Archive for the ‘Employment Law’ Category

W-2 Reporting of Health Care Contributions

401k eggThe induction of the Patient Protection and Affordable Care Act brings forth new guidelines for employers including those participating in a Professional Employer Organization (PEO) relationship. The Patient Protection and Affordable Care Act requires certain employers to report the aggregate value of employer-sponsored eligible health plans on Form W-2 (in Box 12, Code DD) starting January 2013. The aggregate value of an employer-sponsored plan includes both employer and employee contributions made during the year.  Costs incurred by Long – Term Care, Stand-alone Dental and Vision Plans and Archer Medical Savings Accounts are excluded from the new reporting requirement.

 Why is this Information Reported?

The intent for implementing reporting rules is to provide employees with information about the cost of their healthcare expenses. According to the Internal Revenue Service (IRS), the data is displayed for informational purposes only to illustrate the value of healthcare coverage. This information allows employees to easily compare healthcare pricing and understand costs.

What is recorded?

The reporting requirement includes both employer and employee contributions paid to healthcare vendors in 2012.  The types of plans covered include: 

  • Medical plans
  • Prescription drug plans
  • Executive Physicals
  • Onsite clinics (that provide more than superficial care)
  • Medicare Supplemental Plans

The IRS provides a detailed list of coverage options required for W-2 reporting along with exceptions on http://www.irs.gov/uac/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage.

 Type of Employers

 The reporting requirement applies to all private sector employers, federal, state, and local government entities, third-party employers (i.e. PEO), churches, and other religious organizations.  Employers with 250 employees or more are required to report health care costs. The employee count per employer is based on the number of W-2s issued in the prior year. Thus if an employer issued 250 W-2s in 2011, the employer must report costs on 2012 Form W-2s in 2013. Small businesses who filed fewer than 250 W- 2s for the proceeding calendar year have until January 2014 to seek compliance. Furthermore, Indian Tribal governments and  Tribally Chartered Corporations are also not subjected to the new reporting requirement until further guidelines are issued.   

Employers in a PEO Agreement

Although there is no direct answer for reporting requirements for PEOs, the current application of the Family Medical Leave Act (FMLA) and Title VII suggests how this requirement may be enforced. Both FMLA and Title VII are applied on a client – level instead of a PEO level. FMLA guidelines do not apply to PEO clients that employ fewer than 50 employees in a 75-mile radius in the calendar year, even if the PEO has more than 50 employees (at different clients) in the same 75- mile radius. The Equal Employment Opportunity Commission (EEOC) implements a similar structure in regards to Title VII. The EEOC does not have jurisdiction over a PEO client with fewer than 15 employees. Both of these legislations use the employer’s population as the deciding factor instead of viewing the PEO as a whole. If the reporting requirement follows this structure, employers with a small employee population will not have to report healthcare costs even if they belong to a PEO.  

 Another factor to consider is if the employer is involved in a single – employer plan or a multi -employer plan. A single employer plan is a type of pension plan that is sponsored by one employer or a group of employers under a common controlled structure. This means employee benefit plans are maintained by one employer. In a single – employer plan, employers that provide applicable – employer sponsored coverage during the calendar year are subjected to the reporting requirement. In contrast, a multi – employer plan is a pension plan structured by several employers, thus if an employee moves to another employer in the plan, the employee’s benefits are still covered. Employers who only contribute to multi – employer plans are excluded from the reporting requirement.

Penalties

 According to the IRS, failure to report the costs on Form W-2 for the 2012 tax year may result in a penalty of $200 per Form W-2, up to a maximum of $3 million. Liability may also arise for inaccurately reporting data on Form W-2, including but not limited to IRS penalties of $100.00 for each form containing incorrect information.

Best Practices for Employers 

  • Identify the employer-sponsored health coverage benefits subjected to the reporting requirement.
  • Calculate the aggregate cost of employer –sponsored plan for all applicable employees who received health insurance during 2012.  
  • If an employee worked for a portion of the year, report the total premium paid for that applicable timeframe only.
  • Consult your healthcare vendor to understand how preparations for compliance will be handled.

