Category: Payroll

Posted on Jan 24, 2018

For several years now, the responsibility for financing one’s retirement has increasingly shifted from the employer to the employee. According to the Bureau of Labor Statistics, over the 15-year period from 1985 to 2000, the primary retirement plan participation of employees moved from defined benefit plans to defined contribution plans, such as 401(k) plans. And that trend has certainly continued.

401(k) Plan Features

A key feature in most 401(k) plans is that participants make their own investment choices from a set of options offered by the plan. The fact that participants make their own investment choices might lead business owners to conclude that participants — and participants alone — are responsible for the consequences of these decisions. However, plan fiduciaries, such as the employer plan sponsor, are not automatically absolved of responsibility for a participant’s investment decisions merely because the plan offered choices and participants made them. In order for a plan fiduciary to escape liability for losses resulting from a participant’s investment decisions, the 401(k) plan must comply with the Employee Retirement Income Security Act (ERISA) Section 404(c).

Exercise of Control Defined

According to the regulations, participants are able to exercise control when they have the opportunity to give investment instructions to an identified fiduciary and when they have the opportunity to obtain sufficient information to make investment decisions. “Sufficient information” includes a description of the investment alternatives, their objectives, risk/return, type, diversification, fees, expenses and sales loads. Participants must also receive an explanation of how to give investment instructions and any limitations. The regulations include specific requirements for plans that offer employer securities as an investment option.

401(k) Compliance With Section 404

According to regulations issued by the Department of Labor, a 404(c) plan is one in which participants have the opportunity to exercise control over assets in their individual accounts (see box below) and the ability to choose how to direct those assets from a broad range of investment alternatives. The regulations spell out in detail how these two requirements are met and how compliance with each aspect is needed to secure the protection that 404(c) offers.

The “broad range of investment alternatives” must include at least three diversified investment options that enable a participant to materially affect the potential return and minimize the risk of large losses. While most 401(k) products today include more than this minimum number of investment options, the plan sponsor (perhaps with the assistance of an investment professional) still needs to determine whether the asset classes and style of the funds offered satisfy the diversification, potential return and risk minimization requirements.

It is important to note that ERISA Section 404(c) imposes no obligation on plan sponsors to offer investment advice to participants. Also, 404(c) protection is only available to the extent that a participant directs the investments of his or her individual account. It also requires several communications to be made to participants, including notice that the plan intends to comply with 404(c) and that participants are responsible for the results of their investment decisions.

Market Factors

Events from several years ago make a strong case for seeking 404(c) protection. Two bear markets in the 2000s hit investors hard, including many 401(k) participants. Market gains that came easy faded quickly and 401(k) balances plummeted. Corporate scandals have led to collapsing retirement plans at affected firms. Questionable trading activity within mutual funds was reported in the news. All these events have focused attention on 401(k) investment performance and the potential liability of plan fiduciaries for investment losses.

Caution: The relief that ERISA Section 404(c) provides plan fiduciaries is not absolute. Regardless of 404(c) compliance, plan sponsors continue to have the duty to act prudently and solely in the interest of plan participants when selecting the investment options offered by the plan. Furthermore, both investment managers and their offerings must be monitored to ensure that there continue to be prudent choices.

NOTE: Under the Pension Protection Act, signed into law in 2006, retirement plan sponsors and fiduciaries are allowed to hire and compensate “fiduciary advisors” to supply investment advice and make investment transactions for participants and beneficiaries of defined contribution plans and beneficiaries of IRAs. A fiduciary advisor can be a registered broker or dealer, a registered investment advisor, a bank or similar financial institution, an insurance company or an affiliate, employee, agent or representative of one of the above.

Related Posts

Posted on Jan 16, 2018

You already know about the need to create and maintain payroll records, but you may be wondering how long you have to keep payroll records and for what purpose. The answers depend on the amount of time required by the appropriate statute, which can often lead to confusion and mistakes by the uninformed. Here are some general guidelines that can help you sort out your responsibilities. This is valuable information even if maintenance of your payroll system has been delegated.

