Horizon's Tax and HR Alerts

On April 23, 2024 the Federal Trade Commission issued a final rule to promote competition by banning noncompetes nationwide, protecting the fundamental freedom of workers to change jobs, increasing innovation, and fostering new business formation.

“Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned,” said FTC Chair Lina M. Khan. “The FTC’s final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”

The FTC estimates that the final rule banning noncompetes will lead to new business formation growing by 2.7% per year, resulting in more than 8,500 additional new businesses created each year. The final rule is expected to result in higher earnings for workers, with estimated earnings increasing for the average worker by an additional $524 per year, and it is expected to lower health care costs by up to $194 billion over the next decade. In addition, the final rule is expected to help drive innovation, leading to an estimated average increase of 17,000 to 29,000 more patents each year for the next 10 years under the final rule.

An estimated 30 million workers—nearly one in five Americans—are subject to a noncompete.

Under the FTC’s new rule, existing noncompetes for the vast majority of workers will no longer be enforceable after the rule’s effective date. Existing noncompetes for senior executives - who represent less than 0.75% of workers - can remain in force under the FTC’s final rule, but employers are banned from entering into or attempting to enforce any new noncompetes, even if they involve senior executives. Employers will be required to provide notice to workers other than senior executives who are bound by an existing noncompete that they will not be enforcing any noncompetes against them.

In January 2023, the FTC issued a proposed rule which was subject to a 90-day public comment period. The FTC received more than 26,000 comments on the proposed rule, with over 25,000 comments in support of the FTC’s proposed ban on noncompetes. The comments informed the FTC’s final rulemaking process, with the FTC carefully reviewing each comment and making changes to the proposed rule in response to the public’s feedback.

In the final rule, the Commission has determined that it is an unfair method of competition, and therefore a violation of Section 5 of the FTC Act, for employers to enter into noncompetes with workers and to enforce certain noncompetes.

One of the basic principles of the American workplace is that a hard day’s work deserves a fair day’s pay. Simply put, every worker’s time has value. A cornerstone of that promise is the Fair Labor Standards Act’s (FLSA) requirement that when most workers work more than 40 hours in a week, they get paid more. The Department of Labor’s new overtime regulation is restoring and extending this promise for millions more lower-paid salaried workers in the U.S.

Overtime protections have been a critical part of the FLSA since 1938 and were established to protect workers from exploitation and to benefit workers, their families and our communities. Strong overtime protections help build America’s middle class and ensure that workers are not overworked and underpaid.

Some workers are specifically exempt from the FLSA’s minimum wage and overtime protections, including bona fide executive, administrative or professional employees. This exemption, typically referred to as the “EAP” exemption, applies when: 

1. An employee is paid a salary,  
2. The salary is not less than a minimum salary threshold amount, and 
3. The employee primarily performs executive, administrative or professional duties.

While the department increased the minimum salary required for the EAP exemption from overtime pay every 5 to 9 years between 1938 and 1975, long periods between increases to the salary requirement after 1975 have caused an erosion of the real value of the salary threshold, lessening its effectiveness in helping to identify exempt EAP employees.

The department’s new overtime rule was developed based on almost 30 listening sessions across the country and the final rule was issued after reviewing over 33,000 written comments. We heard from a wide variety of members of the public who shared valuable insights to help us develop this Administration’s overtime rule, including from workers who told us: “I would love the opportunity to...be compensated for time worked beyond 40 hours, or alternately be given a raise,” and “I make around $40,000 a year and most week[s] work well over 40 hours (likely in the 45-50 range). This rule change would benefit me greatly and ensure that my time is paid for!” and “Please, I would love to be paid for the extra hours I work!”

The department’s final rule, which will go into effect on July 1, 2024, will increase the standard salary level that helps define and delimit which salaried workers are entitled to overtime pay protections under the FLSA. 

Starting July 1, most salaried workers who earn less than $844 per week will become eligible for overtime pay under the final rule. And on Jan. 1, 2025, most salaried workers who make less than $1,128 per week will become eligible for overtime pay. As these changes occur, job duties will continue to determine overtime exemption status for most salaried employees.