Completing Form I-9

Employers are required by the Department of Homeland Security (DHS) to complete a Form I-9 for newly hired or rehired workers within three days of employment. The purpose of this form is to document that each employee hired is authorized to work in the United States. Verification of employment must be presented by both Citizens and Non-Citizens. It is the employer’s responsibility to examine the documents an employee provides to determine the authenticity of the paperwork and record the information accurately on the form. If an employer representative is not available to review the original documents and sign the form, these documents must be presented to a Public Notary for verification.

Form I-9 consists of three sections:

Section 1 – Employee Information and Verification

Completing the Employee Section

Section one consists of the employee information including name, maiden name, address, date of birth, Social Security Number (SSN) and work authorization status. This section can be completed by the employee or by a translator on his/her behalf. However, the employee must personally sign the form. Newly hired employees must complete and sign section one no later than the first day of employment.  Section one should not be completed before the employee has accepted a job offer.

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 Name Fields: Include full legal name, first name and middle initials. For employees with two last names or a hyphenated last name, include both names in the Last Name field. The employee can include their maiden name or other legally recognized name in the Other Name Used field. If another legal name is not required, write N/A in the field.

Address Fields: Include the current resident address including street number and name, apartment number (if applicable), city, state, and zip code. P.O. Box addresses are invalid and only border commuters from Canada and Mexico may provide an international address. 

Date of Birth Field: Format the date of birth as mm/dd/yyyy.

U.S. Social Security Number Field: Include your 9-digit social security number if your employer participates in E-verify.

Email Address and Telephone Fields (Optional): Include your email address and telephone or write N/A if you choose not to include this information. The Department of Homeland Security may use this information to contact you in case there is a discrepancy between the information provided and government records.

  • Citizenship or Immigration Status Fields: Select the classification status that applies. View http://www.uscis.gov/files/form/i-9.pdf for a description of each classification status. Note: Employees who select the “An Alien Authorized to Work Until…” field and have an I-94 card must list the foreign passport number and country of issuance.        
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Parents or legal guardians assisting minors (individuals under the age of 18) and certain employees with disabilities can review the Handbook for Employers: Instructions for Completing Form I-9 (M-274) on http://www.uscis.gov/files/form/m-274.pdf for guidelines about special procedures for establishing identity for these individuals.

The employer must examine the form to ensure all the required fields are filled and verify that the form is signed and properly dated by the employee. The authorized professional who is responsible for examining the documents should also sign section two.

Section 2 – Employer Review and Verification

Documents for Verifying Identity and Employment Authorization

Section two consists of fields related to verifying the authenticity of the documents presented to confirm employment eligibility and establish identification.

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In the Introduction fields, the employer must enter the employee’s last name, first name, and middle initial to help identify the pages of the form in case they are misplaced.

In the fields directly following, the employer should record the employee’s identification and employment authorization document(s). Employees can choose to provide a document from section List A; or from section List B and List C. List A contains documents to confirm both identity and employment authorization; while, List B documents relate to identity only and List C documents verify employment authorization only. Employers cannot specify which document(s) an employee can use to complete the form and both parties must be physically present during the examination of the documents.

Generally, only unexpired, original documentation is acceptable. Exceptions to this rule include the use of a certified copy of a birth certificate and documents with extended expiration dates.

If the employee cannot provide un-expired versions of the required documents, an acceptable receipt can be provided in lieu of the documents listed in List A or List B and List C. The employee must present valid receipts within three business days of the employment or in cases of re-verification. However, receipts indicating an application for an initial grant of employment authorization or for a renewal of employment authorization are not acceptable.

Completing the Employer Section

The employer must physically examine these documents to ensure the requirements for List A or List B and List C are satisfied.

  • The employer should record the following: document title, issuing authority, document number and expiration date(s) (if applicable).
  • If the employee is a student or exchange visitor who presents a foreign passport with a Form I-94, the employer should enter the Student and Exchange Visitor Information System (SEVIS) number and program end date from Form I-20 or DS-2019.
  • In the field directly following entitled Certification, the employer should provide the date the employee begins work and the name of the authorized representative completing the form, along with his/her title, the date and the name and address of the organization.
  • In cases of re-verification, the employer must record the document title in section two under the section titled List A, List B, or List C as applicable. In the Document Number field, write the word “receipt” along with the document number. The Expiration Date field should include the last day the receipt is valid.
  • Once the receipt validation period expires, cross out the word “receipt”, the accompanying document number and expiration date. Record the number and other required information from the actual document presented. The changes must be authorized with initials and current date.   
  • Photocopies of the supporting documents are not required but if made they must be created for all new hires or re-verifications and retained. Employers must still complete section two even if photocopies are kept on file. Photocopies cannot be used in place of completing Form I-9.  

