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Don’t Stop, Drop and Roll Yet – Non-Competes are About to be Banned (FTC) and Exempt Employee Salary Levels are Increasing (DOL)

Don’t Stop, Drop and Roll Yet – Non-Competes are About to be Banned (FTC) and Exempt Employee Salary Levels are Increasing (DOL)

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 make equal to or more than $151,164 annually 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.

Why choose a PEO?

Why choose a PEO?

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.

Injunction Temporarily Stops New FLSA Regulations

Injunction Temporarily Stops New FLSA Regulations

Last night, a federal district court in Texas granted a preliminary injunction that temporarily blocks the U.S. Department of Labor from implementing and enforcing its recently revised regulations on the white collar exemptions to the Fair Labor Standards Act (FLSA).

As you know, the overtime rule was scheduled to take effect Dec. 1 and would have raised the salary threshold from $23,660 to $47,476.

Employers should note that this is only a temporary injunction, not a permanent one. The injunction simply prevents the regulations from going into effect on December 1. There will be a decision issued at a later date on the actual merits of the case, so changes in the FLSA salary threshold for exemption may be back. However, the judge wouldn’t have granted the preliminary injunction unless, among other things, he thought the states showed a substantial likelihood of succeeding on their claims.

What may be likely is the change will eventually go through – but maybe with a lower number or a small business limitation or exemption created by the Trump Administration and the new Congress.

As Servant HR has worked through the ramifications with many of you, some of you did make some decisions. If your decisions included salary increases to employees in order to maintain their exempt status and HAVE BEEN COMMUNICATED, you may wish to leave that in place as it would be difficult to take that back. We cannot assume that the overtime rule will be permanently barred.

However, if there are exempt employees who were going to be reclassified to nonexempt that have not been or wage increases had not been promised yet, you may want to postpone those decisions and give the litigation a chance to play out.

Servant HR will continue to advise you as implementation becomes more clear.

While we have already reached out to many of you, if you have specific questions about your situation or wish to undo something you already have communicated to us, please contact us directly.

And HAPPY THANKSGIVING a little early!!

PEOs: Connecting HR Services to Grow Healthier Businesses

PEOs: Connecting HR Services to Grow Healthier Businesses

When you have an annual checkup, your doctor gathers a lot of information. Height and weight are measured. Your blood pressure and pulse are taken. Blood may be drawn. You answer questions about family history, current diet and medications. The doctor checks your ears, mouth, neck, heart, lungs, stomach, joints, spine, muscles and skin.

You and your doctor know that these clues work together to determine your overall health. Your doctor also uses these clues to recommend changes in your lifestyle to keep you on the healthy track. You can’t separate your diet from your blood pressure from your weight. You have to have an understanding of how these parts work together to take the best care of yourself.

Human resources works the same way. You know that benefits, payroll and risk management are part of an employer’s HR responsibilities, but if they aren’t considered together to see how the parts affect one another, your business won’t be as healthy as it could be. If your HR service providers aren’t working together to diagnose HR problems and detect HR opportunities, your business suffers. A full-service PEO or Professional Employer Organization is like a doctor asking all those questions. Consider the many services and service providers who may be working on your HR from afar, never collaborating or sharing information to make your business healthier.

HR Management

In small or medium-sized businesses, in-house staff people who wear multiple administrative hats are often the ones managing human resources. In these cases, the question becomes, “What level of training or expertise does your staff person have in dealing with tough HR matters?” It’s an important question to consider because human resources management isn’t as obvious or popular as other HR areas. All business owners know they have certain obligations associated with payroll and tax liability. But they might not realize there are actually more compliance issues related to HR management than payroll and tax. The reality is that a trained HR professional can help employers avoid costly missteps related to EEOC, DOL, FMLA, USERRA, PPACA, ERISA, GINA and the rest of the alphabet soup of HR compliance and risk.

HR management becomes more complicated as your business grows. With more employees comes more obligations. If your business has reached a certain level, you may choose to hire a professional with a PHR or SPHR certification. While this may be a smart choice for larger businesses, many small and medium-sized companies can’t afford to hire a full-time HR professional.