The rule will also increase the total annual compensation requirement for highly compensated employees (who are not entitled to overtime pay under the FLSA if certain requirements are met) from $107,432 per year to $132,964 per year on July 1, 2024, and then set it equal to $151,164 per year on Jan. 1, 2025.

Starting July 1, 2027, these earnings thresholds will be updated every three years so they keep pace with changes in worker salaries, ensuring that employers can adapt more easily because they’ll know when salary updates will happen and how they’ll be calculated.

The final rule will restore and extend the right to overtime pay to many salaried workers, including workers who historically were entitled to overtime pay under the FLSA because of their lower pay or the type of work they performed. 

We urge workers and employers to visit the DOL website to learn more about the final rule.

This article was written by Jessica Looman, and originally published on https://blog.dol.gov/2024/04/23/what-the-new-overtime-rule-means-for-workers. Jessica is the administrator for the U.S. Department of Labor’s Wage and Hour Division. Follow the Wage and Hour Division on Twitter at @WHD_DOL and LinkedIn. 

The Paid Leave for All Workers Act (PLAWA) allows workers to earn up to 40 hours of leave from work each year. Workers can use paid leave for any reason and employers may not require workers to provide a basis for their time off request. Workers earn one (1) hour of paid leave for every 40 hours they work. If an employer has an existing policy, certain exceptions may apply. There are certain categories of workers that are not subject to the law.

The Department of Labor is in the process of preparing guidance and other resources and materials to educate employees and assist employers with compliance. 

Read the Law: 820 ILCS 192/Paid Leave for All Workers Act. (ilga.gov)

For more information please visit: https://labor.illinois.gov/laws-rules/paidleave.html or check out the Illinois Department of Labors Paid Leave FAQS

Effective Jan. 1, 2024, Minnesota’s earned sick and safe time law requires employers to provide paid leave to employees who work in the state.

What is sick and safe time?

Sick and safe time is paid leave employers must provide to employees in Minnesota that can be used for certain reasons, including when an employee is sick, to care for a sick family member or to seek assistance if an employee or their family member has experienced domestic abuse, sexual assault or stalking.

Who is eligible for sick and safe time?

An employee is eligible for sick and safe time if they:

• work at least 80 hours in a year for an employer in Minnesota; and

• are not an independent contractor.

Temporary and part-time employees are eligible for sick and safe time. Sick and safe time requirements will not apply to building and construction industry employees who are represented by a building and construction trades labor organization if a valid waiver of these requirements is provided in a collective bargaining agreement.

How much sick and safe time can employees earn?

An employee earns one hour of sick and safe time for every 30 hours worked and can earn a maximum of 48 hours each year unless the employer agrees to a higher amount.

At what rate must sick and safe time be paid?

Sick and safe time must be paid at the same hourly rate an employee earns when they are working.

What can sick and safe time be used for?

Employees can use their earned sick and safe time for reasons such as:

• the employee’s mental or physical illness, treatment or preventive care;   

• a family member’s mental or physical illness, treatment or preventive care;

• absence due to domestic abuse, sexual assault or stalking of the employee or a family member;

• closure of the employee’s workplace due to weather or public emergency or closure of a family member’s school or care facility due to weather or public emergency; and

• when determined by a health authority or health care professional that the employee or a family member is at risk of infecting others with a communicable disease.

Which family members are included?

 Employees may use earned sick and safe time for the following family members:

1. their child, including foster child, adult child, legal ward, child for whom the employee is legal guardian or child to whom the employee stands or stood in loco parentis (in place of a parent);

2. their spouse or registered domestic partner;

3. their sibling, stepsibling or foster sibling;

4. their biological, adoptive or foster parent, stepparent or a person who stood in loco parentis (in place of a parent) when the employee was a minor child;

5. their grandchild, foster grandchild or step-grandchild;

6. their grandparent or step-grandparent;

7. a child of a sibling of the employee;

8. a sibling of the parents of the employee;

9. a child-in-law or sibling-in-law;

10. any of the family members listed in 1 through 9 above of an employee’s spouse or registered domestic partner;

11. any other individual related by blood or whose close association with the employee is the equivalent of a family relationship; and

12. up to one individual annually designated by the employee.

