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Rick Rossignol

Avoiding Wage & Hour

Posted by & filed under BLOG, Fair Labor Standards Act, Healthcare, Human Resources, IRS, Wage and Hour Compliance.

The IRS, DOL, and EEOC take aim at Employers for misclassification of individuals as independent contractors, or as exempt from the Fair Labor Standards Act. The agencies have discovered an easy revenue source. The Agencies have adopted a policy of strict enforcement, and employers have to make changes to their employment practices or pay penalties for non-compliance. To complicate matters the DOL, IRS, and EEOC all have different definitions. Non Compliance with the FSLA and employment law is big business for plaintiffs’ attorneys.

 

Increases in Minimum Wage

The potential for misclassification increases with the rise in their minimum wages. Not only does it change the rate of pay for non-exempt employees, it changes the salary test for exempt employees.

 

Impact of the Affordable Care Act

A new threat to employers from misclassification arises from the Affordable Care Act (“ACA”). An individual misclassified as an independent contractor could bring a claim against, as well as trigger an ACA penalty for, an employer not offering essential health care coverage if the person was ultimately held to be an employee.

The penalty for failure to provide minimum essential health benefits is equal to the number of full-time employees times $166.66 per month for every employee after the first 30 employees. Any termination of the “contractor” after such a claim of misclassification could also trigger a retaliation claim under the ACA’s broad retaliation provision, Section 1558.

The IRS and DOL have advised that a focus of their audit and enforcement activities will be to identify misclassified workers. Thus, this aspect of the ACA adds to the already broad tax and wage-hour exposure for the misclassification of employees as independent contractors.

In addition, it is also being argued that if an applicable large employer fails to offer coverage to individuals who are held to be employees rather than contractors, they may be liable for the medical claims of those individuals who did not have coverage. If this position is adopted, an employer could face massive bills if such an individual has, for example, a catastrophic accident or serious illness.

Employers also need to hand out the model notice to employees or face a violation of the FSLA.

 

Audit Human Resources Practices

Employers need to Audit their Human Resources practices. Between government agencies, and plaintiff’s attorneys the company needs to audit current independent contractors and to make sure that such individuals actually fit the multi-factor test to qualify as independent contractors.

This process should include a review of key contractual provisions that support independent contractor status as well as those to avoid as inconsistent with independent contractor status.

Similarly, to the extent there are employees classified as exempt, employers should review the salary and the duties test, to review whether employees actually fit within the executive, administrative, professional, outside sales, computer professional, or other FLSA exemptions is well warranted.

Part of that review should involve assessing whether a position’s job description reflects duties that qualify for an exemption. In addition, assuring that the essential functions of the position, including items like attendance and ability to communicate, when appropriate, are documented in the job description is necessary. This effort can mean the difference between success and failure on a disability claim, especially an intellectual disability claim.

Employment Law Changes for 2014

Posted by & filed under BLOG, Fair Labor Standards Act, Human Resources, IRS, Wage and Hour Compliance.

Minimum Wage Increase and Resulting Salary Increase to Maintain Exempt-Employee Status (AB 10)

The California minimum wage will increase to $9.00 per hour, effective July 1, 2014, and to $10.00 per hour effective January 1, 2016. A less-advertised consequence of this increase, however, is the impact it will have on the salary test for preserving an employee’s exempt status. Under California law, a supervisor classified as exempt must be paid a monthly salary that is no less than two times the wages paid to a full-time minimum wage employee. After July 1, 2014, the minimum monthly salary to preserve exempt status under California Labor Code section 515, will rise to $3,120 per month, annualized to $37,440. As this change is scheduled to occur mid-year, employers are advised to make their adjustments early, if needed, to avoid this potential pitfall. In addition, under AB 442 the penalties available for minimum wage violations will now include “liquidated damages.”

 

Wage Rate Increases for Computer Software Employees and Physicians

Labor Code sections 515.5 and 515.6 provide exemptions for overtime for certain computer software employees and licensed physicians who earn a set minimum wage that is adjusted annually by the Division of Labor Standards Enforcement. Effective January 1, 2014, the minimum hourly rate increased to $40.38 (from $39.90) for computer professionals and to $73.57 (from $72.70) for physicians, reflecting a 1.2 percent increase in the California Consumer Price Index. Affected employers should adjust their rates accordingly.