What Are Considered Payroll Records?

In general terms, payroll records refer to the documents kept for the time that your employees work for your company and the wages they are paid. This can reflect amounts paid for overtime (time-and-a-half paid to non-exempt full-time employees for work of more than 40 hours a week). Under the Fair Labor Standards Act (FLSA,) the records should include the following information:

  • Employee’s full name and Social Security Number,
  • Address, including zip code,
  • Birth date, if younger than age 19,
  • Sex and occupation,
  • The time and day of the week when employee’s workweek begins,
  • Hours worked each day and total hours worked each workweek,
  • Basis on which employee’s wages are paid,
  • Regular hourly pay rate,
  • Total daily or weekly straight-time earnings,
  • Total overtime earnings for the workweek,
  • All additions to or deductions from the employee’s wages,
  • Total wages paid each pay period, and
  • Date of payment and the pay period it covers.

In some cases, the length of time to keep payroll records is discretionary, but there are two key federal statutes that require records to be kept for a definitive period: the aforementioned FLSA and the Age Discrimination in Employment Act (ADEA). These records may be required for inspection by the Equal Employment Opportunity Commission (EEOC).

1. FLSA. Generally, the FLSA is the federal law that applies to work performed by employees for most employers, although there are certain exceptions. The FLSA requires employers to pay employees a minimum hourly wage of at least $7.25 under current standards. Note that many states and municipalities impose minimum wage requirements that are higher than the federal standard.

Under the FLSA overtime rules, an employer must pay an employee one-and-a-half times the employee’s regular hourly rate for all hours worked over 40 in any workweek, unless the employee falls in the exempt category, such as salaried executives. Detailed and accurate time records are required for all non-exempt employees. Other restrictions may apply, such as rules regarding labor by children.

It’s important for employers to determine if each worker is an employee and, whether he or she is exempt or non-exempt. For instance, misclassifying an employee as an independent contractor can lead to penalties, as does classifying a worker as being exempt when he or she should be treated as a non-exempt worker. Typically, if an employer lacks the proper records, its exposure to claims is increased.

2. ADEA. The ADEA specifically forbids age discrimination against people who are age 40 or older. Although it doesn’t protect workers under age 40, some states offer comparable protections for these younger workers. It isn’t illegal for an employer to favor an older worker over a younger one, even if both workers are age 40 or older, but discrimination may still occur when the victim and the person causing the discrimination are both over age 40.

Specifically, the law prohibits discrimination in any aspect of employment, including, among other things:

Hiring
 Promotions
Firing
 Layoffs
Pay Training
Job assignments
 Benefits

It’s also illegal to harass a person because of his or her age. Such harassment can include offensive or derogatory remarks about the age of an individual. The law doesn’t prohibit simple teasing, offhand comments or isolated incidents that aren’t very serious. However, harassment is actionable when it’s so frequent or severe that it creates a hostile or offensive work environment or it results in an adverse employment decision (for example, the victim is fired or demoted).

The person harassing may be the victim’s supervisor, a supervisor in another area, a co-worker or an outside person, such as a client or customer.

For both the FLSA and the ADEA, most payroll records must be kept for three years, but the FLSA allows employers to discard some supplementary payroll records, including wage tables, after two years.

Records on which wage computations are based — such as time cards and piece work tickets, wage rate tables, work and time schedules and records of additions to or deductions from wages — may be kept for only two years.

These records must be open for inspection by DOL representatives, who may ask the employer to make extensions, computations or transcriptions. The records may be kept at the place of employment or in a central records office.

Form and Function

According to the EEOC, time clocks aren’t required to keep track of employee hours under the FLSA, nor do payroll records have to be kept in any particular format. Similarly, the ADEA doesn’t mandate one format as long as the records are available when the EEOC requests them. However, under the FLSA, microfilm or punched tape shouldn’t be used unless the employer has the equipment to make these formats easily readable.

