DOL Exemption Changes Struck Down by a Federal Judge

The Department of Labor’s new and planned rules intended to raise the salary threshold for overtime exemption have been stopped by a federal judge.

What that means:

  1. Current Threshold Remains Around $35K: The increase to $44K (July 2024) and the planned increase to $59K (January 2025) are canceled for now. Automatic raises every three years are also blocked.
  2. Reason for the Halt: The court ruled that the Department of Labor (DOL) overstepped its authority by focusing too much on salary instead of job duties when deciding who is exempt from overtime.
  3. What’s Next: The DOL may appeal, but the new presidential administration (Trump, starting January 2025) is unlikely to fight for the rule.
  4. For Employers:
    • If you’ve already raised salaries or reclassified jobs, consider the impact on morale before rolling back.
    • If you haven’t made changes, hold off until there is more clarity.
    • Consider reviewing roles and consulting with us prior to making any additional changes.

This decision requires each employer to continue thoughtful planning to manage employee expectations and legal obligations.

Do You Have Washington Employees? Keep Reading for Important Minimum Wage and FLSA Updates

Washington State’s Department of Labor & Industries has announced a bump in the state minimum wage starting January 1, 2025. This change will also affect the overtime exempt threshold for both small and large employers.

Here’s what you need to know:

Minimum wage increase:

  • For workers aged 16 and older, it goes from $16.28 to $16.66 per hour.
  • For workers aged 14 and 15, it jumps from $13.84 to $14.16 per hour.
  • Keep in mind that some cities like Seattle, SeaTac, Tukwila, Renton, and Bellingham already have their own minimum wage rates. Burien is set to have its own in 2025, too!

Impact on overtime exemptions:

  • For small employers (50 or fewer employees), to classify someone as exempt from overtime, they need to pay at least double the minimum wage, which means:
    • $1,332.80 per week or $69,305.60 per year.
  • For large employers (51+ employees), the salary threshold is higher at 2.25 times the minimum wage:
    • $1,499.40 per week or $77,968.80 per year.
  • Different rules apply for specific roles, like exempt computer professionals and rideshare drivers.

Noncompetition agreements:

The wage threshold for non-competes in 2025 will be $123,394.17. There are also state and federal restrictions on when these agreements can be presented to employees.

Action items for employers:

Be sure to notify employees about these changes and update classifications or payroll before January 1, 2025, to stay in compliance.

Give us a call if have any questions.

2025 Paid Leave Oregon Contribution and Unemployment Insurance Tax Rates Coming in November

On October 10, 2024, the Oregon Employment Department released the following statement regarding 2025 Paid Leave Oregon contribution and Unemployment tax rates:

“Each November, the Oregon Employment Department notifies employers of tax and contribution rates for the next calendar year. We will mail letters to employers with their rate information for both Paid Leave Oregon and Unemployment Insurance on November 15. You can also find your 2025 rate information in your Frances Online account after November 15.

To support Oregon businesses who were negatively affected during the pandemic, the Legislature passed House Bill 3389 (2021) which temporarily held experience ratings at 2020 rates.  For 2025, we are returning to the standard rules that were in place before the pandemic to calculate your UI tax rate.  House Bill 3389 required us to use your 2020 experience rate to calculate your 2024 tax rate, but for 2025, this will change.  We will calculate your 2025 tax rate based on wages and benefit charges from the third quarter of 2021 through the second quarter of 2024.”

FLSA Exemption – Changes Start July 1, 2024

Greetings! We’ve got some significant news fresh from the U.S. Department of Labor (DOL) – they’ve just unveiled the Final Rule: Restoring and Extending Overtime Protections. This update to the Fair Labor Standards Act (FLSA) regulations aims to enhance the compensation landscape for American workers by revising the salary thresholds for certain exemptions. Let’s delve into the details in a business-friendly manner.