 

Meal Periods, Rest Breaks, And Now “Recovery Periods” (SB 435)

For several years, the California Code of Regulations has required employers of outdoor-working employees to allow their outdoor workers the opportunity to “take a cool-down rest in the shade for a period of no less than five minutes when they feel the need to do so to protect themselves from overheating.” (Cal. Code. Regs., tit. 8, § 3395, subd. (d)(3).) Previously, an employer who failed to provide these cool-down recovery periods was subject to a citation issued by the California Division of Safety and Health. But now, effective January 1, 2014, SB 435 provides employees with a right, under California Labor Code § 226.7, to seek recovery of statutory damages each workday that an employer fails to provide an employee with these cool-down recovery periods. Employers with outdoor-working employees should review their current policies and practices to ensure that meal periods, rest breaks, and recovery periods are addressed and afforded.

 

Making It Harder For Prevailing Employers To Obtain Attorney’s Fees And Costs In Wage Cases (SB 462)

California Labor Code Section 218.5 allows the “prevailing party” to recover attorney’s fees and costs in any action brought for the nonpayment of wages (e.g., minimum or overtime wages), fringe benefits, or health and welfare or pension fund contributions. SB 462 amends Labor Code Section 218.5 to make it more difficult for employers to obtain attorney’s fees and costs under this section. Indeed, effective January 1, 2014, to obtain attorney’s fees and costs under Labor Code Section 218.5, an employer must not only be the “prevailing party” in such an action, but the court must also find that the “employee brought the court action in bad faith.” On the other hand, due to the enactment of AB 1386, which amends Section 98.2 of the Labor Code, a final order of the Division of Labor Standards Enforcement can create a lien on the employer’s real property to secure amounts due to a prevailing employee-claimant. Unless the lien is satisfied or released, it will continue for 10 years after the date of its creation.

 

The IRS To Begin Enforcing Its Rule That Automatic Gratuities Are Wages, Not Tips

Restaurants often add automatic gratuities on the bill of large parties (for example, a 20% automatic gratuity for parties of eight or more). Previously, for IRS purposes, these automatic gratuities were considered part of an employee’s “tips,” and thus the employee could pocket their share of automatic gratuities, and it was up to the employee to report them to their employer and on their tax return. Starting in 2014, however, the IRS will treat an employee’s portion of automatic gratuities as the employee’s regular wages and, as such, they will be subject to tax withholdings by the employer. Thus, employees will now receive their portion of automatic gratuities as part of their normal paychecks, and employers will be tasked with the responsibility of actively monitoring these wages, performing the necessary tax withholdings, and correctly reporting these wages to the IRS. Notably, because automatic gratuities will now be considered part of an employee’s regular wages for IRS purposes, employers should analyze whether they are required to account for these automatic gratuities when computing an employee’s overtime rate.

 

Wage Withholdings (SB 390)

Under Labor Code Section 227, it is unlawful for an employer to willfully, or with the intent to defraud, failing to make agreed-upon payments to health and welfare funds, pension funds or vacation plans, or other various benefit plans. SB 390 amends this provision so that it is now also unlawful for an employer to fail to remit withholdings from an employee’s wages that were made pursuant to state, local, or federal law, such as taxes. SB 390 further provides that in criminal proceedings under this section, any withholdings that are recovered from an employer shall be forwarded to the appropriate fund or plan and, if restitution is imposed, the court shall direct to which agency, entity, or person it shall be paid.

 

Criminal History Inquiries (SB 530)

On October 10, 2013, Governor Jerry Brown approved SB 530, which amends California Labor Code Section 432.7 to include additional prohibitions for employers related to pre-employment inquiries into an individual’s prior criminal history. California law already prohibits employers from asking applicants to disclose, or from using, arrest records. Effective January 1, 2014, employers are prohibited from asking job applicants to disclose, or from utilizing as a factor in determining any condition of employment, information concerning a conviction that has been judicially dismissed or ordered sealed. SB 530 exempts employers from the above requirements in the following circumstances: (1) the employer is required by law to obtain such information; (2) the applicant would be required to possess or use a firearm during the course of the employment; (3) an individual who has been convicted of a crime is prohibited from holding the position sought by the applicant, regardless of whether that conviction has been expunged, judicially ordered sealed, statutorily eradicated, or judicially dismissed following probation; and (4) the employer is prohibited by law from hiring an applicant who has been convicted of a crime.

