. If an employer can eliminate or reduce the risk of harm imposed by COVID-19 by implementing these things, then it may not require vaccines. But if adopting these accommodations would impose an “undue hardship” on the business, then the employer does not have to provide the accommodation. Employers may also not require the vaccine if an employee has a medical reason for not being able to take the vaccine.
Title VII prevents an employer from discriminating against employees “on the basis of his race, color, religion, sex, or national origin.” Under this statute, an employee may refuse to take the vaccine due to a sincerely held religious belief or practice.
An employer must provide a reasonable accommodation (see examples above) to any employee who refuses taking the vaccine for reasons protected by Title VII (religious reasons), unless the reasonable accommodations impose an undue hardship. What qualifies as an “undue hardship” must be determined on a case-by-case basis.
OSHA permits employers to require mandatory vaccines and has been used in the past for vaccination in the H1N1 Flu context. However, OSHA cautions employers to know the benefits and to respect refusals for medical reasons. There is no indication that an employer would be in violation of OSHA’s safety requirements in the event it did not require the vaccine.
A tort is “an act or omission that gives rise to injury or harm to another and amounts to a civil wrong for which courts impose liability.”
Many states recognize the tort of negligent transmission of an infectious disease. Under this form of negligence, an employer may be liable for negligently causing the spread of COVID-19. However, an employer or employees would need to have a confirmed positive and still risk transmission before the employer may be liable. It is unlikely that not mandating a vaccine would create liability, however – general negligence still applies and deciding to not require a vaccine may still be a factor.
Other Liabilities
Those are the main four legal areas to consider, but there are other liabilities to consider as well. These include questions such as:
- Are employees who suffer adverse effects from vaccinations covered by worker’s comp?
- Is the vaccination program covered by liability immunity under the Public Readiness and Emergency Preparedness Act?
- Are liability waivers appropriate and enforceable under your state’s law?
- Is your vaccination program subject to any bargaining requirements under union collective bargaining agreements?
- If there are not enough vaccinations available for all employees, how will you prioritize vaccinations without implicating age, disability, and genetic information?
It is likely that these potential liability issues, in conjunction with the laws mentioned above, may create more of a hassle for employers than it’s worth. Either way, these are crucial considerations in the creation of a vaccine policy.
CDC Guidelines
In addition to legal guidelines, there are also guidelines by the Centers for Disease Control Prevention (CDC) employers must stay aware of. According to CNBC, the CDC is now recommending that people age 65 or older should begin receiving the vaccine.
The status of your employees will also factor into a vaccination plan, as essential workers are a large group, broadly defined as “first responders, educators, child care providers, food and agriculture workers, correctional facility staff, postal workers, public transportation workers, and manufacturing and grocery workers.” This article by the National Conference of State Legislatures can help more clearly determine if your employees qualify as essential.
Your Capacity
Lastly, it’s important to consider what is feasible for you in terms of capacity. It is a huge task for a non-health care employer to take on the responsibility of facilitating their own vaccinations. Specifically employers face the challenge of refrigeration—more for the Pfizer than the Moderna vaccine—and the need for a second dose.
However, contracting with reputable third parties can be a good solution for employers. In this case, it is well-advised to mandate vaccines by an administered pharmacy or health provider that is not acting as an agent of the employer.
In Summary
According to the law, an employer may require its employees to submit to mandatory COVID-19 vaccination. To do so, the employer will need to show there are no other reasonable accommodations available that do not impose an undue hardship. Additionally, the employer will need to respect employees who refuse to take the vaccine for disability or Title-VII-related purposes, offering reasonable accommodations to these employees. Employers should also consider other worker’s comp questions, waiver liabilities, and CDC Guidelines in the creation of a vaccine plan. And finally, if considering a mandatory policy, consider out-sourcing as a way to ensure safety, compliance, and a manageable workload.
The considerations surrounding workplace vaccination programs are complex. If you’re looking for a personal approach to handling policy and employee relations, contact us! As a fully integrated HR team working for your protection, these kinds of questions are our specialty.
