Managing Unemployment Forms

“My business was closed for over 2 months due to the state stay-at-home orders. In the past few weeks, I have been bombarded with various unemployment claims and notices but the deadlines for responding have passed. What do I do with them?”

Your HR Survival Tip

You only had to hear the news of all the layoffs caused by the pandemic to know EDD (California’s Employment Development Department) was swamped with unemployment claims. They are slowly catching up but we’ve seen a lot of forms arriving in June but with March and April dates. So now it’s your turn to be swamped.

The way we like to handle them is to first sort them by employee so you can see if there are multiple documents or a progression in the documents for that employee. The most common are:

  • Notice of Unemployment Insurance Claim Filed — This is the first form you receive. It shows you an employee has filed a claim. The form includes the employee’s name and social security number, the effective date of the claim, the last day of work, and the reason the employee gave them for not working. If the information is correct, you can just file this in the employee’s personnel file. If the information has errors (or you want to fight their eligibility), you provide the correct information on the back of the form and return it to EDD. Normally you have 10 days from the “Mail Date” on the form but, right now, just return it as soon as possible. Once things have settled down, EDD will hold firm to that 10 days and you could lose your chance to fight the claim if your response is late.
  • New Employee Registry Benefit Audit — Receiving this form means they want to confirm the information they have on this employee. Questions 1-3 are easy to understand. Question 4 is asking for the most recent pay period start and end dates (this is the period worked) and the employee’s usual pay. Question 5 includes a chart where you must break down their earnings by week, include the hours paid each day and state what type of hours they were (regular, vacation, etc.). The form lists the weeks they are interested in so you only have to complete those lines. In most cases, the employee may not have worked at all during some or all of the weeks they list.
  • Notice of Unemployment Wages — This document informs you of how much your company’s unemployment reserve account will be charged for this employee. EDD looks at the employee’s earnings for each of the last four full quarters. This information is in the chart on the form. Below that they state the percentage of those earnings that came from your company. If it states your company’s percentage is 50%, your account will be charged for 50% of the employee’s weekly amount, up to 50% of the maximum benefit. You may request a ruling if you don’t agree with EDD’s calculation but you’ll need to submit that request at the bottom of the form and submit it prior to the request deadline at the top of the form.

California loves to provide unemployment and it’s easier to qualify than most people think. An employee is unlikely to receive unemployment if they resign, if they destroy property on their way out the door, or if they are insubordinate in front of others. Unfortunately, being bad at their job doesn’t prevent employees from getting unemployment.

Your unemployment reserve account is filled with money you paid in as part of your payroll taxes. Right now, everyone’s unemployment reserve account is taking a beating and you may see your unemployment tax rate increase a bit. Some of you may run it dry. If you have nothing left in your reserve account, you could receive a notice from EDD that allows you to voluntarily add money to your account. We haven’t yet heard a good reason to do this but it’s up to you. Your employees will still be able to receive unemployment, even if your reserve account is empty.

Commission vs. Bonus

“I want to pay my employees a commission of $20 for every successful upsell of our products to a current client. How do I set that up?”

Your HR Survival Tip

Employees are often excited about an opportunity to earn extra money. Let’s first make sure you are using the correct terms and processes for it so you remain in compliance with California law.

In California, a commission is only available when the “salesperson” is actively involved in making and closing the sale and earning a percentage of the sale. You must have a written commission plan signed by each employee with specific details, in accordance with the law. In your case, commission is the wrong term for what you’ll pay.

Since your employees will earn a flat $20 for each upsell, this is considered a non-discretionary bonus. It’s non-discretionary because it is expected whenever they successfully upsell a client. It’s a bonus because it is a flat dollar amount instead of a percentage of the sale.

The only negative is, in CA, a non-discretionary bonus is subject to overtime for the period it covers. For example, if an employee’s bonuses are earned and paid each pay period, you would need to check if any overtime was worked that pay period and adjust the bonus accordingly. If the bonus was only paid quarterly, then you review any overtime worked in that quarter. This is one of California’s many special calculations. It’s not a difficult calculation; you just need to learn how to do it and to use it consistently.