Find a List of Acceptable Documents located on USICS website.

 Section 3 –Updating and Re-Verification
Re-Verification Process

Employers are required to complete section three when updating and/or re-verifying Form I-9. Section three does not apply to employees who are U.S. Citizens or Permanent Residents. This section is completed when the employee indicates that he or she is an alien authorized to work until a certain date listed in section one of the form. Employers should reconfirm the employment authorization of every employee who has presented evidence of work authorization that contains an expiration date. Re-verification can be completed in section three of a new Form I-9 or section three of the original copy. If a new Form I-9 is completed, attach the new form to the original copy.

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Block A: Record the employee’s new name if it is different from the name that appears in the previous sections.

Block B: Record the date of hire if the employee is rehired within three years of when the form was originally completed and the employee is authorized to work under the same basis as indicated previously.

Block C: Complete Block C if the employee’s previous grant of work authorization has expired, or if the employee is rehired within three years of the date this form was originally completed. Examine either items from List A or List C provided by the employee to verify work authorization. Record the document title, document number and expiration date (if applicable).

Authorization Block: Sign and date to attest that the employee is authorized to work in the U.S. based on the documents provided.

 
 
Storing and Retaining Form I-9

Employers must retain each employee’s completed Form I-9 throughout the individual’s employment. Once an individual’s employment ends, the employer must retain Form I-9 for either three years after the date of hire or for one year after employment is terminated. Form I-9 must be stored in a secure location to safeguard employee information. Typically, Form I-9 and the accompanying documents are stored via electronic means, micro-film format or hard-copy method. Regardless of the format, the U.S. Citizenship and Immigration Services (USCIS) recommends separating Form I-9 from other employee records in case of an inspection request. Before an inspection takes place, the employer will receive a written notice three days in advance to provide the documents.

Penalties

Violations for inaccurately completing or not completing Form I-9 can lead to civil fines, criminal penalties and debarment from government contracts. Civil violations include but are not limited to knowingly hiring or continuing to employ an unauthorized worker, failing to comply with Form I-9 requirements, committing or participating in document fraud, committing document abuse and accepting funds from employees as a guarantee for authorized status. In contrast, criminal violations are based on an employer’s pattern or practice of repeated violations. A list of monetary fines placed on each violation can be found on www.uscis.gov.

 

California Meal and Rest Period Requirements

A surge in class-action lawsuits for inadequate employee meal and rest periods has sparked debate and questions for the past few years. Confusion about whether an employer is required to make meal periods available to employees or whether the employer is required to ensure employees actually take breaks has created a sense of ambiguity for employers, employees and law-makers. For employers in California the answers to these questions came in the form of a ruling in the case Brinker Restaurant Corporation v. Superior Court. According to the Brinker case, Employers have a duty to provide meal and rest periods but are not required to ensure work is not performed during that time.

According to the requirements of the California Labor Code and Wage Orders, Employer obligations regarding meal and rest breaks are:

  •  Meal Breaks: Employers must provide non-exempt employees with a thirty (30) minute uninterrupted meal break after five (5) hours of work (unless the employee’s workday is completed within six (6) hours). A second meal period of 30 minutes can be provided if an employee works more than ten (10) hours per day. The second meal period may be waived by mutual consent of the employer and employee only if the first meal period was not waived. 
  • Rest Break: Employees are entitled to 10 minutes of a rest period for shifts three and one-half (3 ½) to six (6) hours in length, 20 minutes break for shifts of more than six hours up to 10 hours, 30 minutes for shifts of more than 10 hours up to 14 hours and so on.
  • On duty Meal Period: An “on duty” meal period is permitted only when the nature of the work prevents an employee from taking a break. Unless an employee is relived of all duties during the 30 minute break period, the period is considered to be “on-duty”. Both parties must sign an agreement stating the employee has the right to revoke the “on-duty” arrangement at any time and will receive compensation for the hour worked. The test to determine whether a job requires “on-duty” meal periods is based on objective factors (i.e. the employee is the sole worker on site). Examples of jobs that meet these criteria include a security guard stationed alone at a remote site or a sales clerk in an all-night convenience store.  
  • Payment for On-duty Meal periods: When an “on –duty” meal period is implemented, the employer must pay for the additional hour of work at the employee’s regular rate of pay. The additional hour is not included in the total hour worked for purposes of overtime calculations.
  • Break Areas: Employers must provide employees with a suitable place designated as the rest/eating area when requested to take meal breaks on Company premise. This area must contain adequate supply of potable water, cleaning materials (i.e. soap), and single use towels for hand washing. Employers in industries such as onsite construction, drilling, logging and mining are excluded from compliance with this requirement.
  • Meal Period Timing: Employers are required to secure hot food and drinks or equipment for heating food and providing a suitable location designated for eating meals, if the meal period occurs on a shift beginning or ending at or between hours of 10:00pm and 6:00am.