(*For even more specific policy questions, we recommend this article – outlining detailed questions for vaccine policy and practice.)
by Mike Yoder | Business Resource, Business Strategy, Culture, HR News, Human Resources, Legal Compliance
Coronavirus is continuing to spread globally, with 82,000 reports worldwide and 60 confirmed cases now in the United States as of this blog. Along with the global advance comes increased anxiety and confusion over how to prepare.
You may have seen that large corporations are canceling conferences, limiting travel and stocking supplies. But is this too extreme—or not extreme enough? What does this mean for smaller companies? And how can workplaces prepare?
This blog is simply intended to provide information to promote common-sense preparedness, not panic.
The Centers for Disease Control and Prevention (CDC) has published guidance that may help prevent workplace exposures to acute respiratory illness and the potential effects of more widespread outbreaks of coronavirus. Their guidance is two-fold: How employers can prevent now, and prepare for later.
What employers can do now
As all workplaces are encouraged to take safety measures, it’s important that employers communicate preparedness to employees. Employers should also be careful not to make determinations of risk based on race or country of origin. The following recommendations should be used to prepare and prevent the spread of the virus, but any confirmed illness should remain confidential.
- Emphasize hygiene etiquette
Post information around the office that encourages staying home when sick and explains cough and sneeze etiquette and handwashing in areas where they are likely to be seen. Provide tissues and alcohol-based hand sanitizer around the workplace to encourage prevention throughout the day. This is nothing new. This counsel is actually what should normally be followed to reduce the spreading of any sickness in the workplace.
Employees should be encouraged to notify their supervisor and stay home if they are feeling sick. Ensure that your company’s sick leave policies are flexible and in line with public health guidance, and communicate these policies consistently so that employees are aware. Some may need to stay home to care for a sick family member or may not be able to obtain a doctor’s note within the usual timeframe. Be flexible and make sure your employees know their health is a priority.
- Advise caution for traveling employees
Direct employees to the CDC’s Traveler’s Health Notices for the latest guidance and recommendations for each country to which employees may travel. Advise employees to check themselves for symptoms of respiratory illness before starting travel and ensure that employees who become sick while traveling can notify a supervisor and contact a healthcare provider. If outside the U.S., sick employees should follow your company’s policy for obtaining medical care or contact a healthcare provider or overseas medical assistance company to assist them with finding an appropriate healthcare provider in that country.
In the rare event your employee is confirmed to have coronavirus, employers should inform fellow employees of their possible exposure, but maintain privacy and confidentiality as required by the Americans with Disabilities Act (ADA) and HIPAA. Employees exposed to a co-worker can conduct a risk assessment per guidance by the CDC. This is not an easy balance – so you may want to obtain some counsel in the event of a confirmed case in your workplace.
Creating an outbreak response plan
The severity of the illness or how many people will fall ill is still unknown, but the CDC has said the current risk in the U.S. from the virus is low. However, employers are still encouraged to develop plans in case the virus becomes more widespread. This could potentially result in containment efforts that might include closing schools, limiting public transportation or canceling large gatherings. The following bullets recommend action items for employers in the event that coronavirus becomes even more widespread.
- Review policies for compliance
Review your company’s human resources policies to ensure practices are consistent with public health recommendations and existing state and federal workplace laws. For more information on employer responsibilities, visit the websites of the Department of Labor and the Equal Employment Opportunity Commission.
Depending on your business, employees may be able to telecommute or flex their normal working hours to increase physical distance between other employees. This may be necessary in the event of an outbreak, as state and local health authorities could recommend social distancing strategies. Employers should ensure that technology and policies are in place to support employees who can work from home.
Identify now the essential functions, roles and elements within your business to maintain regular operations. Develop a plan now for how your business will operate (or not operate) if employees are unable to come to work or if essential functions are inhibited.
Information should be communicated to employees and business partners about your company’s disease outbreak plan. Establish a process now for this communication and set up triggers that will activate the response plan. Employers should anticipate employee fear, rumors and misinformation, so be careful that communication addresses these anxieties.