Benefits

Most businesses work with a broker to handle the benefits part of their human resources. A broker offers the employer a choice of different insurance benefits. Typically, the broker passes along some numbers to an administrative person on a yearly basis, and that person is tasked with understanding the benefits and passing along that information to any new employees or current employees who have become eligible for benefits over the course of the year.

Ideally, a broker should have an understanding of the different benefits plans available and the level of quality of different carriers. A broker should also understand the culture of your business so he or she can match that with the available benefits. Your benefits should be attractive to employees and a good fit for your organization so that your business can use the options as recruitment and retention tools.

Unfortunately, things like benefits have become so commoditized that the opportunity to maximize what benefits can do for you and your business is being overlooked.  Many brokers have tried to add services on the front end with increased communication and hand-holding at the employee level in order to compete in a marketplace that offers a more holistic approach, but they often fall short.

Payroll

Most businesses use some sort of payroll service to make sure employees receive the correct amount of pay on time, and to make sure related tax issues are handled appropriately. When a company chooses to handle payroll in house, it’s often a control issue by the ownership in which someone doesn’t want any confidential information leaving the company. Another reason for handling payroll in house is in a situation where the accounting is atypically complex. For example, if a manufacturer does a lot of piecework, or an engineering or construction firm needs to track how an employee is spending his or her time on projects to determine their contribution to the bottom line, an in-house software program customized to a particular pay setup might be the smartest choice.

Risk Management

At Servant HR, we often hear the misunderstanding that risk management pertains to only worker’s compensation and liability insurance. Employers are often getting this impression from commercial insurance brokers who — you guessed it — provide worker’s compensation and liability insurance. Employers can mitigate risk on a much broader level, and a PEO can often help businesses recognize these opportunities.

Some risk management-related niches cater to certain industries such as construction and healthcare, which require property and casualty insurance coverage. There is often a discount available to employers when they bundle this coverage, so cost savings are a big motivator for employers who may view insurance coverage as a necessary evil.

But things can be done to manage risk without buying up more insurance or bundling policies. This is where a PEO can offer guidance. Safety training can help minimize accidents. General job training can help employers ensure their employees are doing their jobs correctly.  Making sure individual employees are classified appropriately helps employers apply the correct insurance to that employee.  (Employees such as landscapers go under a certain code. But clerical employees in the office of a landscaping company don’t require the same coverage. A PEO can help you see these cost-saving opportunities.) Employers can follow up with claims to be sure employees who claim they are hurt are indeed hurt. Having policies in place that protect you as an employer is the best way to manage risk, which requires the expertise of an HR professional.

Retirement Services

When most employers think about retirement services, the first things that to mind are 401(k) plans and the less popular pension plan. Companies typically use financial advisors to manage 401(k)s. These relationships often start on an individual level, with the business owner using a financial advisor for personal reasons. As the business grows and the need for retirement services arises, the business owner may turn to this same person to recommend a plan for employees.

The challenge in this way of approaching a 401(k) plan for your employees is the owner’s priorities might not line up with the business goals. The owner is looking for a way to get as much of his or her income sheltered from tax, but that shouldn’t be the only motivation. You must also consider that employees across many earning levels should enjoy the rewards of the plan. It is imperative to have someone in place who understands not only how a 401(k) plan works but also how your company is organized. Who is the best person to assume responsibility for the performance of the plan, for example? Is a 401(k) the best choice or is a business better suited to use an SRP (simple retirement plan)?

HR Management + Benefits + Payroll + Risk Management + Retirement Services

Part of the beauty of a full-service PEO such as Servant HR is that a PEO looks at all of these parts of your human resources together so that your business can be as healthy as possible. We aren’t individuals working on services in silos. PEOs connect the dots of businesses’ HR issues. PEOs are set up to take care of employees from “birth to death,” or from the job application to the retirement party. Through the coemployment model, full-service PEOs also assume some of the risk associated with having employees.