Best Practices

The following Best Practices are geared to assist Employers seeking compliance with meals and rest period obligations:

  • Relieve employees of all duties by relinquishing control over their activities and allowing a reasonable opportunity to take an uninterrupted 30-minute break (in which they are free to come and go as they please).
  • Do not impede or discourage employees from taking their meal periods. Educate Managers/Supervisors on the provisions of the law to discourage interference with the employee meals and rest breaks. 
  • Establish a written policy for meal and rest periods that outlines the scheduling procedure. 
  • Develop an Employee Time maintenance system to track when Employees leave for and return from breaks. The Time Maintenance system can serve as evidence for demonstrating a good faith effort in compliance during litigation.
  • Investigate all complaints from Employees in a timely manner and apply the appropriate policy uniformly.

The New 401(k) Fee Disclosure Rules: From A Small Business Perspective

As of July 1st 2012, the Department of Labor (DOL) requires service providers to disclose all direct and indirect fees associated with the management of 401 (K) retirement plans. The DOL’s intent for the implementation of the fee disclosure rules is to provide investors (employees) with a breakdown of fees as well as to encourage employers who sponsor these plans to “shop” around for service providers and compare costs.

The Employee Benefits Security Administration (EBSA, a division of the DOL responsible for overseeing protection of employee rights regarding pension plans) first proposed the new disclosure rules as part of the Employee Retirement Income Security Act (ERISA). The EBSA recognized the need for transparency of fees and expenses in employer-sponsored 401 (k) plans following the recession and decline in retirement investment in 2010. Efforts to make fees and expenses transparent heightened after a series of class-action lawsuits were filed against large employers, alleging violation of fiduciary duties for undisclosed fees and excessive charges. As a result, the DOL enacted the new disclosure rules in April 2012, but decided to postpone the implementation date to July 2012 to allow service providers time to seek compliance.

Service providers must furnish documentation on:

  • Administrative fees and expenses;
  • Individual fees and expenses;
  • Performance data;
  • Comparison of each investment product available; and
  • Deducted fees and expenses in a dollar amount.

Investors will receive an initial disclosure detailing their investment, record-keeping expenses, and other fees deducted from their 401(k) plan by August 30, 2012 and can anticipate receiving the first quarterly statement listing fees by November 14, 2012.

What does this Mean for Small Business Employers?

 Since the new disclosure rules expose deducted fees and miscellaneous expenses, employers will have the resources they need to evaluate the price of their plans and they can “shop” around for the best service providers. According to Cerulli Associates, there are approximately 500,000 small and mid-size businesses that offer a 401(k) plan. About 10% of the businesses with fewer than 100 employees have a plan and 99% of companies with greater than 50 employees have a plan.  In general, small to midsize employer plans receive less attractive pricing in comparison to large company plans. The new disclosure rules allow employers to view the exact cost of the plan so that they may compare plan options.

 401(k) Fee Disclosure Rules Resource:

http://www.dol.gov/ebsa/newsroom/fsparticipantfeerule.html

Revised EEOC Enforcement Guidance for Using Arrest and Conviction Records

Many employers use background checks to combat theft and fraud as well as prevent workplace violence and negligent hiring lawsuits. About 92% of companies run criminal background checks on some or all applicants. Although the use of background checks serves a practical purpose in locating the “right” employee for the job, the EEOC warns that using of an individual’s criminal history when making employment decisions may be discriminatory under Title VII of the Civil Rights Act of 1964.