Understanding the Adjustments
Effective July 1, 2024, the salary threshold for the “white-collar exemptions” – encompassing executive, administrative, and professional roles – will be elevated to $844 per week, or $43,888 annually. This reflects a substantial increase from the previous threshold of $684 per week, or $35,568 annually. By January 1, 2025, the threshold will further escalate to $1,128 per week, or $58,656 annually.

Similarly, the total annual compensation requirement for the highly compensated employee (HCE) exemption will witness a notable surge. Commencing July 1, 2024, the total annual compensation threshold for this category will ascend to $132,964, up from the current $107,432. By January 1, 2025, it will peak at $151,164.

Additionally, the DOL has established a framework for regular updates to these thresholds every three years, starting July 1, 2027. This mechanism ensures the thresholds remain aligned with prevailing economic conditions and data.

Employer Action Items
In response to these changes, employers must proactively assess their workforce composition and compensation structures. The first crucial step is to conduct a thorough review of exempt employees’ salaries, particularly those falling under the white-collar exemptions or the HCE category. Employers need to ensure compliance with the new salary requirements within the stipulated timelines.

For employees projected to fall below the revised thresholds, employers face a dual decision:

  1. Salary Adjustments: Employers may opt to raise employees’ salaries to meet the new thresholds. This approach allows employers to maintain the exempt status of affected employees while aligning with regulatory mandates.
  2. Reclassification: Alternatively, employers can reclassify employees as non-exempt, thereby subjecting them to overtime eligibility and any other related provisions like meals, breaks, and enhanced recording keeping. This decision necessitates careful consideration of operational and financial implications, including potential adjustments to scheduling and payroll practices.

Implications for Employees
Employees impacted by these changes should be engaged and informed throughout the transition process. Communication from employers regarding any salary adjustments or reclassifications is paramount. Understanding the implications of these changes on employment status and compensation empowers employees to advocate for their rights and navigate potential adjustments effectively.

Conclusion
The U.S. Department of Labor’s Final Rule: Restoring and Extending Overtime Protections heralds significant shifts in labor regulations, with far-reaching implications for both employers and employees. By revising salary thresholds for certain exemptions, the DOL aims to promote fairness and equity in the workplace.

As employers navigate the implementation of these changes, collaboration and transparency are key. By prioritizing compliance with regulatory requirements and fostering open communication with employees, organizations can navigate the evolving landscape of labor standards effectively.

One last thought: While the rules are all about the salary threshold it is also a great time to make sure that a complete analysis of classification is undertaken including the duties test.

For assistance with this important work, or any other HR topic, please reach out.

OFLA – BOLI Issues Administrative Order

If you have 25 or more employees in Oregon keep reading…

Oregon’s Bureau of Labor and Industries has issued a Temporary Administrative Order with proposed rule to inform organizations about the process to end and transition coverage from Oregon Family Leave Act (OFLA) protection to Paid Leave Oregon Insurance (PLO) protection.

As a reminder, the list of OFLA covered instances will be reduced on July 1, 2024 in accordance with SB1515.

Current OFLA list (Through June 30, 2024):

  • Parental leave for the birth, adoption, or foster placement of a child.
  • Leave for an employee’s own serious health condition or to care for a family member with a serious health condition.
  • Pregnancy disability leave before or after the birth of a child or for prenatal care.
  • Home care leave for a child with an illness or injury that is not a serious health condition.
  • Leave for a child whose school or childcare provider has closed due to a public health emergency.
  • Bereavement leave after the death of a family member.
  • Military family leave for a spouse or domestic partner called to active duty.

New OFLA list (Effective July 1, 2024):

  • Home care for the employee’s child (both serious and non-serious health conditions) and school/childcare closures for public health emergencies.
  • Bereavement leave, limited to two weeks per family member, with a maximum of four weeks in a given leave year.
  • Pregnancy disability leave.
  • Military family leave (up to 14 days per deployment) will continue to count against available OFLA.
  • From July 1, 2024, through January 1, 2025, OFLA will also provide up to two additional weeks of leave to facilitate the legal processes required for placement of a foster child or adoption.