- Stay informed in the community
According to the CDC, local conditions will influence the decisions that public health officials make regarding community-level strategies. Employers should take the time now to learn the plans in place for each community in which the business is located.
Looking ahead
Taking preventative and proactive measures now will prepare both employers and employees in the event that coronavirus does become more widespread. Rather than scrambling last minute, an overly cautious approach will make employees feel confident, informed and safe.
As your PEO, we’re here to support you. This blog is intended to promote preparedness, NOT panic. Have further questions or concerns? Give us a call today and we’ll be happy to take steps with you toward protection and compliance.
See the following links to more information about coronavirus:
by Mike Yoder | Business Resource, Business Strategy, HR News, HR Tips, Human Resources, Legal Compliance, Outsourcing, Payroll, Servant HR
Servant HR provides fully integrated HR services—giving employers the freedom to focus on the success and growth of their businesses. Operating as a PEO enables us to take on the administrative load that comes with paying employees, offering benefits, managing risk and more.
But what exactly is a PEO again? And how is it different from the other HR service options out there? Good questions! Let’s get a lay of the land.
Defining terms
PEO stands for Professional Employer Organization. The biggest distinction of a PEO is that it offers its services through a “co-employment” relationship. Co-employment means that the PEO allocates responsibilities between the employer and the PEO, as expressed in a service agreement.
While the employer maintains their relationship with worksite employees, PEO’s provide many back-end services in a bundled offering. These often include payroll, health and welfare benefits, workers’ compensation and risk management services.
Perhaps the biggest misconception about PEO’s is that the client loses control of its workforce through the co-employment model. But this is not the case, as PEO clients retain complete control over day-to-day operations and workforce management. Employers continue to make their own hiring, termination, discipline, scheduling, promotion, safety and culture decisions.
The relationship actually provides the exact opposite, as PEO’s often add to the control and confidence of an employer. Clients have access to higher quality HR offerings, systems and processes, and benefit from PEO expertise in making big decisions.
Other options
You may have heard of an ASO as well, which stands for Administrative Services Organization. The main difference between a PEO and an ASO is the co-employment relationship. An ASO manages only day-to-day administrative operations, but does not process payroll, remit taxes, sponsor benefit programs or offer workers’ compensation coverage under the PEO umbrella. There is no shared employment relationship.
If that’s still not enough acronyms for you, there is an HRO model as well! Human Resources Outsourcing is the process of subcontracting human resources functions to an external supplier. This option has traditionally been only available to larger organizations, but like an ASO, an on-site employer remains the “employer of record” in the arrangement.
So, why a PEO?
Here are three of our favorite reasons to consider:
Compliance
For many small businesses, administering payroll is a huge task in itself. What may seem just like “cutting checks,” actually involves many parts of the business, all affected by payroll functions. PEO clients enjoy easier, more confident compliance in tax payments, and more benefits options. A PEO literally has hundreds of years of human resource experience. Partnering with a PEO provides peace of mind that a full-service team of experts is working solely for your protection.
Benefits
Another perk is there may be access to more affordable health and ancillary insurance. Alongside a PEO, you gain access to a much larger pool of employees when obtaining insurance quotes. PEO’s may receive bulk, discounted pricing so that clients are able to offer employees more comprehensive insurance coverage with better rates.
Cost
For many small business owners, cost is the most compelling reason for signing on with a PEO. Service fees for PEO’s are often significantly less expensive than hiring a full-time, in-house Human Resources professional. The PEO manages all the functions of a full-time employee, and in some cases, for as little as a quarter of the cost.
In addition, many employers struggle under the weight of being both the business owner and the HR department. The inability to balance both effectively can ultimately cause a business to suffer.
Thinking it through
Partnering with a Professional Employer Organization can have a ripple effect across an entire company, offering better health benefit options, employee management and more time for business owners to spend on what they really care about—their business.