What additional sick and safe time responsibilities do employers have?

In addition to providing their employees with one hour of paid leave for every 30 hours worked, up to at least 48 hours each year, employers are required to:

• include the total number of earned sick and safe time hours available for use, as well as the total number of earned sick and safe time hours used, on earnings statements provided to employees at the end of each pay period;

• provide employees with a notice by Jan. 1, 2024 — or at the start of employment, whichever is later — in English and in an employee’s primary language if that is not English, informing them about earned sick and safe time; and

• include a sick and safe time notice in the employee handbook, if the employer has an employee handbook.

The Minnesota Department of Labor and Industry has created a uniform employee notice that employers can use. It is in English and translated into 17 additional languages; employers can request additional languages.

For more information please visit the Minnesota Department of Labor and Industry's ESST FAQ Page

The Illinois Secure Choice Savings Program Act aims to increase retirement savings access to private-sector employees. Companies with five or more employees are required to register by November 1, 2023. Approved by the state in July 2021, H.B. 0117 requires employers with at least five employees to:

• Automatically enroll each employee who has not opted out of participation in the program
• Provide payroll deduction arrangements and deposit fund into the program on behalf of those employees
• Create automatic, annual increases to contribution rates up to a maximum of 10% of a participant's wages

Who is required to provide a plan? Businesses that:

• Have at least 5 employees that work in Illinois
• Have been in business at least 2 years
• Do not offer a qualified savings plan such as a 401(k), SEP-IRA, or Simple IRA

Upcoming deadline:

• Illinois Employers with 5+ employees: November 1, 2023

Deadlines that have passed:

• Illinois Employers with 16-24 employees: November 2022
• Illinois Employers with 25-99: November 2019
• Illinois Employers with 100-499: July 2019

Illinois Secure Choice is legally mandatory. Employers who do not comply may be subject to penalties.

• $250 fine for each employee for the full or portion of the first calendar year in which the employee isn’t enrolled or didn’t opt out of the plan
• $500 fine for each employee for the full or portion of the second calendar year in which the employee isn’t enrolled or didn’t opt out of the plan

IRS announces moratorium on processing new claims for ERC (employee retention credit)

On September 14, 2023, the IRS announced (IR-2023-169) in a news release that it was immediately pausing processing of new claims for the employee retention credit (ERC) through at least the end of the year due to continuing concerns about improper claims.

The ERC is a refundable federal employment tax credit that was first enacted as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in 2020 and repeatedly modified and extended. The credit is available for qualified wages paid by eligible employers during the pandemic from March 13, 2020, through September 30, 2021.

The credit is generally claimed by filing a refund claim for the relevant quarter. While many refund claims already have been paid, others are still pending. The IRS has noted its concerns about the legitimacy of many of the refund claims, putting aggressive promotion of the ERC at the top of its "Dirty Dozen" list of tax scams for 2023.

The IRS has received approximately 3.6 million ERC claims since the program started. According to the IRS, the total inventory of unprocessed Forms 941-X, on which the ERC is claimed, was approximately 637,000 as of September 6, 2023.

Florida’s SB 1718 went into effect on July 1st, 2023, requiring all public employers and all private employers with 25 or more employees to use e-Verify. This means that in Florida, e-Verify certification is required for all employees hired on or after July 1st, 2023.

What is e-Verify, you ask? It's an online system that helps confirm the eligibility of employees to work legally in the United States. Applicable employers must use e-Verify to certify the employment eligibility of all of their employees performing services within the state of Florida.

Penalty for Non-Compliance: The Florida Department of Commerce is required to issue a fine of $1,000 per day if it is determined that the E-Verify system was not used three times in a 24-month period. The fine will continue to accrue until the employer demonstrates compliance with the law.