Giving employees the opportunity to earn a little extra money can be a great motivator, in addition to helping your sales. However, since it is about money, you should create a simple written plan to ensure it is implemented and calculated correctly and everyone understands it. A good idea can fall flat if there are misunderstandings about the money or if it’s too complicated. Contact us if you want help with your plan.

Mid-Year Updates

Once upon a time, all the legal changes in California became effective on January 1st. But that was then. The past several years have shown us changes can go into effect at any time so we have to be more diligent if we want to be compliant.

This July 1st, 2020, is the effective date for the following changes:

  • Paid Family Leave (PFL) — This is currently 100% paid by employee taxes but it is not an actual leave. Employees may receive supplemental pay from the state if you have approved a leave and the employee has an eligible reason. The most common use of PFL is for baby bonding. Since PFL began, the maximum time has been 6 weeks but that has now been expanded to 8 weeks.
  • New Local Minimum Wage — The City of Santa Rosa has set a minimum wage of $14-15 per hour, depending on the size of the company. This will become $15 per hour for all employees in January.
  • Increased Minimum Wages — The following localities have a mid-year increase in their minimum wage:
    • Alameda: $15.00/hour
    • Berkeley: $16.07/hour
    • Emeryville: $16.84/hour
    • Fremont: $15.00/hour if 26+ employees; $13.50/hour if 25 or fewer employees
    • Los Angeles City: $15.00/hour if 26+ employees; $14.25/hour if 25 or fewer employees
    • Los Angeles County (unincorporated areas): $15.00/hour if 26+ employees; $14.25/hour if 25 or fewer employees
    • Malibu: $15.00/hour if 26+ employees; $14.25 if 25 or fewer employees
    • Milpitas: $15.40/hour
    • Novato: $15.00/hour if 100+ employees; $14.00/hour if 26-99 employees; $13.00/hour if 25 or fewer employees
    • Pasadena: $15.00/hour if 26+ employees; $14.25/hour if 25 or fewer employees
    • San Francisco: $16.07/hour
    • San Leandro: $15.00/hour
    • Santa Monica: $15.00/hour if 26+ employees; $14.25/hour if 25 or fewer employees

This is a good time to remind you that your remote employee must be paid based on where their home office is located since that’s where they are now working. Review the home addresses of anyone working remotely and confirm their pay (and often paid sick time) meets the requirements of that locality.

Broker Trust Broken

“I’ve been working with my insurance broker for many years. Lately, when I’ve asked him a question based on something I heard, I find myself worrying about the answers he gives me.”

Your HR Survival Tip

As with any profession, it’s important to stay up-to-date with the changes in your industry and with technology being used in the industry. Too often, when we start working with a new client, we find the insurance broker doesn’t know the answer to our questions…and we believe they should.

While loyalty is a fabulous thing, you may have to decide if your loyalty really belongs to your broker or to your employees. You may not like “breaking up” with your broker but you do need to take responsibility for the choices you make affecting your employees. We all use brokers to provide us with those choices.

We recently heard a client’s broker say he wasn’t really “techie,” so he was unaware that technology started playing a big role in insurance enrollments years ago. Whether you are enrolling directly online with the carrier or using an online broker-provided service like Ease, being able to have employees enroll online (by smartphone or computer) is a huge time saver. You don’t have to chase the paper or try to read someone’s writing. The employee’s payroll deduction immediately appears so they know what that choice will cost them.

Some industries won’t find this as useful because their employees are not computer literate and don’t have easy access to these online options. Even if this is the case, make sure you are involving your broker by ensuring he is available to help employees with the forms and their questions.

Does your broker check on pricing every year? How do you know you’re being offered the best pricing or coverage if he doesn’t? Your broker should be informing you about the latest changes to the insurance industry so you are aware of other options you may have. While the Affordable Care Act (ACA) is still in force, it has gone through some changes and isn’t as rigid as it once was. Maybe you can now only afford to pay $100 toward an employee’s premium rather than 50%. Maybe you want an executive carveout with better choices. Has your broker provided options to help or inform you?