These changes facilitate the change that OFLA will no longer run concurrently with Paid Leave Oregon, meaning employees will not be able to draw from both OFLA or PLO for the same qualifying events. The list of qualifying events for OFLA has been shortened, and some provisions, such as additional sick child leave for employees who take 12 weeks of parental leave, will no longer be provided.

The Temporary Administrative Order outlines that a notice must be provided to all employees about the change in qualifying events. In addition, and no later than JUNE 1, 2024, notice must be given to employees on protected OFLA leave for a qualifying event that is sunsetting, identifying the end of that protection on June 30, 2024, and the process to apply for PLO.

A copy of the Temporary Administrative Order can be found HERE.

If you have any questions on this topic, or other HR matters, please reach out.

FLSA Exemption – Changes Start July 1, 2024

Greetings! We’ve got some significant news fresh from the U.S. Department of Labor (DOL) – they’ve just unveiled the Final Rule: Restoring and Extending Overtime Protections. This update to the Fair Labor Standards Act (FLSA) regulations aims to enhance the compensation landscape for American workers by revising the salary thresholds for certain exemptions. Let’s delve into the details in a business-friendly manner.

Understanding the Adjustments
Effective July 1, 2024, the salary threshold for the “white-collar exemptions” – encompassing executive, administrative, and professional roles – will be elevated to $844 per week, or $43,888 annually. This reflects a substantial increase from the previous threshold of $684 per week, or $35,568 annually. By January 1, 2025, the threshold will further escalate to $1,128 per week, or $58,656 annually.

Similarly, the total annual compensation requirement for the highly compensated employee (HCE) exemption will witness a notable surge. Commencing July 1, 2024, the total annual compensation threshold for this category will ascend to $132,964, up from the current $107,432. By January 1, 2025, it will peak at $151,164.

Additionally, the DOL has established a framework for regular updates to these thresholds every three years, starting July 1, 2027. This mechanism ensures the thresholds remain aligned with prevailing economic conditions and data.

Employer Action Items
In response to these changes, employers must proactively assess their workforce composition and compensation structures. The first crucial step is to conduct a thorough review of exempt employees’ salaries, particularly those falling under the white-collar exemptions or the HCE category. Employers need to ensure compliance with the new salary requirements within the stipulated timelines.

For employees projected to fall below the revised thresholds, employers face a dual decision:

  1. Salary Adjustments: Employers may opt to raise employees’ salaries to meet the new thresholds. This approach allows employers to maintain the exempt status of affected employees while aligning with regulatory mandates.
  2. Reclassification: Alternatively, employers can reclassify employees as non-exempt, thereby subjecting them to overtime eligibility and any other related provisions like meals, breaks, and enhanced recording keeping. This decision necessitates careful consideration of operational and financial implications, including potential adjustments to scheduling and payroll practices.

Implications for Employees
Employees impacted by these changes should be engaged and informed throughout the transition process. Communication from employers regarding any salary adjustments or reclassifications is paramount. Understanding the implications of these changes on employment status and compensation empowers employees to advocate for their rights and navigate potential adjustments effectively.

Conclusion
The U.S. Department of Labor’s Final Rule: Restoring and Extending Overtime Protections heralds significant shifts in labor regulations, with far-reaching implications for both employers and employees. By revising salary thresholds for certain exemptions, the DOL aims to promote fairness and equity in the workplace.

As employers navigate the implementation of these changes, collaboration and transparency are key. By prioritizing compliance with regulatory requirements and fostering open communication with employees, organizations can navigate the evolving landscape of labor standards effectively.

One last thought: While the rules are all about the salary threshold it is also a great time to make sure that a complete analysis of classification is undertaken including the duties test.

For assistance with this important work, or any other HR topic, please reach out.

Oregon Family Medical Leave: Reminder Deadline May 1st

Employee notice due May 1, 2024

Attention all organizations with 25 or more employees in Oregon! Senate Bill 999 mandates a crucial change regarding the Oregon Family Leave Act benefit year. Effective July 1st, 2024, the benefit year will align with Paid Leave Oregon Insurance, shifting from existing options. This change impacts the start of the benefit year, which will now commence the Sunday preceding the first date of qualifying leave. Remember, you must notify your employees at least 60 days prior to this transition.