As with the existing version of Section 432.7, SB 530 allows an applicant to recover from an employer the greater of actual damages or two hundred dollars ($200), plus costs and reasonable attorneys’ fees, for a violation of the statute and the greater of treble actual damages or five hundred dollars ($500), plus costs and reasonable attorneys’ fees, for an intentional violation of the statute. An intentional violation of the statute is a misdemeanor punishable by a fine not to exceed five hundred dollars ($500).

This expanded protection for applicants with criminal conviction records supplements the federal government’s recent efforts on this topic. The U.S. Equal Employment Opportunity Commission has published an Enforcement Guidance on the consideration of conviction records in employment decisions. In order to avoid claims of disparate treatment or impact, the EEOC recommends that employers develop narrow policies that determine the specific criminal offenses that may demonstrate unfitness for particular jobs. The EEOC recommends individualized assessments as opposed to blanket policies. Employers should carefully review their job application form to ensure compliance with these new requirements.

 

Domestic Worker Bill of Rights (AB 241)

Another wage-and-hour change comes from the Domestic Worker Bill of Rights, which took effect on January 1, 2014. The new legislation establishes, among other things, overtime compensation at a rate of one and one-half times the regular rate of pay to caregivers who work more than nine hours a day or more than 45 hours a week. Covered caregivers include those who provide one-on-one care for 80 percent or more of their duties, such as nannies and in-home caregivers of the elderly or disabled. It does not cover babysitters, family members who provide babysitting services, or caregivers of low-income individuals through California’s In-Home Supportive Service. Caregivers who work at facilities that provide lodging or boarding are also excluded.

 

Victims’ Rights to Time Off From Work (SB 288)

Employers may not retaliate or discriminate against employees who are victims of certain felony crimes, domestic violence or sexual assault for taking time off from work to appear in court or to obtain prescribed relief. A new addition to California Labor Code — Section 230.5 — now will also prohibit an employer from terminating or discriminating against an employee who is a victim of certain additional specified criminal offenses from taking time off to appear in court. These specified offenses include vehicular manslaughter while intoxicated, felony child abuse, felony stalking and many other “serious felonies.” The employee-victim may take such time off from work to appear in court to be heard at any proceeding involving a postarrest release decision, plea, sentencing, postconviction release decision, or any proceeding in which a right of the victim is at issue. Employers should include a policy addressing this leave of absence right in their employee handbooks.

 

Victims of Stalking (SB 400)

Sections 230 and 230.1 of the California Labor Code set forth various protections for victims of domestic violence or sexual assault. SB 400 expands these protections to victims of stalking and also requires employers to provide “reasonable accommodations” to such victims. The bill defines reasonable accommodations to include a transfer, reassignment, modified schedule, changed work telephone, changed work station, installed lock, an implemented safety procedure, or another adjustment to a job structure, workplace facility, or work requirement in response to domestic violence, sexual assault, or stalking, or referral to a victim assistance organization. As with reasonable accommodations for disabilities, employers must engage in a timely, good faith, and “interactive process” with the affected employee to determine effective reasonable accommodations. Again, language should be added to an employee handbook to address this new right.

 

Family Temporary Disability Insurance Program (SB 770)

Beginning on July 1, 2014, the scope of the family temporary disability program will be expanded to include time off to care for a seriously ill grandparent, grandchild, sibling or parent-in-law. The employee’s certification required to qualify to take such leave to care for a family member must include a number of items, including a statement that the serious health condition warrants the participation of the employee to care for the family member. “Warrants the participation of the employee” includes providing psychological comfort as well as arranging third party care for the family member.

 

Sexual Harassment Definition Clarified (SB 292)

SB 292 amends the definition of harassment under California law to clarify that sexually harassing conduct does not need to be motivated by sexual desire. This law is intended to overturn the decision in Kelley v. Conoco Companies which had affirmed summary judgment against the plaintiff in a same-sex harassment case on the grounds that the plaintiff had failed to prove that the alleged harasser harbored a sexual desire for the plaintiff. This legislation may signal interest by Sacramento in passing broader “anti-bullying” protections for California employees.