The key function of maintaining employee payroll records under the FLSA is to protect an employee’s rights to fair pay, including the right of covered, nonexempt workers to the minimum wage and overtime pay. The records may also be used to ensure an employer isn’t violating child labor laws.

The records that must be kept for the ADEA serve a different purpose. They are intended to ensure that an employee who is discriminated against due to age can identify and locate the information needed to prove or disprove a claim.

Consult the Pros

Under both the FLSA and the ADEA, payroll records should generally be kept for three years following the date of an employee’s termination. However, other statutes may come into play, including various state laws. Rely on the expertise of professionals in this area.

Related Posts

Posted on Jan 10, 2018

Often, bad hiring decisions don’t become apparent for weeks or months. Then, it might take much longer to rectify hiring mistakes, whether that means a termination or resolving the performance issues. Here are some of the most commonly reported hiring mistakes, and some tips for avoiding them.

Consider the Consequences

Perhaps the biggest error is moving too quickly. A rushed hiring process usually means cutting corners — not searching broadly enough for the best candidate and short-circuiting the candidate assessment process. If you need to move quickly, just devote more time to the process (and enlist support) instead of trying to streamline it.

One way to motivate yourself not to rush a hiring decision is to think about the impact that a poor hire can have. Depending on the individual’s shortcomings, the effects of a poor performer can ripple throughout your whole organization.

For example, a new employee’s bad attitude can spread like a virus. Also, when a worker isn’t carrying his or her own weight, for whatever reason, those left to pick up the slack can become resentful. Finally, consider how much of your time or a supervisor’s time can be sapped trying to rehabilitate an underperforming employee or to bring an underqualified hire up to speed.

Getting in a hurry to fill a vacancy may lead you to only interview job candidates who respond to help-wanted ads. Often, however, the best fit for the job is someone who isn’t looking for work and, therefore, won’t see your ad. If finding qualified applicants is a problem, consider turning your employees into recruiters by asking them to recommend good candidates they may know. You might motivate them to do so by offering a reward if the recommendation leads to a new hire.

Cast a Wide Net

Once you have applications that look promising, conduct reference checks — don’t waste this opportunity by taking this step too lightly! It’s true that, when asked to give job references, many companies aren’t willing to give more than basic employment information, such as when the person in question worked for them. This isn’t surprising, given the litigious culture we live in. Former employees who are given negative references sometimes head to court claiming unfair treatment. Likewise, a company that fails to provide critical information (such as a history of violence in the workplace) could also end up in the hot seat.

With this reluctance in mind, you’ll have to be more persistent to get real information. If the references provided to you are skimpy or you can’t get a return call, tell the applicant you need more contacts, possibly including personal references. Also, if the applicant was a supervisor, try to talk to people that he or she supervised.

Grill References Thoroughly

When you talk to references, in addition to verifying basic facts, use open-ended questions rather than inquiries that can be answered with a simple yes or no. For example, you can ask:

  • How would you describe the candidate’s job performance?
  • How did the candidate deal with high-pressure situations?
  • How did he or she solve problems?
  • How did the candidate work in terms of cooperation with coworkers?

Also, characterize the responsibilities and qualifications that the candidate listed on his or her resume, and ask the reference if they accurately describe the applicant. Resume-padding is rampant.

Finally, listen for the silence that can speak volumes. As noted earlier, fear of litigation often prevents people from giving useful information, such as “the former employee had a poor work attendance record.” Within reason, you should take note if the reference neglects to say something flattering when given the opportunity, or seems to dodge a question. Consider whether he or she is masking a negative response.

Suppose, for instance, you say, “Tell me about John’s leadership skills.” If the answer you get is something along the lines of, “Here at Acme Co., we encourage all of our employees to develop leadership skills,” you might reasonably surmise that John’s leadership skills aren’t exemplary.