If you have any questions or need compliance assistance in implementing this system, don't hesitate to reach out to our team!

We recommend asking if they need an accommodation during the application process, but above all, ensure that having this information doesn’t influence your hiring decision. The Americans with Disabilities Act (ADA) requires employers to provide accommodations to applicants with disabilities if needed to be considered for a job unless the accommodation causes an undue hardship. If the applicant doesn’t need an accommodation, simply continue to focus on the candidate’s skills and abilities relative to the position you’re hiring for.

As you’re likely aware, employers are prohibited from asking about disabilities before offering an applicant the job. As a best practice, you should be asking all candidates—not just those who disclose a disability or appear to have a disability—whether they can perform the essential functions of the job with or without a reasonable accommodation. This can be as simple as adding a question to your job application.

It’s important to not make assumptions about a candidate's ability to perform their job based on their disability. If a candidate during the post-offer stage requests an accommodation to perform the essential functions of their job, then you would engage in the interactive process with them to determine what accommodations may be effective.

This Q&A does not constitute legal advice and does not address state or local law.

Answer Provided by Rachel, SHRM-SCP

Rachel has a B.A. in Psychology, she began her HR background in employee relations, staffing and payroll as an HR Generalist for a variety of industries. During her free time, Rachel is an avid kayaker and plans to visit every National Park during her lifetime.

If you have any further questions, give us a call (937-434-8244)

At-will employment means that the employer or employee can end the employment relationship for almost any reason (with or without cause) at any time (with or without notice).

It does not, however, allow you to terminate someone for an illegal reason, like their inclusion in a protected class or their exercise of a legal right.

Every state (except Montana) assumes the employment relationship is at-will unless there is a legal agreement in place that says otherwise. Assuming you want to maintain the at-will relationship with employees, we recommend including clear language about this in your employee handbook. But keep in mind that even with an at-will relationship, terminations carry risk. A terminated employee can always claim that they were terminated for an illegal reason, at which point you’ll want to be able to show otherwise. To reduce that risk and nip any potential claims in the bud, you should have and document a lawful, business-related reason for each termination.

You can find more information on employment termination and at-will employment on the platform. If you would like more information on drafting an employment contract, please contact an attorney.

This Q&A does not constitute legal advice and does not address state or local law.

Answer Provided by Marisa, SPHR

Marisa has experience working in a wide variety of HR areas, including payroll, staffing, and training. Having supported HR functions in various industries, Marisa is able to apply her knowledge to each client's particular situation. Marisa earned her B.S. in Business Administration and Communications from the University of Oregon.

If you have any further questions, give us a call (937-434-8244)

Florida is threatening to suspend licenses for businesses failing to provide proof of E-Verify compliance, which ensures they are not employing illegal immigrants. It comes as part of its greater effort to protect Florida residents and their jobs as the nation faces a mass immigration crisis on the southern border.

The Department of Economic Opportunity sent letters to several businesses, flagging the various companies for “repeat non-responsiveness” to the Florida Department of Law Enforcement (FDLE).

“If you persist and fail to respond to the Department of Economic Opportunity (DEO), there will be significant consequences,” the letters reads, warning that the notice serves as the “final opportunity to respond before consequences are initiated.”

It adds that the DEP will “not grant any extensions” or excuses for nonresponses. The companies had one month from the date of the letter to provide an affidavit stating the company will comply with the law and terminate the employment of illegal aliens. 

Failure to comply with the letter in the given time frame would result in a suspension of “all licenses” held by the company “specific to the business location where the unauthorized alien(s) performed work.” In cases where they do not have a license specific to the business location where the illegal alien worked, the licenses held by the company at its “primary place of business” will be suspended.

This information has been sourced from a variety of news articles and public statements from the Florida Governors' Office. As the enforcement and policies change around E-Verify compliance, we will continue to provide updates. 

This alert does not constitute legal advice and does not address state or local law.