 

Expansion of Employee Whistleblower Protections (SB 496)

On October 12, 2013, California Governor Jerry Brown signed into law SB 496, which amends Section 1102.5 of the California Labor Code to provide greater whistleblower protections to employees who disclose information related to their employer’s alleged violations of or failure to comply with the law. Specifically, SB 496 now provides that an employee’s disclosure of information to a government or law enforcement agency regarding their employer’s violation of local rules or regulations is a legally protected disclosure. Formerly, employees were only protected if they disclosed information regarding their employer’s noncompliance with state and federal laws. Employees now enjoy complete whistleblower protection for disclosing information if the employee has reasonable cause to believe that the information shows a violation of a state or federal statute, or a violation of or noncompliance with a local, state, or federal rule or regulation. Also, disclosures made to a supervisor of another employee who has the authority to investigate, discover and correct the alleged legal violation is a significant expansion of the protection under SB 496. Interestingly, the statute’s expansion now also includes the circumstance where the employer merely “believes the employee disclosed or may disclose information.” Employers are subject to steep civil penalties, up to $10,000 per violation, if they prevent or retaliate against an employee for an employee’s disclosure of information related to their employer’s violation of the law or refusal to participate in any activity which would result in a violation of local, state, or federal law.

 

Unfair Immigration-Related Practices (AB 263, SB 666)

AB 263 amends several sections of the California Labor Code, all with the goal of providing greater employee protections for making complaints regarding unsafe, unfair and illegal work practices. First, AB 263 amends Section 98.6 of the Labor Code to include an employee’s written or oral complaint of unpaid wages as a legally protected activity. Employers may not discharge or in any manner discriminate, retaliate or take any adverse action against an employee for making such a complaint regarding unpaid wages owed to them. Under AB 263, employers are now at risk of facing a civil penalty of up to $10,000 per employee for each violation for failing to comply with Section 98.6.

AB 263 further amends the Labor Code by adding protections for immigrant employees. Under the new Unfair Immigration-Related Practices section of the Labor Code (sections 1019 et seq.), employers may not engage in any unfair immigration-related practice, as defined under the statute, against any employee for the purpose or intent of retaliating against employees for the exercise of any right afforded to them under the law. The term “unfair immigration-related practice” is defined to include: (i) requesting more or different documents than are required under federal immigration law, (ii) refusing to honor immigration-related documents that on their face reasonably appear to be genuine; (iii) using the federal E-Verify system to check the employment authorization status of a person at a time or in a manner not required by federal law, (iv) threatening to file or the filing of a false police report, and (v) threatening to contact immigration authorities. Now, without the threat of reprise from their employer regarding their immigration status, employees are allowed to (1) make a good-faith complaint or disclosure of an employer’s violation of or noncompliance with any federal, state or local law; (2) seek information regarding their employer’s compliance with federal, state or local laws; or (3) inform and assist other employees of their rights or remedies under the law. Employers are subject to heavy sanctions for any unlawful threat, attempt, or actual use of an employee’s immigration status to retaliate against an employee for engaging in legally protected workplace activities. Sanctions may include but are not limited to, up to a 90-day suspension of the employer’s business licenses and a host of other civil damages.

Another legislative enactment, SB 666, provides that businesses licensed under the Business and Professions Code (including lawyers, accountants, engineers, and contractors) are subject to suspension, revocation, or disbarment if they are determined to have reported or threatened to report an employee’s, former employee’s, or prospective employee’s citizenship or immigration status, or the citizenship or immigration status of a family member of the same, to a federal, state, or local agency because the employee, former employee, or prospective employee exercises a right under the provisions of the Labor Code, the Government Code, or the Civil Code. In addition to any other remedies available, the bill provides for a civil penalty, not to exceed $10,000 per employee for each violation, to be imposed against a corporate or limited liability company employer. The bill contains an important exception, stating that an employer is not subject to suspension or revocation for requiring a prospective or current employee to submit, within three business days of the first day of work for pay, an I-9 Employment Eligibility Verification form. (Beginning not later than January 1, 2015, the DMV will be required to issue driver’s licenses to certain non-U.S. citizens, although this particular form of driver’s license may not be used to verify employment eligibility for purposes of a Form I-9.)

Finally, certain unfair immigration-related practices are also a crime. For example, Penal Code section 518 defines “extortion” as the obtaining of property from another, with his/her consent, or the obtaining of an official act of a public officer, induced by wrongful use of force or fear. Extortion is punishable as a felony by up to four years in jail. AB 524, which amends the Penal Code, provides that “wrongful use of force or fear” now includes the threat to report an individual or their family’s immigration status or suspected immigration status.

 

Expansion of Leaves of Absence for Emergency Duty (AB 11)

Existing California law requires employers to provide temporary leaves of absence for volunteer firefighters so that they could attend required fire or law enforcement training. AB 11 expands the protected leave rights for volunteer firefighters, reserve peace officers, and emergency rescue personnel, and allows for leave for emergency rescue training in addition to fire or law enforcement training. The law applies only to employers with 50 or more employees. Under the law, employees that are fired, threatened with being fired, demoted, suspended, or otherwise discriminated against because they took time off for qualifying training are entitled to reinstatement and reimbursement for lost wages and benefits. Employee handbooks should be revised to comply with this expanded law.

