» Employment Laws

Paying the Price of Keeping Time

C.J. Westrick — Sun, 07 Mar 2010 15:46:00 +0000

California has been reaping the financial benefits of your timekeeping efforts. Over the past couple of years, more and more companies are getting caught by insufficient proof that they’ve properly tracked (and paid for) employees’ time.

A proper time card shows:

exactly what time your employee started work,
exactly what time your employee left for a meal break,
exactly what time your employee returned to work, and
exactly what time your employee quit working for the day.

Sounds easy, doesn’t it? Then why are so many companies paying huge fines and penalties? Because they aren’t doing it correctly.

I recently viewed a company’s time cards for all of 2009. Every time card for every employee said exactly the same thing: in at 8:00a, out at 5:00p, one hour lunch. Let’s face it, there is no way even one employee clocked in and out at exactly the same time every day for a year. Don’t even get me started on the impossibility of taking exactly one hour for lunch every day.

Those time cards do not protect that company from claims because they aren’t truthful. It doesn’t matter that the employees filled them out… they aren’t believable and certainly not honest.

You can’t afford to let your employees get away with “easy” time cards. You need a time card that will back up your own claims that you have paid employees for any overtime worked, that they took at least 30 minutes for a meal break every day, and that the meal period began within the first five hours the employee worked.

If this sounds like too much work for you, do the math. Every day that a non-exempt employee misses at least one rest break or takes less than the 30 minute meal break required, you have to pay that employee one hour of penalty pay… plus a half hour of overtime if the missed meal break caused them to work more than 8 hours.

Let’s go over those rules again. Non-exempt employees must take a 10-minute rest break (not 8-minutes and not two 5-minute breaks) for every 4 hours worked. In addition, if they are working more than 6 hours that day, they must take at least a 30-minute meal break that starts within the first 5 hours of work. One skipped rest break or a meal break that is interrupted by work results in the need to pay one hour of penalty pay for that day.

So, let’s go through that math again with the lowest denominator. If one minimum-paid employee misses one rest break one day each week, you have to pay the employee:

$8 (one hour) penalty pay for the rest break that was missed that week
Multiplied by 52 weeks in a year
Equals $416.00 just in penalty pay for the year.

Give some thought as to what poor timekeeping records could cost you in a year, then ask yourself if it’s worth throwing away that much money just to make it easier for your employees.

Posting GINA

C.J. Westrick — Fri, 27 Nov 2009 00:03:19 +0000

The feds passed the Genetic Information Nondiscrimination Act (GINA) and it took effect on 11/21/09… which means you should add it to your wall of employment law posters immediately. (Note: California already prohibits this type of discrimination, so you may be covered if the “EEO and The Law” section of your posters includes genetic information.)

This federal law affects you if your company has 15 or more employees. GINA is intended to prohibit genetic information (such as genetic tests and family medical histories) discrimination by insurers and employers. Although this isn’t the type of information you just trip across, review your forms to check that you aren’t asking a question that could fall into this category. Your to-do’s for GINA include:

Adding the GINA poster to your wall (or confirming it’s already included in your current posters). Here’s a copy for you: Give me GINA!
Update your non-discrimination policy to include genetic information.
Audit yourself to ensure you aren’t asking employees for information that’s not allowed by GINA. You may request sufficient information to meet certification requirements for state or federal medical leaves but be sure what you’re asking for doesn’t cross this line.
Separate genetic information, including family and medical leave certifications, from other personnel documents and place it in a confidential medical file accessible only to employees with a need to know the information. For your company’s protection, make sure that’s a really short list that needs to know!

Violations Abound

C.J. Westrick — Thu, 19 Nov 2009 15:54:37 +0000

A 2008 survey of 4,387 workers within low-wage industries in Chicago, Los Angeles, and New York City revealed that many of the laws meant to protect workers are frequently violated. Here are a few examples of the violations:

Minimum Wage: 26% of workers were paid less than minimum wage.
Overtime: 25% worked over 40 hours the previous week, but 76% of them were either underpaid or not paid at all for the time.
Off-The-Clock: Almost 25% came in early and/or stayed late but 70% received no pay for work performed outside of their shift.
Meal Break: 86% were legally entitled to at least one meal break during the previous week; however, 69% of them received no break at all, had their break shortened, were interrupted by their employer, or worked during the break.
Pay Stub: 57% didn’t receive a proper pay stub with their pay from the previous week.
Pay Deductions: 41% had improper deductions in their pay for damage/loss, work-related tools/materials or transportation.
Retaliation: 20% had made a complaint to their employer or attempted to form a union in the last year. 43% of those experienced at least one form of retaliation by their employer or supervisor, such as being threatened with a pay cut or reduced hours, threatened with calls to immigration, or fired or suspended.
Fear of Retaliation: Another 20% of workers did not make a complaint in the past year about dangerous working conditions or being paid below minimum wage. 50% of them were afraid of losing their job, 10% were afraid of having their hours/wages cut, and 36% didn’t think making a complaint would make a difference.