Working with a PEO is a big decision for any company. While it may stand to benefit your business in many ways, don’t just take our word for it! Feel free to check out our reviews and explore our website resources. Learn more about our team and exactly what we do.
Still not sure if a PEO is right for you? Give us a call today! We’d love to help answer any of your questions and determine how Servant HR can serve you and your business.
by Mike Yoder | Business Resource, Hiring, HR News, Human Resources, Legal Compliance
Happy New Year, and Happy New Form W-4!
On December 5, the IRS issued the redesigned 2020 Form W-4 (Employee’s Withholding Certificate). The form is long-awaited in the payroll community, as the redesign has been postponed for years due to various concerns and time constraints. However, change can be confusing and the update has been dreaded by many employers and employees alike.
It used to be that new hires filled out their filing status and the number of allowances on the W-4. Using the W-4 personal allowances worksheet, employees calculated a number that told their employers how much money to withhold from their paychecks for federal, state and local taxes.
What’s changed and why
Now things are a bit different. The Tax Cuts and Jobs Act (TCJA) eliminated personal exemptions, which allowed for deductions against a taxpayer’s personal income. These exemptions were tied to allowances, but since exemptions are now gone, the need to determine the number of allowances is gone as well.
Enter the new Form W-4! The form is designed to make tax withholdings more accurate. Those who fill out the 2020 form are less likely to end up with a large tax bill or a big refund when they file tax returns in 2021. This way, wages can be more accurately invested or spent on essential expenses throughout the year. Interestingly, this may actually be the biggest concern for many employees who have used their tax filing as a savings account of sorts in the past.
Not all workers must complete the 2020 Form W-4, as the IRS has designed the withholding tables to work with prior year forms as well. However, all new employees starting in 2020 or employees updating their withholdings in 2020 must use the new Form W-4. The IRS also recommends that employees revisit their W-4 forms annually to account for any life changes, such as getting married or having kids.
A step-by-step guide
So, how should your people actually fill out the form? We’re glad you asked! Listed below are the 5 simple steps for filling out the new W-4:
1.Enter Personal Information
First name, last name, social security number and filing status (single, married, head of household, etc.) are all lumped in this box. This step must be completed by all employees, so if an employee does not fill out the form at all, you are required to calculate their withholding as “Single.” This withholds their taxes at the “Single” rate, resulting in more income tax being withheld.
2. Multiple Jobs or Spouse Works
Employees should complete this step if they currently work more than one job, or if they are married filing jointly and their spouse is working as well. For this step, following option A will give employees the most accuracy (and privacy) of the three, since the new online withholding estimator will use all the relevant entries for the form. Option B provides accuracy as well, but requires manual work so there is more room for error. Option C is the easiest to complete but is the least accurate, as it assumes that both jobs have similar pay.
3. Claim Dependents
Here employees will multiply their number of dependents by specific dollar amounts. When the TCJA was enacted, the law changed so that more people would qualify for the child tax credit. Single taxpayers with an income of $200,000 or less ($400,000 if married filing jointly) are now eligible. If your employees have questions about this section, feel free to direct them to the definitions in IRS Publication 972 – Child Tax Credit if they’re looking to claim the credit.
4. Other Adjustments
This section is optional, but offers a few other things employees may want to consider when calculating their tax withholding. Other income (not from jobs) could include retirement income, dividends, or any additional income that might not be subject to direct withholding. Deductions include things like mortgage interest or charitable contributions. Extra withholding is simply any extra amount of income that the employee would like to withhold per paycheck.
5. Sign and Date
Last of all, your employee must sign the W-4 in order for the form to be valid.
And that’s it! The new W-4 definitely comes with a learning curve, but your confidence with the form will instill confidence in your employees that their taxes will be withheld accurately. More details on each of the steps above (including information on who can claim exemption from withholding) can be found on page 2 of the form.
If you’d like, you can also direct hesitant employees to the IRS Tax Withholding Estimator. Employees can use their most recent pay statements and income tax return to fill in the questions online. This will then calculate an estimate from the IRS of what their tax liability will be, and whether their current withholding is too much or not enough to meet the liability.