Furthermore, Senate Bill 1515 will also come into effect on July 1st, 2024, introducing significant revisions to the types of leave protections under OFLA. These changes necessitate careful deliberation on how to adapt existing policies and procedures. We understand that implementing the revisions from Senate Bill 1515 might not be feasible before the notification deadline for the benefit year change. Hence, your organization may need to approach this as a two-step process of change.

If you require assistance with navigating these updates or any other matter, please don’t hesitate to reach out. Time is of the essence, and we’re here to help you smoothly transition through these legislative changes.

You may want to participate in one of our upcoming webinars:

Oregon Family Medical Leave Act – 2024 Changes

Monday, May 13th, 2024: 9:00am – 10:30am
Thursday, May 23rd, 2024: 3:30pm – 5:00pm
Thursday, June 6th, 2024: 8:30am – 10:00am

Important Bulletin from the Oregon Employment Department

Important information about Unemployment Insurance Benefits launching in Frances Online

The Oregon Employment Department is launching Unemployment Insurance (UI) benefits through Frances Online. The new UI benefits system is scheduled to go live through Frances Online on Monday, March 4.   

Here is what you need to know:

  • Frances Online will not be available during the migration.
    The Frances Online website will be unavailable from 5 p.m. on Wednesday, February 28, to 8 a.m. on Monday, March 4.
  • Customer service by phone or email will not be available.
    Phone lines for UI, Paid Leave Oregon, and employer contributions will be unavailable from 8 a.m. on Wednesday, February 28, to 8 a.m. on Monday, March 4.

Here is what you can do:   

  • Finish any outstanding tasks you need to do in your Frances Online account before it goes offline at 5 p.m. on February 28. You will not have access to any account information in Frances Online from 5 p.m. Wednesday, February 28, until 8 a.m. Monday, March 4.
  • Note that our staff will not be answering phone calls or emails starting at 8 a.m. from Wednesday, February 28, until 8 a.m. Monday, March 4.
  • To reduce processing delays during this time frame, please respond to all requests for information promptly.

We understand this may cause an inconvenience. We are doing everything we can to make this process as easy as possible. We encourage you to review all correspondence from the Oregon Employment Department in the coming weeks.

Visit the Employer page of the OED website and follow us on social media (Facebook, LinkedIn) for important updates about the migration. 
Thank you for your patience.  

Important Washington Wage Change Information

Employers in Washington or with workers in Washington need to take note of some important updates regarding employee wages. Here’s a breakdown of key information:

1. Overtime Exemptions: To be exempt from overtime laws, Washington workers need to earn at least $67,724.80 per year or $1,302.40 per week. This amount is part of a phased implementation, with future thresholds based on the Consumer Price Index. Employers should remember that meeting the salary requirement is just one part of the exemption test; employees must also be paid on a salary basis and meet specific duties criteria. All parts of the test must be met for exemption.

2. Outside Employment Restrictions: In general, employers cannot restrict employees from having outside employment or being self-employed unless they are paid at least $32.56 per hour.

3. Non-compete Thresholds: Employees earning $120,559.99 or more may be subject to non-competition agreements, while independent contractors have a higher threshold at $301,399.98.

4. Dairy & Agricultural Workers: These workers are eligible for overtime if they work more than 40 hours per week. Previously, the policy required agricultural workers to exceed 48 hours for overtime eligibility. The overtime pay rate must be at least 1.5 times the regular rate of pay.

5. Minimum Wages for 2024:
– Washington State: $16.28 per hour
– Seattle: $17.25 to $19.97 per hour (with variations for small business employers)
– SeaTac: $19.71 per hour (Hospitality and Transportation Industry)
– Tukwila: Large employers: $20.29 per hour; Mid-size employers: $18.29 per hour (effective 7/1/2024)

If you have additional questions about this information or any other human resource topic, don’t hesitate to reach out.