Businesses with under 100 employees were found to be at greater risk of violations than larger businesses. The survey results suggest that it’s a company’s broader business strategy that results in decisions about legal compliance. Be prepared to see the government crack down on these violations.

This survey information is from Broken Laws, Unprotected Workers, by Bernhardt, A.; Milkman, R.; Theodore, N.; etal.

Pending Federal Legislation

C.J. Westrick — Mon, 21 Sep 2009 17:00:31 +0000

You’ve heard me talk a lot about all the employment laws California has. Now the feds are getting more liberal and it’s bound to be interesting to see what passes. Currently pending legislation includes:

Family Fairness Act of 2009: This would eliminate the 1,250 hour requirement of the Family Medical Leave Act (FMLA) so part-time employees could also be eligible for this leave.

FMLA Enhancement Act of 2009: Companies with only 25 employees would be subject to FMLA (instead of the current 50 employee minimum) and it adds more reasons an employee could take leave time.

FMLA Inclusion Act: This widens the circle of what is considered family in relation to FMLA leaves.

Family Leave Insurance Act of 2009: In California, we have the Paid Family Leave and this is very similar except both employees AND employers would pay 2% of pay into it.

Healthy Families Act: If passed, companies with 15+ employees would have to provide up to 7 paid days of sick leave each year.

Paid Vacation Act: This requires employers to provide one week of paid vacation each year and increases that to two weeks after 3 years of employment. It may not affect companies of <50>

If history repeats itself, California won’t change or eliminate any of its employment laws even if the feds pass some of these. That means you’ll have to determine which law is the most beneficial to employees and follow that one. It’s scary that the feds are now surpassing California in coming up with laws that place a bigger burden on employers.

Make sure you know which employment laws your company needs to follow because the fines and penalties are always harsher than just being compliant.

Is Your Contractor Really Independent?

C.J. Westrick — Mon, 14 Sep 2009 22:56:24 +0000

I talk with a lot of small business owners who tell me they are using Independent Contractors (I/Cs) rather than hiring employees. But have they really thought it through? The one thing few companies are doing when making the decision between I/Cs and employees is checking the legal liability of their decision.

Did you know that the IRS, Department of Labor, state agencies, Congress, state legislatures, courts, class action attorneys, and unions care about your decision? What those entities have in common is that they assume your worker is an employee and that it’s your responsibility to prove that you are using an I/C. IRS calculates it loses $3-5 billion per year because of misclassified workers and has created a new audit program in an effort recoup some of these losses.

The biggest determining factor seems to be the level of control you or the workers have regarding behavior, finances, and the relationship. Although each entity has its own testing requirements, an I/C is likely to:

Have a financial stake by risking a profit or loss from the work;
Furnish his own tools and/or equipment needed to complete the work;
Be paid by the job rather than by the hour;
Provide similar services to more than one company;
Invest in his own business, tools/equipment, and facilities;
Pay his own business and travel expenses;
Hire and pay for any helpers needed to complete the work; and
Set his own working hours and days.

Misclassifying workers is seen by the government as cheating. Statistics show 7-15% of workers are misclassified and 15% of employers have misclassified workers. Now all this sounds frightening but do you know who is the scariest and most likely to start all your legal and financial problems? That worker you classified as an I/C.

The predominant problem I see is that the workers you are hiring as I/Cs aren’t seeing themselves as businesses. A signed I/C Agreement is barely worth the paper it’s printed on if that I/C doesn’t have the business mindset. That mindset means they are truly operating like a real business, they have other clients, and take on jobs over which they have total control except for the agreed-upon outcome.

Instead, a worker agrees to be an I/C because you’ve asked them to and they follow your instructions, use your tools/equipment and facilities, and are paid for the time worked. Then, when you don’t need them any more, they file for unemployment and start the governmental nightmare for you by triggering an EDD (Employment Development Dept.) audit.