If you have any further questions, give us a call (937-434-8244)

In general, yes. We recommend having a policy for time off that explains how employees can request time away from work and what criteria the company uses to approve or deny requests. For example, you might base approvals on the order in which requests came in, the seniority of those requesting time off, the needs of the business, or some combination of these. Whatever your policy, take care that it doesn’t adversely affect members of certain protected classes. If male employees, for example, had their time requests granted more often than female employees, you could be looking at a discrimination claim.

If the holidays are either busier than usual or a more popular time for time off requests, you might consider a rotating holiday schedule or a set up where employees can sign up for an extra day off either before or after the holiday.

It’s also a good idea to specify how employees will know if their request has been granted and ensure that your managers understand your time off approval process.

This Q&A does not constitute legal advice and does not address state or local law.

Answer from Kim, SPHR, SHRM-SCP

Kim is a results-driven HR Professional with experience from diverse industries, including but not limited to, transportation, environmental services, staffing, pharmaceutical, market research, banking, retail, software development and education non-profit.

If you have any further questions, give us a call (937-434-8244)

The Equal Employment Opportunity Commission (EEOC) requires certain employers to submit a report categorizing their employees by race or ethnicity, gender, and job category. This demographic survey, called the EEO-1, is due by March 31. All employers with 100 or more employees must file the report.

Employers also must file if the organization is any of the following:

Owned by or affiliated with another company and the entire enterprise has 100 or more employees 
A federal government prime contractor or first-tier subcontractor with 50 or more employees and with a contract or subcontract amounting to $50,000 or more:
- Serving as a depository of government funds in any amount
- A financial institution that is an issuing and paying agent for US Savings Bonds and Notes
If required to file, employers should follow these guidelines:

- Use employment data from one pay period in October, November, or December of 2017.
- For a single-establishment company, submit only one EEO-1 data report. For a multi-establishment company, submit a separate report for each location. 
- Identify the race or ethnicity of employees based on how they identify themselves. If they decline to self-identify, then use employment records or visual observation.
- Include both full-time and part-time employees.
Include employees who telecommute in the survey for the location to which they report. 
The EEOC would prefer that employers file online. When doing so, don’t forget to click the “certify report” button; otherwise, the EEOC will not receive your report. Go here to file, and find the EEOC’s FAQs on filing here. Questions? Contact us anytime.

Yesterday the Second Circuit Court of Appeals became the second federal appellate court to rule that under Title VII of the Civil Rights Act of 1964, the word sex includes sexual orientation. The first was the Seventh Circuit, which we reported on last April.

The Second Circuit Court’s ruling yesterday affects only New York, Vermont, and Connecticut. All three of these states already prohibit discrimination in employment because of sexual orientation, so the ruling does not have a significant impact on employers there. It does, however, ensure that it is possible for employees who feel they have been discriminated against based on sexual orientation to sue under both state and federal law.

Between 1979 and 2012, most of the circuit courts of appeal ruled that the term sex in Title VII did not include sexual orientation, including the Second Circuit in 2005. But in Monday’s decision, the court acknowledged that legal doctrine evolves. The court reasoned that although Congress may not have contemplated that discrimination “because of sex” would include sexual orientation when it drafted Title VII, that fact need not limit the court’s current interpretation of the statute. The court also pointed to the Equal Employment Opportunity Commission’s position (held since 2015) that sex includes sexual orientation as support for its ruling.

Although circuit courts of appeal often try to align their rulings with the decisions of the other circuits, and most circuits still do not currently recognize sexual orientation as part of sex, the two most recent decisions may indicate a shift in perspective and encourage other circuits to follow suit, overruling their past decisions in favor of a broader meaning for the word sex. The circuits’ conflicting decisions also make it more likely that the Supreme Court will accept a case on this issue soon. Watch for more info.

The Occupational Safety and Health Administration (OSHA) mandates that all employers with more than 10 employees - except those in exempt low-risk industries - maintain a record of work-related injuries and illnesses. Those who are required to maintain these records should use OSHA’s Form 300: Log of Work-Related Injuries and Illnesses or an equivalent state-specific form, and forms must be posted by February 1.