Your broker makes a nice commission on your insurance policy premiums and it’s your job to make sure he earns it by helping you and your employees. Feeling confident your broker is current with the options available for you, is able to answer all your questions, and makes enrollments easy for you…that’s how they really earn your loyalty. And, yes, we know some good brokers and would love to make an introduction.

Unlimited PTO

“I’m tired of paying out vacation when someone terminates. How can I offer vacation without accruing it?”

Your HR Survival Tip

You can front-load vacation so it doesn’t need to be accrued but that doesn’t eliminate the need for a payout upon termination. The only other option is an unlimited paid time off (PTO) plan but it has problems of its own to consider.

A California appeals court recently ruled a company’s unlimited PTO plan wasn’t done correctly and the result was the plan was accruing for purposes of that particular case. The court was very specific that the results were based on this particular case and may not apply to other plans.

CA doesn’t require companies to provide vacation time. However, if you offer paid time off, any accrued time is considered earned wages and cannot be taken away from the employee. Accrued time must either be used as paid time off by the employee or be paid out. This is why it’s critical you have a cap on accruals (which must be at least 150% of their annualized accrual) so you limit their accrual balance.

If you’ve been thinking about implementing an unlimited PTO plan, add this to your thinking:

  • The wording is critical to avoid it becoming an accrual plan when read by attorneys and judges. There are a few keywords and phrases that can work against you. You also want to be clear the PTO is not a form of wages.
  • You cannot restrict why they use the time off so medical leaves of absences qualify as paid time off. This means you need to consider what you can do to minimize long paid absences.
  • You must have a written policy that is signed by every employee. This is where the case mentioned above went wrong…they didn’t properly inform this employee they were under an unlimited PTO plan so it reverted to their normal accrual plan.
  • Will you allow sufficient opportunity for employees to actually take time off or reduce their hours in lieu of taking time off?
  • A common theme to these plans is the condition that it is the employee’s responsibility to ensure their work is being completed while absent. This means you need good job descriptions to use as a measurement for their work and performance.
  • Are there penalties for not properly scheduling the time off?
  • How are you ensuring the plan is fair? Will some employees take the time off while leaving the work for others who now won’t have the opportunity for time off?

Even if you figure out the answers to all these things, your plan will not be risk-free. Unlimited PTO is fairly new and new things are tested in court. No California state court nor the DLSE (CA’s Division of Labor Standards Enforcement) has definitively ruled on just what your unlimited PTO plan must include (or exclude) to avoid legal risk. Therefore, we are waiting for more court cases to provide more guidance.

Payroll Checkup

“One of my employees asked me about her overtime pay. When looking at our timekeeping system, I was shocked to realize the overtime isn’t being calculated correctly.”

Your HR Survival Tip

Even when things are going well, we have all experienced that occasional computer glitch. Since we know they happen, why do we still expect our systems to always work perfectly? Most companies are using online payroll processing but you can’t just assume there will never be a problem.

Payroll needs a checkup at least twice each year to review:

  • Your company information — Look at a wage statement (pay stub) to confirm your full legal name and full street address are still correct. We aren’t expecting pieces of information to be dropped from something that’s been the same for years but it does happen.
  • Timekeeping system — If you are using an app or the payroll company’s timekeeping, review the calculations it’s providing. Is overtime calculating the daily hours, then the weekly hours? Remember the payroll processing companies are nationwide so they might not have set you up properly for California since we’re the only state with the 8-hour days before paying overtime. Also, make sure your employees are actually clocking out/in for meal breaks.
  • Paid time off — California has at least 29 localities with different minimum wages and paid sick leave plans. Is each employee’s sick leave being calculated properly? When using vacation or sick leave, is it being properly reflected in the balances on their wage statements?
  • Employee information — When was the last time you checked that your employees’ addresses are still correct? When using direct deposit, employees often forget to notify us of address changes and we don’t find out they are incorrect until the W2s are mailed.
  • Benefit deductions — Are your deductions appropriately set up as pre-tax or after-tax? Has the amount of the deduction changed based on age-banded rate changes, renewals, etc.?