Because misclassifying an employee is a wage and hour law issue, California can collect unpaid payroll taxes and unpaid overtime hours for the previous four years… plus the associated fines and penalties. It’s not pretty and it’s very expensive.

So, just how sure are you that you have properly classified your workers? If you’re not positive that I/C is operating as an independent business, you may have a problem. Sorry, but there’s really no cheap and easy fix here. However, being proactive in correcting misclassifications is usually less costly and looks better for your company than just waiting until you’re sued or audited.

AN ALTERNATIVE TO HIRING EMPLOYEES: Rather than making the mistake of misclassifying workers as Independent Contractors, consider hiring temporary employees through an agency. Yes, you’ll pay more per hour but you won’t have to worry about unemployment, benefits, workers’ compensation insurance, payroll taxes, or the fines and penalties of misclassifications. Plus you can swap out workers if they aren’t working out for you!

When You’re “On Notice”

C.J. Westrick — Mon, 20 Jul 2009 20:29:29 +0000

When you think about your employment risks (assuming you think about them at all), what do include in that process? Are you expecting employees to walk up to you and say something directly to your face? Or have you and your supervisors been trained to pay attention to the more subtle clues that the company has been put “on notice” for something?

Let’s look at a situation: You’re a supervisor working in your office when you realize you can overhear three female employees talking in the hallway outside your office. One says, “Can you believe Tom mentioned sex during yesterday’s sales meeting?” The second says, “Oh, he always talks like that.” The third responds, “Yeah, he always seems to have sex on the mind.” Should you, or are you required to, do anything? Do you consider this “water cooler talk” and ignore it since they didn’t know you could hear? Or do you take action and, if so, what type of action?

Let’s take our situation a step further. Three months later, during your annual sales meeting, a female employee files a complaint alleging that Tom raped her at the hotel. This complaint obviously requires an investigation so I’m not going whether or not you’ll have one conducted. What I want to know is how your company may be affected?

Regardless of your response to the original situation, the complaint that came later makes what you overheard much more believable and serious, doesn’t it? Guess what, the court and jury are going to agree. In fact, any supervisor overhearing employees talk about any type of harassment … whether they know you’re listening or not … is considered sufficient to put your company “on notice” of harassment and requires action by the company.

While it’s a nice dream to think employees will always be up front with you and know the proper way to phrase things so you see a big red flag at that particular moment, that rarely happens. Your company should have a policy that ensures every supervisor is aware of their responsibility and a process on what to do with information learned about possible harassment.

When your company is put on notice in some way, the clock starts ticking. What that means is that a court and jury will look at your actions from the moment they feel you did, or should have, known there might be a problem. If, in the original situation, you didn’t do anything it’s going to look as if the company doesn’t care. Look at it from the jury’s viewpoint… you knew there might be a problem but you didn’t act and it resulted in an alleged rape case. Needless to say, this will really cost you when a decision comes down.

On the other hand, if you immediately reported what you heard, it will show that your company is serious about providing a harassment-free environment because you acted quickly and followed procedure.

Protect your company by making sure your supervisors are well-trained in the various ways harassment may appear in the workplace… and what to do about it. Oh, it might help them be more diligent if you mention that, in California, supervisors may be personally sued in some cases!

Have You Papered Your Employees?

C.J. Westrick — Sun, 10 May 2009 23:06:06 +0000

Consulting with companies that don’t have or need a full-time HR person (my specialty) continues to bring me surprises. When I first started consulting I discovered that neither the state nor federal government websites offered new employers information about being an employer beyond how to obtain an Employer’s Identification Number (EIN). Not a thing about the fact that hiring employees automatically brings a business into the world of HR … or it should. It was both a surprising and disappointing discovery.

Considering that federal employment laws apply to every employer in the U.S., you’d think some kind of "cheat sheet" would be available to give new (or experienced) employers a heads-up on what they need to do to be compliant with these laws. Yes, you can read the full text of the federal laws but no help is provided in how to implement them or what they mean in the day-to-day running of your business.

I recently reviewed a 45-page booklet provided by the SBA (Small Business Administration). Lots of great information in general for business owners but it only told readers how to get an EIN, not how employment laws may affect how they do business and deal with their employees.