Those same employers must then post OSHA’s Form 300A: Summary of Work-Related Injuries and Illnesses each year between February 1 and April 30. As its name implies, Form 300A summarizes (and sanitizes) the information logged on Form 300.

OSHA Form 300A must be certified by a company executive and posted in a conspicuous location where notices to employees are customarily posted. The notice must be posted even if there were no workplace-related injuries or illnesses.

In addition to these internal record keeping requirements, certain employers with 20 or more employees must submit their OSHA 300A form online by July 1. The website for submission is OSHA’s Injury Tracking Application (ITA), which can be found here.  For more information or help navigating the forms, contact us today. 

Last Friday, the Department of Labor (DOL) adopted a new test for unpaid interns. Employers should use this test—called the primary beneficiary test—when determining if a worker can be properly classified as an unpaid intern or if they need to be classified as an employee and paid minimum wage and overtime. The test adopted by the DOL has already been in use in four federal appellate courts, most recently the Ninth Circuit Court of Appeals. The DOL’s switch to the primary beneficiary test creates a nationwide standard.

Balancing v. All-or-Nothing
Previously, the DOL was using a six-question all-or-nothing test. An employer needed to be able to say “yes, the internship does that” to all six questions or else classify the worker as an employee. The new test is a balancing (or factors) test and has seven questions. No single question will disqualify the worker from being classified as an unpaid intern. Instead, the employer may look at the answers as a whole.

The New Questions
The new questions overlap significantly with the old questions. The major element missing from the new test is a focus on whether the intern is providing tangible benefit to the employer. The old test indicated that the employer should receive little to no benefit from the services of an unpaid intern, with the exception of goodwill and a qualified future applicant. The new test doesn’t ask if the employer is receiving a benefit.

In place of questions about whether the employer receives any benefits, the new test places more emphasis on the internship being academically focused. Only one of six questions in the old test asked about the training and educational aspects of the job, whereas four of seven do in the new test. Employers are free to look at factors outside of these seven, but should be careful about stretching to find new questions if these seven lead to an answer of “paid employee.”

Under the primary beneficiary test, employers should consider the following:

The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee.
The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.
Questions? Contact Horizon anytime.

The minimum wage for federal contractors will increase to $10.35 per hour as of January 1, 2018. The wage requirement applies to new and replacement contracts (solicited on or after January 1, 2015) with employers covered by the Service Contract Act or any employer who handles concessions and services in connection with federal property or lands. We recommend that employers review the pay rates of their employees and plan any changes necessary to comply with the rate increase. Questions? Drop us a line.

For your convenience, we've posted the 2018 minimum wage rates. States seeing big increases include California, Maine, Maryland, and New York. Rates vary in many states according to factors like job location (e.g., city vs. state), business size, and benefits status. Questions? Contact us anytime.

Beginning Monday, September 18, employers must use the revised Form I-9 for all new employees. This new version of the form has the revision date of 7/17/17.

Access the new I-9 form here.

For help, contact us anytime.

A federal Appeals Court once again ruled in favor of an employee who fired off a string of obscenities aimed at his employer on Facebook. The Court found that the employee’s termination was wrongful because his rant constituted “concerted activity” under the National Labor Relations Act. This has been a murky and changing area of law, but the Court’s latest decision sheds some light on it. 

It has always been the case that griping about low pay, bad hours, or mean managers in the physical presence of a co-worker would qualify as "concerted activity" and be protected by the NLRA. (Reminder: the NLRA protects employees in both unionized and non-unionized environments.) However, the extent to which these protections apply to online or social media has been a moving legal target.

Because of the ambiguity, and the overall employee-friendliness of the NLRB over the last several years, we have been advising clients to be extremely careful about disciplining employees for anything work-related they say on social media.

For more information on the NLRA, NLRB, or social media, contact us anytime.