California is very protective of an employee’s earnings, as we know, or have learned the hard way. Save time and avoid those future headaches by developing a checklist and scheduling a regular checkup of your payroll.

Exposed

“An employee called me to say he might have been exposed to COVID-19 over the weekend. What should I do?”

Your HR Survival Tip

Many people are confused about time off related to COVID-19. As calls from employees reporting possible exposure are increasing, companies are realizing they aren’t quite sure what they can or should do. The Families First Coronavirus Response Act (FFCRA) provides emergency paid sick leave but only if the employee qualifies.

Typically, to qualify for FFCRA paid sick leave, the employee must have symptoms and is seeking a diagnosis. Here are a few scenarios:

  • Bob has symptoms and decides to quarantine himself for 2 weeks but does NOT seek a medical diagnosis or advice from a doctor.
    • Generally, this will be unpaid time off but Bob could use any accrued sick leave.
  • Bob has symptoms and seeks a medical diagnosis or advice from a doctor.
    • Bob will be eligible for FFCRA emergency paid sick leave for up to 2 weeks.
  • Bob has no symptoms but believes he has been exposed recently and plans to self-quarantine.
    • Until Bob is showing symptoms, this will be unpaid or accrued sick time off.
  • Bob has no symptoms but has a doctor’s note stating he should quarantine himself because he lives with an at-risk family member.
    • Bob will be eligible for FFCRA emergency paid sick leave for up to 2 weeks but, after that, he’ll be on unpaid time off.

You are not allowed, due to privacy laws, to let other employees know Bob has symptoms or believes he may have been exposed. Instead, you inform Bob’s close coworkers that “an employee” has symptoms of COVID-19 and is on leave. Yes, they will likely figure out it was Bob but it shouldn’t come from you. Remind the coworkers they should inform you and not come in to work if they develop symptoms.

It’s important to obtain the proper information from employees when paying the emergency paid sick leave. The reimbursements are a tax credit and you need the right backup for the IRS. Ask us for the certification you’ll need from each eligible employee.

Job Killers

As if you aren’t dealing with enough while trying to get your business back to some version of normal, it feels like the California legislature has been working against us lately. The CA Chamber of Commerce has provided its annual list of “job killer” bills. A bill gets this designation when the Chamber feels it threatens the state’s economic recovery and may hurt your ability to rehire or maintain employment of workers. The bills below have not yet been passed so there’s still hope.

Please make use of your personal protective equipment (i.e., your chair) before reading:

AB196, AB664, and SB893 Presumption of injury — AB196 will increase workers’ compensation costs by presuming it’s a workplace injury if your “essential worker” contracts COVID-19. AB663 adds to that by requiring public employers and public/private hospitals to provide additional compensation for things like temporary housing costs based on the employee being exposed or contracting a communicable disease, including COVID-19. SB893 focuses on public and private hospitals by presuming certain diseases are caused by the workplace. This will also establish a precedent for expanding this presumption into the private sector.

AB1107 Massive unemployment and tax increases — This will raise employers’ payroll taxes to fund a 130% increase in unemployment payments.

AB2999 New protected leave — This will require all employers of any size to provide up to 10 days of unpaid bereavement leave, regardless of how long the employee has worked for you. The bill also includes additional litigation possibilities.

AB3075 Public shaming — Corporations can be publicly shamed by local jurisdictions based on arbitrary, unclear, and unfair standards. This means your city or county can impose their own wage payment requirements that are more stringent than state requirements… and let it be known publicly if you aren’t following them.

AB3216 COVID-19 leave mandate — In addition to current federal, state, and local laws, this bill provides unlimited job-protected family and medical leave for all employees in any size company for anything related to COVID-19.

SB1399 Increases costs and liabilities on the apparel industry — This bill requires the industry to have a $600,000 bond to operate and the Chamber believes this financial burden will force the closure of many of the shops.