 

Military and Veteran Status Is Now a Protected Category Under the FEHA (AB 556)

AB 556 broadens the scope of “protected categories” under the California Fair Employment and Housing Act to include “military and veteran status.” Under the law, an employee with “military and veteran status” is defined as a member or veteran of the United States Armed Forces, United States Armed Forces Reserve, the United States National Guard, and the California National Guard. The law provides an exemption in circumstances where an employer makes an inquiry into an employee’s military status to afford the employee preferential treatment in hiring. All equal employment opportunity policies should now include this additional protected category.

 

Family-Friendly Workplace Ordinance

San Francisco’s Family Friendly Workplace Ordinance (“FFWO”) became effective on January 1, 2014. As currently written, the ordinance applies to employers with 20 or more employees, although an amendment is expected to pass early in the year which will clarify that the ordinance applies regardless of where the 20 employees are based. The ordinance provides employees who are employed within San Francisco, who have been employed for six months or more, and who work at least eight hours per week with the right to request flexible work arrangements to assist with caregiving responsibilities. Such requests may include but are not limited to modified work schedule, changes in start and/or end times for work, part-time employment, job-sharing arrangements, working from home, telecommuting, reduction or change in work duties, and predictability in the work schedule. The employee may request a flexible or predictable working arrangement to assist with care for a child or children under the age of eighteen, a person or persons with a serious health condition in a family relationship with the employee, or a parent (age 65 or older) of the employee. Within 21 days of an employee’s request for a flexible or predictable working arrangement, an employer must meet with the employee regarding the request. The employer must respond to an employee’s request within 21 days of that meeting. An employer who denies a request must explain the denial in a written response that sets out a bona fide business reason for the denial and provides the employee with notice of the right to request reconsideration. The ordinance also has posting and recordkeeping obligations and prohibits retaliation for exercising rights protected by the ordinance. Employers with any San Francisco based employees (whether they telecommute or otherwise) should consider revisions to employee handbooks, comply with posting obligations (in English, Spanish, Chinese and any language spoken by at least 5% of the employees the workplace or job site), and establish a procedure to timely handle written requests for flexible work arrangements under the FFWO.

Wage and Hour

Posted by & filed under BLOG, Wage and Hour Compliance.

The proliferation of wage and hour lawsuits is due in part to the attractive features of such cases to plaintiffs and, perhaps more importantly, their attorneys. First, prevailing plaintiffs in such cases are typically entitled to recover their attorneys’ fees and court costs. Second, a single lawsuit may include claims on behalf of numerous employees and/or former employees, and potential damages can be staggering. Third, the cost to an employer of defending a wage and hour lawsuit, particularly a class or collective action, can be substantial. For such reasons, employers may be more inclined to settle these cases.

 

Audit Any Workers Not Classified as Employees

Employers sometimes use the services of workers who are classified as independent contractors, interns or volunteers, and who are not paid wages or overtime. Employers should regularly review the classification of such workers to ensure that it complies with the criteria set forth in applicable regulations and court decisions and should consult counsel when necessary.

In recent years, the U.S. Department of Labor (DOL) began an initiative scrutinizing the use of workers classified as independent contractors in businesses such as hotels, restaurants, janitorial services, construction, landscaping, and home health care. Most recently, the DOL began another initiative to scrutinize the use of such workers in Marcellus Shale-related businesses.

Unpaid internships are popular with employers and recent graduates as a way to obtain pertinent work experience. However, recent litigation in this area suggests that courts may be receptive to the argument that many workers classified as interns are actually employees entitled to wages. A recent court decision holding that Fox Searchlight Pictures improperly classified employees as interns has already prompted further litigation in this area.

Likewise, although federal wage and hour law recognizes a limited exception for individuals who volunteer their time to religious, charitable, civic or humanitarian causes, the DOL will scrutinize the use of that exception and has also consistently rejected any suggestion that persons who work in a commercial setting for a non-profit entity (e.g. a thrift store) are exempt from the Fair Labor Standards Act.