Look for Flaws

Many books have been written on how to interview job candidates. Here are just three tips for rooting out characteristics you’d want to avoid in an employee:

  • Poor attitude. A negative, cynical complainer might hide those traits when talking to you. However, the more of your people the job candidate encounters, the greater the chances that you’ll get a hint of that personality type. Give candidates a chance to meet separately with some people they would work with. That’s a helpful opportunity for the applicants to learn more about your organization. It also gives you additional lenses through which to view them, as other employees provide feedback. It’s a good idea to also ask for feedback from others who weren’t part of the interview, for example, the receptionist. Often applicants are less guarded around people they see as uninvolved in the hiring process.
  • Over-the-top ambition. Although you probably want to hire employees who hope to climb the ranks, watch for signs that the candidate is only interested in finding a job as a short-term stepping stone. Insights can be gleaned from such standard questions as, “Where do you see yourself in three (or five or ten) years?”
  • Dependency. Some employees are needy and require more support and direction from supervisors than you’d hope or expect. How can you spot such people before hiring them? You may be able to gauge a person’s ability to confront a challenge independently by asking him or her to describe a previous work situation. For instance, you might say: “Tell me about a time when you had to solve a problem with your job by yourself, and how you did it.”

As an employer, you hope that your employees are not only able to work through problems on their own, but also capable of applying what they learn to future issues. This same step should apply to how you fine-tune your hiring process. Take note of what works well and use that to create a hiring procedures checklist that will help as you continue to build your organization. Consistently adhering to an experience-tested process helps prevent costly hiring mistakes.

Related Posts

Posted on Dec 6, 2017

The federal overtime law can lend itself to differing interpretations. In those cases, workers may challenge how an employer applies the rules.

Under the Fair Labor Standards Act (FLSA), eligible employees must be paid time-and-a-half their regular pay rate when they work more than 40 hours a week, unless there’s an exemption. Here are three examples of when employees challenged their employer’s application of the law.

1. Bonuses and shift differentials. The Wage and Hour Division (WHD) of the Department of Labor (DOL) reached a settlement with a Midwest health care management company regarding overtime violations at 23 skilled nursing and assisted living facilities. The company agreed to pay $165,379 to 594 workers in back wages and damages.

The WHD found that the company violated the FLSA when it failed to include non-discretionary bonuses and shift differentials in calculating overtime rates. The omissions also triggered violations of the recordkeeping provisions of the FLSA.

In addition to paying the back wages and damages, the company agreed to use a new payroll service and software.

Failing to accommodate bonuses and shift differentials in overtime pay is a common FLSA violation, particularly in the health care industry.

2. Employees working multiple jobs. In another case, the U.S. Third Circuit Court of Appeals ruled that a Pennsylvania county didn’t willfully violate the FLSA when it calculated overtime.

Two employees worked two separate part-time jobs. The county tracked and paid these employees for each of their two individual jobs, but later discovered that it had failed to aggregate the hours for both jobs, resulting in a failure to pay the overtime rate.

The county didn’t dispute that it violated the FLSA’s overtime provisions. The issue at hand was whether the violations were willful. This issue matters because a finding of willfulness expands the limitations period for claims under the FLSA.

The court ruled that although there was evidence the county made bureaucratic errors that perhaps could be attributed to “government morass,” its failure to pay correctly didn’t rise to a level of “recklessness or ill will” that might have demonstrated willfulness. (Souryavong v. Lackawanna County, CA-3, Dkt. No. 15-3895, 9/20/17)

Top Court Definition of “Willfulness”

Under the U.S. Supreme Court’s long-standing definition, willfulness includes situations when the employer, at the time of its FLSA violation, either knew its conduct was prohibited by the law or “showed reckless disregard” for the matter. Simply acting unreasonably is insufficient. In other words, there must be an element of actual awareness. (McLaughlin v. Richland Shoe Co., U.S. Sup. Ct., 486 U.S. 128, 5/16/88)

The county employees argued that the violations were willful in this case because:

    • The county made the same mistake with another employee who held two separate jobs,
    • The county’s Human Resources director sent out an email to county officials raising the concern that employees working multiple jobs might file labor grievances, and
  • County officials testified that they were generally aware of the FLSA and its requirements.