Criminal records reduce an applicant’s likelihood of a job callback or offer by nearly 50%. These staggering statistics caused the EEOC to provide updated guidelines regarding the use of arrest and/or conviction records in making employment decisions, to discourage discrimination against individuals with a criminal background. The new Enforcement Guidance provides an outline of provisions to guide employers in utilizing background checks for screening job applicants and making other employment decisions.

Disparate Treatment and Disparate Impact

Under Title VII, a covered employer is liable for discrimination against members of a protected class based on disparate treatment or disparate impact. Disparate treatment arises when an employer intentionally treats an employee differently based on the employee’s protected class status (i.e. race, gender, national origin). This type of discrimination is based on unequal treatment of an individual. In contrast, disparate impact occurs when a neutral policy or practice has the effect of treating individuals disproportionately on the basis of a protected category. This type of discrimination is based on unequal treatment of a protected group whether intentional or not. The EEOC  explains that in some instances, refusing to hire applicants due to their criminal records could have a disparate impact based on race and national origin. Thus even if a consistently applied background check policy is used to make employment decisions, it may still cause unlawful discrimination based on the applicants’ race and national origin.

An employer’s defense to disparate impact is to prove that the policy or practice is “job related and consistent with business necessity”.  The Enforcement Guidance states that the employer must do the following to validate business necessity or job relatedness for using background checks.

  • Use the Uniform Guidelines on Employee Selection Procedures.
  • Develop a targeted screening process to consider at least the nature and gravity of the offense or conduct, the time that has passed since the offense, conduct, and/or completion of the sentence and the nature of the job held or sought. This provides an opportunity for an individualized assessment of applicants instead of a “blank” policy.

 Arrest vs. Conviction Records

Another area for potential discrimination is in the interpretation of an arrest versus a conviction. An arrest is an exercise of the power to deprive a person of his or her liberty. An arrest is not a job-related factor and does not state that criminal conduct has occurred. An employer can only make an employment decision based on the conduct underlying an arrest if this conduct makes the individual unsuitable for the position. However, a conviction record can be used as evidence to disqualify the individual for the position.

 Best Practices for Employers

  • Determine the positions which require a background check based on job relatedness and business necessity.
  • Develop a well tailored written policy and procedure for screening applicants.
  • Comply with federal law by only considering convictions that are both job-related and recent.
  • Continuously train managers, hiring personnel and decision–makers on Title VII guidelines and updates.

Limit your Liability: Discouraging Retaliation Complaints

The U.S Equal Employment Opportunity Commission (EEOC) announced an increase in complaints of retaliation for a second year in a row. In the 2011 Fiscal Year, the EEOC received a record 99,947 charges of employment discrimination, which trumps the 99,922 claims filed in 2010. Specifically, statistics show claims of retaliation accounted for 37.4 percent of the charges, surpassing complaints regarding violations of Title VII (discrimination on the basis of sex, race, color, religion and national origin).

 Retaliation occurs when an employer takes adverse action against an individual because the individual partakes in a legally protected activity or participates in a complaint against the employer. Most retaliation suits are filed by employees who claim their bosses fired or mistreated them after they filed a discrimination claim or participated in a “whistleblowing” activity. For an employee to assert a retaliation claim the following must be present: (1) the employee participated in a protected activity (i.e. opposing an unlawful activity); (2) there was an adverse employment action present (i.e. denial of raise or termination); and (3) there is a connection between the employees’ involvement in the protected activity and the adverse action.

Reasons for Increase in Retaliation

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As illustrated by the EEOC Chart, retaliation claims are rising faster than any other category of complaint. There are several proposed contributors to the increase in retaliation claims. A difficult economy and an increasing unemployment rate has caused many employees to stay at their jobs instead of seek employment elsewhere when faced with retaliation or unlawful employment practices. Additionally, more employees would rather challenge their employer’s practices and decisions instead of changing their jobs. Another contributor is the fact that employees have an increased understanding of the laws governing retaliation. From an employee perspective, retaliation claims are often easier to prove than discrimination or harassment claims . Furthermore, the U.S Supreme Court’s expansion of the anti-discrimination laws also contributes to the increase in retaliation. In 2006, the Supreme Court lowered the standard that employees must meet to win a retaliation claim under federal anti-discrimination laws. Specifically, the court determined that an employee need only show that the employer took an action that “might have dissuaded a reasonable worker from making or supporting a charge of discrimination.”