Is it any surprise that so many small (and larger) employers aren’t fully compliant with employment laws? Even the basics are often omitted by a company … usually due to lack of knowledge than a willful omission. However, if you ever ended up with a labor claim or lawsuit, ignorance of the law isn’t considered a defense. A no-win situation. No information and no defense!

Consider this post your information resource for the most basic part of compliance with federal employment laws: the forms you are required to give employees.

Current federal employment law poster – This isn’t something you need to give employees but you are required to hang the poster in a conspicuous place located where all employees will see it. The usual place is the coffee area, next to the time clock, or other place where everyone has reason to go by it. Sometimes you need to get creative. I know a couple of companies who are putting the information as an addendum to their Employee Handbook because their employees don’t come into the office.
IWC Wage Order – If you look really close at the margins of the employment law poster you may find a little sentence that reminds you about posting this information but most companies miss it. The Industrial Welfare Commission (IWC) has created 17 different wage orders, each directed toward specific industries. You need to determine which IWC Wage Order fits your industry, print it out (about 14 pages), staple it together, and stick it on the wall next to your employment law poster. This gives all the minute details about the wage and hour laws affecting your industry. There may be subsequent "interpretations" written about how to implement this wage order but those don’t need to be posted.
IRS W-4 form — This is the one form that everyone seems to use … but that’s only because it has information you need when putting an employee on payroll. Although the Internal Revenue Service (IRS) issues a fresh copy each year, nothing but the year imprinted on it has changed in a long time.
INS I-9 form – Although the Immigration and Naturalization Service (INS) created this form many years ago, it’s been taken over by Homeland Security. That means the form has seen several updates in the last few years and another is expected mid-2009. This form needs to be fully completed within 3 days of an employee’s hire date. There are fines and penalties for partially completed forms, so be sure to finish what you start. The point of this form is to ensure you have hired a person legally authorized to work in the U.S. The documentation an employee may use to prove that is what Homeland Security continues to change. While the form continues to evolve, you don’t need to have a new one completed each time. Just use the newest form with new employees. If an employee is using documentation that expires, you will need to follow up and record the updated documentation as needed.
Initial Notice of COBRA Rights — You only need to worry about this if you are providing benefits to your employees that are subject to COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985). This issue just got more complicated with Obama’s stimulus bill, so check with your insurance broker to ensure you are doing everything you need for this. The point of this notice is just to let new employees know that, if employment ends, they may be able to continue their benefits via this law.
Workers’ Compensation Insurance brochure — This is a brochure that you should be able to obtain for free from your insurance carrier. The brochure provides basic information on what the insurance covers and what the employee should do if an injury happens.
Sexual Harassment brochure — To be honest, I don’t know that this brochure is "required" but I feel it should be (and is in California). It’s a simple brochure that provides a description of sexual harassment and what an employee can do about it. This is really only the tip of the iceberg on this topic and I would strongly recommend you also invest in some type of recorded training that becomes part of your orientation. This is still the most common area for lawsuits so it’s worth the investment to ensure your employees understand what harassment is and, as importantly, that you don’t condone or tolerate that behavior.

California also has several state forms that are required but this post is only about the federal ones. Once you start using these forms, you’ll find that it really isn’t that much extra effort to minimize your company’s risks. You can get the latest versions of INS I-9 form, IRS W-4 form, and COBRA notices here (HR Jungle’s free HR forms). If you have employees that have never received these forms, it’s better late than never to work on being compliant with them. So, get your materials ready and go "paper" your employees!

Fed’s Snake in the Grass

C.J. Westrick — Thu, 09 Apr 2009 16:53:07 +0000

This year is the first that I can remember where there were more Federal changes to employment laws than California changes. That alone is historic! But the changes to COBRA almost seem like they should have been California’s idea because they are so favorable to the employee … or, in this case, the ex-employee.

The American Recovery and Reinvestment Act of 2009 (ARRA) was passed on 2/17/09 as part of Obama’s stimulus package. Employers subject to COBRA will now be providing a subsidy to offset the cost of COBRA coverage for employees who were (or are) involuntarily terminated (fired or laid off, unless terminated for gross misconduct) between 9/1/08 and 12/31/09. Yes, it’s retroactive!

You only have until 4/18/09 to get notices out to the affected employees and must send a notice even if they did NOT elect to take COBRA when it was previously offered to them. New employees and newly terminated employees are to receive special notices of these COBRA changes. These model notices can be found in HR Jungle’s free HR forms.