Update For Qualified Retirement Plans

Special appreciation to Keith Mayfield with Plan It Financial for providing us with information on three significant items for qualified retirement plans:

1. FOR NEW PLANS–Significant Tax Credits to set up a 401k, 403b or SIMPLE. The government currently offers significant tax credits to offset some costs of setting up an organization retirement plan and offset costs of making employer contributions to the plan. See this link at the Planit401k.com blog for an example of a 50-person group who received $16,500 in tax credits to offset the cost of a plan AND $175,000 in tax credits to offset the cost of making $250,000 in employer contributions.

2. FOR CURRENT PLANS–Review current 401k plan. Common improvements are to:
a. Change to a 3(38) Investment Manager— ERISA puts financial and fiduciary liability on plan sponsors for ongoing investment selection and monitoring and requires them to do so at the level of a prudent investment specialist. ERISA allows this responsibility and liability to be shifted off the sponsor when they have their plan advisor accept the liability and responsibility as a section 3(38) Investment Manager. In Planit’s opinion, most plan sponsors will adopt this change to meaningfully limit their work and financial liability.
b. Employer Benefit: Organizations put time, effort and perhaps up to 6% of their entire corporate payroll as an employer contribution into the retirement plans. Yet many plans do not have a focus on making this investment a true Employer Benefit that assists with Recruit, Reward, Retain. Keep the following question top of mind when evaluating each decision with your retirement plan… “How can we improve this benefit to positively impact the perception of our company/organization to current and prospective employees”. The more that question is asked, the better your plan serves your participants and the better your plan returns value to your company/organization.
c. Review Plan Fees: Anything that reduces plan growth is equivalent to a plan fee. Sponsors are used to basic fees such as investment/advisor/TPA cost reducing plan growth, but items such as lower than optimal participant rates, contribution rates and investment usage reduce plan growth much more than normally measured “fees”.

3. FOR SIMPLE CONVERSIONS–Convert SIMPLE plans to more beneficial 401k plans. Following find three main reasons for the change:
Employer Benefit-–The purpose of an employee benefits is to improve a company’s ability to recruit, reward and retain. The features of a 401k provide a meaningful improvement in how employees and prospective employees perceive working at their employer over a SIMPLE plan. Items such as higher contribution limits, better investment guidance, and the employee engagement with retirement planning education provided by an advisor are highly ranked by employees when evaluating retirement plan value.
Contribution Limits–Increased employee contribution limits especially for owners/highly compensated employees. While a SIMPLE plan contribution maximum of $15,500/$19,000 is often enough for rank-and-file employees, this limits owners/high saving employees’ ability to fund enough to meet their goals. The 401k limits of $22,500/$30,000 allows owners/high saving individuals a 50% increase in retirement planning limits.
• The ability to have Roth contribution in a 401k (not allowed in SIMPLE plans) further increases owners/highly compensated individuals’ deferral power by approximately another 30%.
Employer Contributions and Vesting Schedules— SIMPLE plans require employer contributions, while employer contributions are optional with 401k plans. When making employer contributions, only the 401k allows vesting schedules which makes employees earn the right to keep those contributions over up to 6 years of tenure using a vesting schedule. This is both an employee retention tool as well as a tool to reclaim employer matching contributions from those shorter-term employees who do not really impact the business. Reclaiming “unvested” contributions typically results in a 10%-25% lower annual expense of employer contributions (which are normally 3% to 6% of total company payroll).
• Notice: Notice to close a SIMPLE must be given by November 2. To close a SIMPLE, notice has to be given by November 2. Though rules in 2024 allow mid-year changes from a SIMPLE to a 401k, mid-year changes have restrictive rules that limit some important normal 401k options available in a calendar year switch.
If you would like to learn more and ask questions Keith will be joining HR Answers on December 6th for HR Lunch Bunch and a discussion on 401k’s. Visit our website for more information.
For additional questions please feel free to reach out to Keith Mayfield at keith@planitfinancial.com or at www.planitfinancial.com or 888-654-4015 ext. 1.