As you can see, COVID-19 continues to be the impetus for changes that may cost us more. The only good news is that last year there were 31 job killer bills and only two made it to the Governor and only one was signed into law. However, a year ago we didn’t have COVID-19 playing havoc with our businesses so even one of these bills getting passed will be bad news.

Reluctant Returns

“I finally received my PPP (Payroll Protection Program) funds but I am finding it hard to get employees to return to work. Unemployment is either paying them more than they earned each week with me or at least enough so they’d rather not work for nearly the same money. What can I do?”

Your HR Survival Tip

You’re not alone with this particular dilemma! We have heard the same thing from several clients. Even those companies that don’t have PPP money but are ready to slowly start back up are having similar problems. However, the PPP money requires you to maintain a certain headcount for the funds to be forgiven so you may have to make a hard decision about those employees.

Employees First

Employees are often making more on unemployment right now due to the extra $600 they are getting each week. You could sympathize with their desire to receive more money right now and allow them to stay on unemployment. However, please keep in mind they are turning down work and therefore, legally, are committing fraud by continuing on unemployment… where they are attesting they are “willing and able to work” each week. You might also be adding to the fraud by not reporting they turned down work. One solution is to have enough employees come back at least part-time so they might still be eligible for some unemployment (and that $600). However, you may also need to start hiring more people immediately to meet the requirements for the forgiveness of your PPP money.

Business First

You’ve worked hard to make it possible to once again offer employees work and there’s a certain irony that the extra unemployment money is working against the requirements of the PPP money and your ability to reopen. If you inform employees of your reopen date, you will likely get some employees returning to work… reluctantly. If they turn you down or don’t show up, be prepared to accept that as a resignation and report it as such. If you can get by with offering part-time work and still meet the PPP requirements, great. However, be prepared to start hiring new people who are actually interested in getting back to work.

Report Fraud

If you want to report fraudulent claims when employees turn down work just so they can stay on unemployment, you can let EDD know at report fraud.

The Federal government might have had a great idea for supplementing unemployment but how they implemented that idea makes you the bad guy when you shut it off by having work available. Overall, we feel it’s more important right now that you can reopen, rehire, and use the PPP money as it’s meant to be used. Whether that’s with your previous employees or you have to hire a whole new team, it’s up to you on how you choose to move forward. Let us know if we can help.

Forgetting the Laws

There are several laws companies tend to forget when you’re busy. Right now, it’s even easier to ignore some of the employment laws if you’re in survival mode. However, while you may believe you’ll get a free pass because of the pandemic… think again.

California has allowed very few exceptions to the normal employment laws and you will be held accountable for non-compliance if problems from those “forgotten laws” should pop up during a future audit. Here are a few things we’ve noticed:

  • Meal and rest breaks — Yes, even those employees working at home must still follow the usual timing for meal and rest breaks and those meal breaks need to show up on timecards.
  • Scheduling — Employees often like to create their own schedules when working at home. However, this can create payroll issues due to split work shifts (more than 1 hour between their morning and afternoon shifts) or overtime pay because they were in a flow and didn’t want to stop working that day. Maintain your regular work hours even with remote workers.
  • Classification issue #1 — If you have exempt, salaried employees who now have too few employees reporting to them (the equivalent of 80+ hours at a bare minimum), they have lost their exemption and should be hourly for the duration.
  • Classification issue #2 — If you have an exempt outside sales rep, the only way they qualify for the exemption is to be knocking on doors 51% of the time. Since that’s not possible, their exemption is not possible and they should be hourly for the duration.
  • Fraud — Unemployment is quite attractive at the moment due to the extra money people are receiving from the government. Some people are making more money with unemployment than when they worked. However, it is fraud if they are turning down work you have available for them and, whenever possible, you should fight their claim.

Life doesn’t feel anything like normal at the moment. However, things will eventually level out and California and the feds will be looking over everything that’s happened. Don’t become a target for an audit by pretending the laws are more relaxed right now. The basics haven’t changed at all.