With soaring statistics in 2010 and now in 2011, evidence suggests that retaliation complaints will continue to grow in 2012. Many employers seek resources to proactively deter employees from filing retaliation claims. Currently, the Department of Labor provides retaliation guidelines under the Fair Labor Standards Act (FLSA) and Family and Medical Leave Act  (FMLA).

 The American Medical Association encourages employers to use the following Best Practices as a means to avoid a retaliation lawsuit and/or increase the chances of winning a legal dispute when presented with the issue.   

 Ways to Avoid Retaliation Liability

  • Employers should research and become acquainted with the laws governing retaliation. Federal law prohibits retaliation under the Civil Rights Act, American with Disabilities Act, Age Discrimination in Employment Act, Fair labor Standards Act, and Family and Medical Leave Act.
  • Employers can mandate a Zero Tolerance Policy for retaliation and investigate all the cases of discrimination before producing an output. All employee concerns brought forth should be handled in a fair and consistent manner that illustrates that every employee is governed under the same policies.
  • All arising complaints should be kept confidential .
  • Employers should implement a comprehensive policy to manage employee expectations and outline the procedures to follow when a retaliation claim is made. This written policy should be given to all employees.

Permissible Wage Deductions

Are you confused about what deductions can be taken out of an employee’s paycheck? Well, you are not alone! The Wage and Hour Division (WHD) of the Department of Labor completed 33,295 compliance actions and collected more than $224 million in back wages for more than 275,000 workers during the 2011 Fiscal Year (http://www.dol.gov/dol/budget/2013/bib.htm#whd). The WHD serves as the governing agency for Federal laws pertaining to minimum wage, overtime pay, recordkeeping and prevailing wages for government service and construction.  The WHD provides a general overview of permissible wage deductions, but most wage deduction requirements are dictated and outlined within State laws.

Under the Fair Labor Standards Act (FLSA), permissible deductions from minimum wage include wage meals, lodging and similar facilities, tax withholdings, court-ordered payments, and voluntary deductions/payments to assignees. Specifically, these wage deductions are among the most common deductions that can legally decrease an employee’s wages below the federal or state applicable minimum wage.

Meals, Lodging and Other Facilities

Employers can deduct the reasonable cost of providing meals, lodging, and similar facilities. Only the reasonable cost of these items can be deducted – not any amount attributable to an employer’s profit.

Tax Withholding

Employers are permitted to deduct taxes from an employee’s wages. These deductions are permitted for the employee’s share of Social Security taxes, as well as other federal, state and local taxes.

Court-Ordered Payments

The FLSA does not restrict court-ordered garnishments as long as neither the employer nor any person acting on its behalf derives any benefit from the transaction. However, federal and state garnishment laws can set limits on the amount of wages that can be garnished.

Voluntary Deductions/Payments to Assignees

An employer can deduct amounts the employee directs the employer to pay to third parties, including deductions for: U.S. savings bonds, union dues, employee accounts with merchants, charitable contributions and employee benefit plan premiums or contributions. However, these deductions are permitted only if the employee has voluntarily assigned such amounts to the third-party, and neither the employer nor any person acting on the employer’s behalf derives any profit from the transaction.

There are many other common and permissible deductions that are allowed as long as the employee’s wages do not fall below federal or state applicable minimum wage. It is important to stress that many of these deduction requirements are regulated by the state. For example, many retail employers look for ways to recover cash register shortages from their sales clerks. Many state wage payment laws, however, forbid deductions for this purpose. Listed below are common deductions employers take from employee wages:

    • Items Considered to Primarily Benefit or Convenience the Employer

Items such as uniforms, tools, damages to the employer’s property, financial losses due to customers not paying bills and theft of the employer’s property by the employee or other individuals.

    • Uniforms

The FLSA does not require that employees wear uniforms. However, if wearing a uniform is required for safety or is the nature of the business, the cost and maintenance of the uniform is considered to be a business expense of the employer. An employer may prorate deductions for the cost of the uniform over a period of paydays.