The HR services PEOs provide are getting done in any size business in some way, shape or form with or without a PEO. Payroll has to get done, worker’s compensation matters have to be dealt with, and retirement benefits have to at least be considered. In many cases, businesses rely on some combination of different vendors and often in-house staff to carry out these tasks.  While this may be an effective process in some situations, it’s not always the best direction for managing a company’s HR needs.

To find out if a PEO is right for your business, download our guide “Are You a Good Fit?”

Wage garnishment: can they really take my paycheck?

Wage garnishment: can they really take my paycheck?

There you are, fearing the worst, afraid to check your mailbox, knowing that it is coming. You are already having financial problems, living paycheck to paycheck, struggling to pay the bills, but you know your situation is about to become a lot worse. Then the day finally comes, and you open the letter that contains the phrase you have been dreading: “garnishment of wages.”

Anyone in this position will likely have many questions: Can they really take my paycheck? How much can they take? Will I lose my job when my employer finds out? Is there anything I can do about it? The answers below may help you understand your rights and what to expect if you find yourself facing a wage attachment.

What is a wage garnishment?

Wage garnishments typically result from unsecured debt (such as credit cards) that has gone unpaid and ignored, or from delinquent tax situations or back-owed child support.  A creditor or debt collection agency can file a lawsuit as a last ditch effort to recover an unpaid debt.  If the court rules in favor of the creditor, a judgment may be issued that requires an employer to garnish (or “attach”) the debtor’s wages, sending a portion of each paycheck to the creditor.

How much can they take?

The amount of earnings that can be garnished in a work week or pay period is restricted by Title III of the Consumer Credit Protection Act  (CCPA).  If a pay period covers more than one week, weekly pay calculations must be used to determine the amount garnished. The amount is typically the lesser of:

1.) 25% of an employee’s “disposable earnings” (money left over after regular taxes are withheld), or

2.) the amount that disposable earnings are greater than 30 times the federal hourly minimum wage

Example:
If an employee’s disposable earnings are $217.50 ($7.25/hour x 30 hours) per week or less, there can be no garnishment. If disposable earnings exceed $217.50 but are less than $290.00 ($7.25/hour x 40 hours), any amount over $217.50 is subject to garnishment. A maximum of 25% can be garnished if disposable income is $290.00 or higher. (Example provided by US DOL website.)

Wages may not be garnished by more than one creditor at a time unless the primary garnishment does not take the full 25% allowed by law. (These garnishment restrictions do not apply to certain bankruptcy court orders or debts due for federal or state taxes.)

Child or spousal support orders are always given priority over any other wage garnishment.  Federal law for child support and alimony allows up to 50% of disposable income to be garnished if an employee is supporting another spouse or child, or 60% if not supporting another spouse or child. An additional 5% can be garnished for support payments that are 12 or more weeks in arrears.

Can I lose my job over this?

Employees are often embarrassed when faced with garnishment, because it means that their employer will now be made aware of their financial situation. The CCPA does protect an employee from being fired because of a single wage garnishment; however, in some states, that protection goes away if more than one garnishment occurs within a 12-month period.

What can I do about it?

If you are facing a debt that you are struggling to pay, the best plan of action is to act early and reach out for help. Speak to your creditors, work out a payment arrangement and stick to a repayment plan.  A counseling agency may also be able to help you negotiate lower payment arrangements with a creditor. State law requires creditors to provide adequate notice of any pending legal action, but once a judgment has been issued and the payment arrangement is set by the court, your options will be very limited.

If you have already received notice that your employer has received an order to garnish your wages, you may be upset or angry. But it is important for you to understand that your employer is obligated to comply and garnish your wages according to the legal order. If you have already made other arrangements for repayment of the debt, contact your creditor directly or appeal to the court. If the amount being garnished is causing undue hardship in paying other bills or properly providing basic needs for your family, you can hire an attorney and set up an appeal to the judge to reconsider the amount.

Remember, it is always better to tackle the issue early on and work out a way to satisfy your creditors before a wage garnishment is issued as a last resort.

This article is intended as general information and should not be used as legal advice. Please visit the Department of Labor’s Wage and Hour Division page or call 866-4USWAGE for more information.

 

 

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