The subsidies are for up to 9 months for COBRA-eligible employees involuntarily terminated and also for affected spouses and dependents who are COBRA qualified beneficiaries. The simple explanation of this subsidy is that the employee/dependent only pays 35% of the COBRA premium and the employer pays 65%. You then get reimbursed for the 65% through a federal payroll tax credit so be sure to keep good records on the financial side of this. The subsidy ends when the eligible employee or dependent (1) gets other insurance coverage or (2) the 9-month subsidy period runs out or (3) their COBRA period ends.

Another aspect of ARRA is that you can offer these employees/dependents different coverage than they had pre-COBRA as long as it costs the same or less, is also offered to active employees, and is not just an add-on coverage (like dental-only, etc.) without including medical insurance. If this option is offered, they only have 90 days after receiving the notice to switch their benefits.

What to do?

Download the new model COBRA forms that the Feds have created. You’re not required to use them as-is but using them will be much easier than creating your own.

Make sure the General Notice is given to new employees with other new hire paperwork. This works for companies subject to either COBRA or Cal-COBRA (California’s version of COBRA for employers with only 2-19 employees). Also distribute the General Notice to all current employees eligible for benefits (whether they participate or not).

On or before 4/18/09, send the Notice in Connection with Extended Election Periods to any eligible employee/dependent who was originally eligible for and offered COBRA from 9/1/08 through 2/16/09. Yes, also send it to those people who declined COBRA. This extended period does not apply to state mini-COBRA coverages, like Cal-COBRA.

You will be wise to coordinate with your insurance broker to ensure you are providing the appropriate forms to the right ex-employees. You might also ask if they are planning to add any services that help with the administrative side of this new law.

Latest Immigration I-9 Form

C.J. Westrick — Mon, 14 Jul 2008 19:19:17 +0000

Homeland Security has once again revised the Immigration & Naturalization Service’s I-9 form. As usual, you can get immediate access to the latest I-9 form on my website.

Just so you know what to look for, the newest version has an 06/30/09 expiration date in the upper right corner of page one. Although this doesn’t affect any of the I-9 forms you’ve already completed and have on file, you should discard any blank copies of other versions and start using this latest version immediately.

Sick Leave That Makes You Sick

C.J. Westrick — Thu, 10 Jul 2008 17:31:47 +0000

As you’ve probably noticed, California is always leading the way for new employment laws. However, within California, that leader is San Francisco and it’s often scary to realize what local laws San Francisco has enacted. Let’s just say that, while it’s tough doing business in California, it’s tough and expensive in San Francisco.

The latest bill to hit California proposed by a San Francisco Assemblyman concerns sick leave. This bill, AB 2716, has already made it past the Senate Labor and Industrial Relations Committee and is lined up for the Appropriations Committee. So what’s so bad about AB 2716? It forces every business in California to provide a specific minimum amount of paid sick leave to every employee.

Here’s the actual language:

This bill would provide that an employee who works in California for 7 or more days in a calendar year is entitled to paid sick days, which shall be accrued at a rate of no less than one hour for every 30 hours worked. An employee would be entitled to use accrued sick days beginning on the 90th calendar day of employment. The bill would require employers to provide paid sick days, upon the request of the employee, for diagnosis, care, or treatment of health conditions of the employee or an employee’s family member, or for leave related to domestic violence or sexual assault.

Now for those of you who are running the math through your head, let me help. A full time employee working 40 hours per week would accrue 66.67 hours of sick leave over a year if the employee worked 50 weeks (assuming a 2-week vacation). That’s 8 1/3 days of paid sick leave per year you will be required to provide if this law is enacted. However, there is a clause that says small businesses only have to allow 5 paid days per calendar year. But it neglects to define "small businesses."

Let’s not forget all those part-time employees! Yes, the law specifies EVERY employee. So even those part-timers who you haven’t been giving any benefits would be accruing sick leave based on hours worked.

The unused sick leave would carry over from year to year but, as now, does not get paid out upon termination of employment. This means the way you give and track sick leave would need to be a true accrual method (normally maintained through your payroll system).

While I believe a certain amount of paid sick leave is normal for full-time employees of small businesses, few small businesses offer more than a week of sick leave. And even fewer companies offer any sick leave to part-time employees. So, you’ve been warned. Now all we can do is wait and watch to see what happens with this bill.