Questions, concerns or needing help with onboarding in general? We’re here to help! At Servant HR, we strategically partner with you to manage and optimize all your human resource responsibilities. From employee onboarding to legal counsel, we help lighten your administrative load so you can focus on what matters most. Give us a call today and see how Servant HR can serve your business in 2020!
by Mike Yoder | Business Resource, Culture, HR News, Human Resources, Legal Compliance
Here we go again! As of August 12th, the Department of Labor’s (DOL) proposed overtime rule affecting the base wage of overtime exemptions was sent to the White House for final review.
This high-priority Trump Labor Department rule takes a more business-friendly approach than attempted in the Obama administration—expecting to make about 1 million workers newly eligible for time-and-a-half overtime pay when working more than 40 hours in a week.
Raising the Threshold
According to The Society for Human Resource Management (SHRM) the rule would raise the salary threshold for the Fair Labor Standards Act’s (FLSA’s) white-collar exemptions to $35,308 ($679 a week) per year from $23,660 ($455 a week). The barred Obama-era rule would have raised the threshold to about $47,500, and worker advocates as well as some Democratic lawmakers are still pushing for that level. However, business groups generally support the Trump administration’s proposed increase.
SHRM states that to be exempt from overtime, employees must be paid a salary of at least the threshold amount and also meet certain “duties” tests. These tests define specific regulations for several exemptions, the most common being those related to executive, administrative and professional work. If they are paid less or do not meet the duties test requirements, employees must be paid 1 1/2 times their regular hourly rate for hours worked in excess of 40 in a workweek.
A Rushed Rule
The DOL sent the final draft to the White House Office of Information and Regulatory Affairs only five months after proposing the rule, resulting in more than 116,000 public comments. Urgency from department officials stems from the desire for protection from anticipated legal battles with worker advocates.
According to a report by Bloomberg Law, the administration wants the rule in place before the end of President Donald Trump’s first term in office. Bloomberg also reported new regulations are in the works for calculating overtime pay rates and limiting wage and hour liability for franchisers and businesses that use staffing labor.
What It Means
If finalized, the overtime rule would cover more workers than was previously the case. More than a million currently exempt workers would be reclassified as non-exempt, and pay would increase for those above the new threshold. Unlike prior drafts, the proposal does not call for automatic adjustments to the salary threshold, does not create different salary levels based on the region of the country, and does not make any changes to the duties tests.
The salary threshold was last increased in 2004. The DOL is using the same economic methodology used to reach that standard, which the department officials say should protect the proposal from litigation.
(To get a more comprehensive timeline, click here to read our March 2019 blog and October 2016 blog, or check out SHRM’s Overtime Rule History timeline here.)
While You Wait
Time will tell—likely sooner than later. But in the meantime, employers should begin auditing their exempt workforces to determine how many might qualify under the criteria of executive, administrative and professional exemptions. Before re-classification, it is possible that employees currently or potentially exempt due to salary may not pass the primary duties tests.
Now is also a good time to weigh your options as an employer. If exempt employees currently make salaries significantly lower than the threshold, reclassifying employees to non-exempt and overtime eligible might make sense.
But, employers can also avoid salary and overtime pay altogether. Hours for newly non-exempt employees may be reduced, part-time or contract workers may be hired to fill gaps, tasks may be re-assigned to other exempt employees, and perks may be dismissed since the exempt/non-exempt distinction is often used to provide benefits.
If making such significant changes, employers must then weigh the cost of morale. Overall, it makes more sense to reclassify to non-exempt if an employee does not work much beyond forty hours. But for employees who often work over 40, it may be less difficult and less expensive to increase salary to the new threshold, rather than paying consistent overtime.
In general, the pending proposal offers valuable time for fixing current errors and planning for the future. We at Servant HR would love to help plan for yours. If you’re our client, we’re already on it. But if you have questions about the specifics of the proposal, or are wondering how a PEO can help manage these crucial details, please don’t hesitate. Contact us today!