    • Advances or Loans

According to the Department of Labor, if an employer makes a loan or advance of wages to an employee, the principal can be deducted from the employee’s earnings even if the deductions cuts into the minimum wage or overtime pay due to the employee. However, an employer cannot deduct for administrative costs or charge any interest if it brings the employee below minimum wage. Additionally, some states may have rules governing how and when an employer can collect from the employee.

    • Wage Overpayments

Federal law does not prohibit employers from recouping wage overpayments. However, state laws should be reviewed prior to making these deductions as some states do not allow wage overpayments to be collected. It is considered an employer error that should not penalize the employee.

Requiring written authorization for deductions is common. Even if this is not mandated by federal or state laws, it is always an HR Best Practice to have an employee’s written authorization and documentation to make payroll deductions.

Revised Expiration Date of the FMLA Certification Forms

As of December 31 2011, the Family and Medical Leave Act (FMLA) Certification forms expired, leaving many employers wondering what forms to use in attempts to remain in compliance and when a new form will be released. The Department of Labor (DOL) announced that the outdated forms could still be used although these forms lack mention of important regulations, including 2010 Amendments for Military Family Leave and the Genetic Information Nondiscrimination Act of 2008 (GINA).

At the beginning of 2012, the DOL released the forms with a temporary expiration date on a monthly basis. The delay in the revision date was due to a review of the forms by the Office of Management and Budget (OMB). Under the Paperwork Reduction Act of 1995, the DOL is required to submit FMLA forms to OMB for approval. The form was initially approved in late 2008 and carried a three (3) year expiration date, the maximum time frame allowed.

 Recently, the forms were released with an expiration date of February 28 2015, but the new forms do not include any substantive changes (view updated forms below). The DOL did not use this opportunity to update the shortcomings of the expired forms.

The U.S. Equal Employment Opportunity Commission (EEOC) recommends employers include language pertaining to GINA in a customized version of the form. GINA requires employers who request medical certifications from employees to safeguard against the collection of any genetic information about the individual.

 The Genetic Information Nondiscrimination Act of 2008 (GINA) prohibits employers and other entities covered by GINA Title II from requesting or requiring genetic information of an individual or family member of the individual, except as specifically allowed by this law. To comply with this law, we are asking that you not provide any genetic information when responding to this request for medical information. “Genetic information,” as defined by GINA, includes an individual’s family medical history, the results of an individual’s or family member’s genetic tests, the fact that an individual or an individual’s family member sought or received genetic services, and genetic information of a fetus carried by an individual or an individual’s family member or an embryo lawfully held by an individual or family member receiving assistive reproductive services.

Calculating Overtime Pay

Many employers find it difficult to accurately calculate overtime due to complex calculations  and changing regulations. The burden falls on the employer to properly classify an employee (as exempt or non-exempt) and provide compensation in compliance with the Fair Labor Standards Act (FLSA). According to the Wage and Hour Division of the Department of Labor, employers were fined $3.1 million in penalties for FLSA violations in 2008 and more than 197,000 employees received a total of $140.2 million in lawsuits regarding minimum wage and overtime back wages. The growth in employee lawsuits can also be observed in 2010; the number of FLSA lawsuits filed in federal courts in the second quarter of 2010 were 22 percent higher than in the first quarter of 2010.

Exempt vs. Non-Exempt

As determined by the FLSA, employees are placed in an either the exempt or the non-exempt category based on the employee’s job duties and responsibilities. The exemption refers to an employee’s eligibility to be paid overtime for hours worked over 40 in a workweek. If an employee is in the non-exempt category, the employee must be paid overtime, which is an additional one-half of an employee’s regular rate of pay for all hours worked over 40 in a workweek. Some states may have different and more stringent guidelines.

To help avoid penalties involved in calculating overtime, the FLSA recommends compliance with three key guidelines:(1) identify an employee’s regular rate of pay; (2) determine what activities count as hours worked; and (3) apply the FLSA definition of a workweek. Employers are encouraged to comply with these guidelines and retain documentation of compliance to serve as a good faith effort during a Department of Labor (DOL) audit.

Determine What Counts as Hour Worked

Hours worked include the entire time an employee is on duty, on company gorunds or at any other prescribed place of work. The time the employee is “permitted” to work as well as time the employee voluntarily stays late to finish work or comes in early counts as hours worked.