 

Audit Any Employees Classified as Exempt

Employers often classify employees or groups of employees as “salaried” and treat those employees as exempt from the overtime provisions of federal and state law. Once again, it is important to regularly review the jobs being performed by those employees to ensure that they truly satisfy the requirements of federal and state law for such exemptions. Job descriptions, if accurate, can be helpful in making a rough, initial assessment. However, the actual duties performed by the employee are determinative. Also, employers should be mindful that the overtime exemptions under state law are not always identical to those under federal law.

 

Audit Payroll Practices – Do’s and Don’ts

  • Don’t permit “off the clock” work. If an employee works beyond their scheduled hours, they should be paid and, if appropriate, counseled not to do it again. Also, employers should consider requiring employees to certify the accuracy of their time records at the end of the day or week.
  • Do review any work-related time that is treated as unpaid. For example, employers should review unpaid time for putting on equipment or for job-related travel to ensure that such treatment satisfies both federal and state law.
  • Don’t allow “comp time” instead of overtime. Private employers are not permitted to allow compensatory time off in lieu of overtime. Recent legislative efforts to allow such comp time (e.g., the Working Families Flexibility Act of 2013) are unlikely to become law anytime soon.
  • Do ensure proper calculation of overtime rates. Overtime rates for non-exempt employees must be calculated based on one and one-half times the employee’s “regular rate.” The regular rate may not be the employee’s base hourly rate. Instead, it often must take into account commissions, bonuses, and other incentives paid to the employee.
  • Don’t allow improper deductions from salaried employees. Improper deductions (e.g., deductions for certain absences) can destroy the exempt status of an employee, making the employee eligible for overtime.
  • Do comply with record-keeping and posting obligations. Federal and state laws require the posting of notices and maintenance of payroll-related records.
  • Do adopt a payroll/overtime policy. An employer should have a written policy that confirms its commitment to comply with wage and hour obligations and provides a method for employees to report any types of wage claims. Employees should be familiarized with the policy, and managers should be trained about it.

 

Top Ten Human Resources Issues 2014

Posted by & filed under BLOG, Human Resources.

Top Ten Human Resources Issues 2014

At about this time every year, HR professionals and Employment attorney’s publish a list of issues that employers should be audited for compliance in 2014.  The big two are on the Department of Labor hit list are Misclassification of Non-Exempt and Independent contractor. Conducting an audit of how the organization determines classifications can help employers to control their risk.

 

  1. Misclassification of Non-Exempt Employees as Exempt
    Many employers continue to assume that their salaried employees are not entitled to overtime pay. However, paying an employee a salary does not necessarily mean the employee is exempt from the minimum wage and overtime requirements of the federal Fair Labor Standards Act (FLSA) and similar state laws. Employers also must consider the duties the employee performs and whether those duties qualify the employee for an exemption. Because misclassification can result in liability for two years of back pay (three years for willful violations), as well as double damages and attorneys’ fees, this issue continues to be subject to scrutiny by the U.S. Department of Labor (USDOL) and plaintiffs’ attorneys. To assess whether an employee is properly classified as exempt, the USDOL web site is a good place to start. But before reclassifying any worker, we recommend consulting with your attorney, particularly because how the message is communicated to employees during the reclassification process may be critical to minimizing risk.
  2. Misclassification of Employees as Independent Contractors
    I continue to receive calls from employers under audit by the Illinois Department of Employment Security (IDES) regarding their classification of workers as independent contractors. Employers should bear in mind that the test utilized by IDES to ferret out worker misclassifications is more stringent than both the Internal Revenue Service’s (IRS) and USDOL’s tests. Whether a worker is free from direction and control is just one factor to consider. To survive IDES scrutiny, an employer also must establish that the services the worker performs are either outside the employer’s usual course of business or outside the employer’s place of business and that the worker is engaged in an independently established trade, occupation, profession, or business. IDES presumes every worker is an employee, and the burden always remains on the employer to prove otherwise. See also our previous article on the classification of independent contractors.But don’t forget about the USDOL and the IRS, both of which have made worker misclassification a priority. As just one example, on November 12, 2013, a bill was introduced in the U.S. Senate entitled the “Payroll Fraud Prevention Act of 2013.” If passed, it will amend the FLSA and impose penalties on employers who intentionally misclassify workers as independent contractors. With these types of initiatives in mind, if you have classified workers as independent contractors, it would be wise to consult with your attorney, particularly if reclassification is in order, as timing may be important to avoid unnecessary exposure.
  3. FICA Tax on Severance Paid in Connection with a Workforce Reduction
    Ordinarily, employees and employers pay Social Security and Medicare taxes on wages received by employees. An employer withholds an employee’s share from his or her paycheck and sends it to the IRS along with the employer’s matching payment. However, the question of whether severance payments made in connection with a workforce reduction are “wages” is an issue that the Supreme Court of the United States (SCOTUS) soon will decide. If severance payments are considered wages, it’s business as usual. But if not, then such payments are exempt from these FICA taxes, and employers may be entitled to refunds from the IRS and also will be required to distribute to affected former employees their share of the refund. Because SCOTUS likely will decide the issue after April 15, 2014, IRS filing deadline, employers that have made severance payments because of a workforce reduction should consider promptly filing protective refund claims. Consult with your accountant or tax attorney for additional guidance.
  4. Legalization of Medical Marijuana
    In August, Illinois Governor Pat Quinn signed the Compassionate Use of Medical Cannabis Pilot Program Act, making Illinois the 20th state to legalize marijuana for medical use. Although that does not mean patients who test positive for marijuana cannot be disciplined or fired from their jobs, we expect there will be employees who choose to challenge such decisions. For further information and guidance, see our article on the legalization of medical marijuana in Illinois.
  5. The NLRB’s Continued Intrusion Into the Non-Union Workplace
    In the last two years, the National Labor Relations Board (NLRB) has, in the form of new rule-making, new case law precedent, and advisory memoranda from its Acting General Counsel made it clear that non-union workplaces are not immune to the requirements of the National Labor Relations Act. The NLRB’s initiatives have impacted, for example, the long-standing practice of most employers to issue a directive to employees requiring confidentiality during workplace investigations and whether and when employers can discipline employees as a result of their social media posts. In 2014, we expect the NLRB to continue to issue decisions that have the effect of intruding more deeply than ever into the non-unionized workplace.
  6. Obamacare
    The word “Obamacare,” alone, is daunting to many employers. The coming year will undoubtedly be an important period for employers subject to the Affordable Care Act (ACA). Although the deadline for compliance with many of the ACA’s requirements was delayed until January 1, 2015, employers should become familiar with their obligations and begin steps to comply. See our previous article on the “Pay or Play” rules and our related article on some effects of the ACA on dental and vision coverage.

IRS Announces 2014 Pension Plan Limitations.

Posted by & filed under BLOG, IRS.

IRS Announces 2014 Pension Plan Limitations; Taxpayers May Contribute up to $17,500 to their 401(k) plans in 2014

IR-2013-86, Oct. 31, 2013

WASHINGTON — The Internal Revenue Service today announced cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for the tax year 2014.  Some pension limitations such as those governing 401(k) plans and IRAs will remain unchanged because the increase in the Consumer Price Index did not meet the statutory thresholds for their adjustment.  However, other pension plan limitations will increase for 2014.  Highlights include the following:

  • The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $17,500.
  • The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $5,500.
  • The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500.  The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
  • The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $60,000 and $70,000, up from $59,000 and $69,000 in 2013.  For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $96,000 to $116,000, up from $95,000 to $115,000.  For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $181,000 and $191,000, up from $178,000 and $188,000.  For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
  • The AGI phase-out range for taxpayers making contributions to a Roth IRA is $181,000 to $191,000 for married couples filing jointly, up from $178,000 to $188,000 in 2013.  For singles and heads of household, the income phase-out range is $114,000 to $129,000, up from $112,000 to $127,000.  For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
  • The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $60,000 for married couples filing jointly, up from $59,000 in 2013; $45,000 for heads of household, up from $44,250; and $30,000 for married individuals filing separately and for singles, up from $29,500.

IRS Mileage Rate 2014 Posted

Posted by & filed under BLOG, Fair Labor Standards Act, Human Resources.

Standard Mileage Rates for 2013

R-2012-95, Nov. 21, 2012 WASHINGTON — The Internal Revenue Service today issued the 2013 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. Beginning on Jan. 1, 2013, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 56.5 cents per mile for business miles driven.
  • 24 cents per mile driven for medical or moving purposes.
  • 14 cents per mile driven in service of charitable organizations.

The rate for business miles driven during 2013 increases 1 cent from the 2012 rate. The medical and moving rate is also up 1 cent per mile from the 2012 rate. The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously. These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical, or charitable expense are in Rev. Proc. 2010-51. Notice 2012-72 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

Advice for keeping employee holiday parties lawsuit-free

Posted by & filed under BLOG, Human Resources.