Apply the FLSA Definition of a Workweek

FLSA defines a workweek as a fixed and regularly recurring period of 168 hours, or seven consecutive 24-hour periods. The workweek can begin on any day of the week and at any hour of the day. The frequency of an employee’s pay (i.e. bi-weekly, semi-monthly, monthly) has no impact on determining the fixed workweek. When calculating overtime payment, each workweek must be analyzed individually; two or more workweeks cannot be combined. The workweek is determined by the employee’s start and stop times which remain fixed regardless of the hours the employee is scheduled to work. However, the start and stop times can be changed, as long as the change is intended to be permanent and complies with overtime requirements.

Identify an Employee’s Regular Rate of Pay     

An employee’s regular rate of pay is the weighted average of the employee’s hourly rate. To calculate calculate the rate of pay, divide the total pay for employment in a workweek by the total number of hours actually worked. Total pay is all payments made to or on behalf of the employee including shift differential, non-discretionary bonuses, promotional bonuses and cost-of-living adjustments. Payments made in the form of goods or facilities customarily provided by the employer are also included. For example, if an employee’s wages include lodging, the reasonable cost or the fair value of that lodging is added to the employee’s earning before determining his/her regular rate. However, deductions for board, lodging or similar facilities do not affect the regular rate of pay calculation; thus the calculation should be made before the deductions are made.

Statutory Exclusions

As per the FLSA, certain payments are excluded from the regular rate of pay. These exclusions include:

  • Payment for gifts for holidays, special occasions, or as a reward for service;
  • Payment made for occasional periods when no work is performed due to vacation, holiday, or failure of the employer to provide sufficient work;
  • Premium payments for overtime, or for working on weekends and holidays; and
  • Benefits for life insurance and health insurance.

 Four Steps to Calculating Total Weekly Compensation

  • Step 1: Regular Pay= Total Pay for Workweek + Additional Compensation – Exclusions
  • Step 2: Regular rate of Pay= Regular Pay divided by Total Hours Worked
  • Step 3: Premium Pay for Overtime= Regular Rate of Pay multiplied by 0.5, multiplied by (Total Hours Worked – 40)
  • Step 4: Total Weekly Compensation= Total Pay for Workweek + Premium Pay for Overtime

Companies should review their compensation and incentive practices to ensure compliance with all applicable Wage & Hour laws to avoid problems or investigations by the DOL. For more information, please visit the DOL’s website: www.dol.gov.

New York: Wage Theft Prevention Act becomes Effective February 1st

Employers, are you prepared to comply with the Wage Theft Prevention Act? The New York Wage Theft Prevention Act outlines an employer’s responsibility to communicate an employee’s terms of employment in a written notice. Effective February 1, 2012, employers must present the written notice to employees at the time of hire and annually thereafter (on or before February 1st of each subsequent year).

The written notice should include:

  • The employee’s rate(s) of pay;
  • The basis of the employee’s rate(s) of pay (e.g., by the hour, shift, day, week, salary, piece, commission, or other);
  • Whether the employer intends to claim allowances as part of the minimum wage, including tip, meal, or lodging allowances, and the amount of those allowances;
  • The employee’s regular pay day designated by the employer in accordance with the frequency of pay requirements in New York Labor Law Section 191;
  • The name of the employer and any “doing business as” names used by the employer;
  • The physical address of the employer’s main office or principal place of business, and a mailing address if different; and
  • The telephone number of the employer.

Employers can notify employees in writing within seven calendar days if any of the information above changes, through a new written notice or modified paycheck stub.

The written notice can be in English and in any other language primarily spoken by the employees. The New York Deportment of Labor (NYDOL) offers translations of the notice in Chinese, Haitian Creole, Korean, Polish, Russian and Spanish (online). Additionally, the Act allows employers to distribute the notice electronically, if the employer can confirm that the employee will receive the notice along with the acknowledgement form and the employee can print a copy of the notice for their records.

Employers must obtain a signed and dated acknowledgement of the notice for each employee. If the employee refuses to acknowledge the notice, the employer is advised to note the employee’s refusal to sign. Copies of the notice and accompanying acknowledgement must be retained for six years to serve as documentation upon request of the NYDOL.

Fines: Failure to provide the notice within ten (10) business days of a new employee’s starting date could potentially result in costly litigation, where the employee can recover $50 for each work week, with up to a maximum of $2,500 along with attorney’s fees and cost.