With Christmas and New Year’s approaching, companies often treat their employees to parties to celebrate the holidays and honor employees’ hard work during the past year; however, no one wants these parties to turn into a human resources nightmare.
“Plan your party carefully and have a committee develop the plans,” said Rick Rossignol, CEO of RTR CONSULTING The Human Resource Experts. “I highly recommend not serving any alcohol. No one wants to be the Grinch, but limiting alcohol is a very good idea.”
The 20-year human resource expert suggests using drink tickets for all drinks, hosting the event at a restaurant or hotel and hiring professional bartenders and servers.
If alcohol is served, Rossignol recommends giving employees taxi vouchers or booking hotel rooms for those who are too inebriated to safely drive themselves home. Assigning a monitor also helps.
“Even though your company party may not occur during working hours or at your workplace, liability is still there,” Rossignol said, referencing a recent court case involving the Marriott.
A Marriott employee who left the company party, struck another vehicle and killed the driver was sentenced to six years in prison. The deceased’s family sued Marriott, and the courts ruled that an employer may be found liable for its employee’s offences as long as the proximate cause of the injury (here, alcohol consumption) occurred within the scope of employment. Since the company party was an annual event, the court considered it within the scope of employment. According to the court, it was irrelevant that the employee’s negligence was the cause of the death.
Sexual harassment at Christmas parties can also lead to law suits. Thirty-six percent of U.S. employers report worker misconduct at holiday parties. This misconduct includes excessive drinking, sexual advances, off-color jokes, vulgar language, arguments and fistfights.
Rossignol suggests companies send employees an email reminding them they are accountable for their actions.
“Invite spouses and significant others to the party,” Rossignol said. “It reminds people to behave themselves. It is imperative to remind employees that the company rules still apply — this means appropriate dress and appropriate conduct.
“Even with these safety precautions, you can still use this opportunity to show your appreciation and reflect on the success and contributions of your employees,” he said.
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RTR CONSULTING The Human Resource Experts is a human resources consulting company with more than 20 years of experience. The firm helps small, start-up and medium-sized businesses develop effective and efficient human resource policies, procedures and best practices. In addition, RTR CONSULTING works to help their clients build and align their human resources strategies, retain the best talent and lower their employment costs. Its three programs are Outsourced Human Resources Retained Partnership, Human Resources Helpline and Human Resources Projects. For more information, call 805-493-2136 or visit www.ExpertHRConsulting.com.

Employee Handbooks

Posted by & filed under BLOG, Fair Labor Standards Act, Human Resources, Wage and Hour Compliance.

Producing and distributing an employee handbook is one of the best ways to protect your business from employee lawsuits and clearly communicate your company policies. The absence of a formal employee handbook or company policy manual, or a poorly drafted handbook, put your company at risk for costly lawsuits and fines.
All employers should have a well-drafted handbook. Handbooks and personnel policies communicate core information to employees and, when designed and used properly, can serve as an organization’s best defense in employment law disputes. Handbooks and personnel policies are viewed as legal documents and are often introduced as evidence in employment-related disputes.
Are you protected? The Handbook is a combination of policies and procedures designed to be in compliance with wage and hour rules, as well as to protect the company and establish the work rules for managing the employees. A good employee handbook can avert many problems. RTR Consulting regularly draft, audit and update employee handbooks, as well as advise clients on employment-related documents and policies and procedures that reinforce a company’s expectations and guidelines.
RTR Consulting can assist with the drafting and the review of all employment policies, including those addressing:

  • Non-discrimination
  • Harassment
  • Workplace security and violence prevention rules
  • Vacation, sick leave and paid time off (“PTO”) policies
  • Right to revise and modify policies
  • Payroll and compensation policies
  • Meal and rest period policies
  • Drug and alcohol policies and procedures
  • Privacy and electronic and computer usage guidelines
  • Benefit disclaimers
  • Progressive and corrective discipline policies
  • “At will” statements
  • Drug and alcohol screening, detection and prohibition policies
  • Desk and locker inspection policies
  • Workplace security and violence prevention rules
  • Vacation, sick leave and paid time off (“PTO”) policies
  • Right to revise and modify policies
  • Payroll and compensation policies
  • Meal and rest period policies
  • Social Media
  • Standards of conduct
  • Leaves of absence
  • Compensation and benefit issues
  • Conflicts of interest and proprietary information
  • Performance review policies and procedures
  • Disciplinary issues

RTR Consulting constantly monitors new developments in employment law and continually informs clients on employment law updates to ensure that handbooks and manuals stay current.