The court, however, found no evidence that the county was “specifically aware” of the multiple-job FLSA overtime problems. The court also noted that the problem was addressed within a year of the email raising concerns — much sooner than another case where the court did find willful violation.

3. Requests for overtime pay. In yet a third case, the Seventh Circuit Court of Appeals upheld a lower court’s decision that a city wasn’t liable for paying overtime wages to off-duty police officers working on mobile devices. (Allen v. City of Chicago, CA-7, Dkt. No. 16-1029, 8/3/17)

The officers were members of an organized crime bureau. Although the officers had scheduled shifts, they were sometimes required to work hours when they would ordinarily be considered off-duty. To assist its officers, the police department issued mobile devices that could be used during off-duty work.

Under the police department’s procedure, officers were required to submit time slips to obtain overtime pay. The officers regularly used this system, but during the period covered by the lawsuit, many officers didn’t submit slips for work done on the mobile devices.

Was Unwritten Policy the Problem?

The main issue was whether the unwritten policy prevented or discouraged the officers from submitting overtime slips. Although an employer’s duty to pay overtime arises even when it doesn’t request the work or the work hasn’t been reported, the FLSA stops short of requiring employers to pay for work they didn’t know about and had no reason to know about.

Some plaintiffs testified that the culture of the organized crime bureau would frown on submitting slips for work using the mobile devices, but others, including some plaintiffs, had submitted slips for such work and were never denied compensation. Some supervisors knowingly approved slips submitted for such work; others probably did so without knowing it since the slips didn’t indicate whether the work was done on a mobile device.

No one ever told plaintiffs not to submit slips for that work, and no one was ever reprimanded or disciplined for submitting such slips. All told, the court concluded, the evidence didn’t bear out the common culture plaintiffs alleged and there was no FLSA violation.

Moral of the Examples

It isn’t unusual for situations to fall between the cracks of the usual overtime applications. Hire a reputable payroll provider you can trust and look to your Human Resources department for guidance.

Related Posts

Posted on Nov 27, 2017

Employers are often prohibited from interfering in the lives of their employers under various privacy laws. But it’s a different matter when employees fail to pay court-ordered child support.

In cases like that, an employer may be required to garnish child support from an employee’s wages. This isn’t uncommon. Employer withholdings account for about 75% of child support payments each year. In addition, wages may be garnished for unpaid taxes and defaulted student loans, among other debts.

With that in mind, here’s a primer on the basic rules of garnishment.

Under the federal Consumer Credit Protection Act (CCPA), employers may be required to withhold child support (or certain other debts) as payroll deductions. But it’s not up to the employer to decide to do this.

Elements of a Withholding Order

Employers are notified by an Income Withholding Order (IWO) from the U.S. Department of Health and Human Services (HHS), which administers the law. The employer must comply with a legally valid IWO, which:

  1. Is for one of your employees or independent contractor,
  2. Is an order for payment or has such an order attached, and
  3. Is a direction for you to submit payments to the state disbursement unit.

However, you can’t fire or otherwise punish the employee simply because of the IWO. This is strictly prohibited by law.

Calculating the amount to be withheld is complex. Initially, the amount is based on “disposable income.” This is the amount remaining after mandatory deductions — federal, state and local taxes, unemployment insurance, workers’ compensation insurance, state employee retirement deductions and other deductions under state law. Generally, federal benefits such as Social Security, veterans’ benefits, and student assistance, among others are exempt from garnishment.

Disposable income and “net pay” aren’t necessarily the same. Net pay might include other deductions (for example, 401(k) plan deferrals) that aren’t figured into disposable income. Tip income, however, isn’t included in wages when calculating disposable income, but service charges are included.

Allowable Disposable Income

The maximum amount available for child support withholding is the “allowable disposable income.” The amount in the IWO may be higher, but the allowable amount is disposable income multiplied by a CCPA limit. Leave the details to your payroll advisors.

If you receive an IWO from a state that is different from the one where the employee works, you must take into account the laws for each jurisdiction. Generally, the employer follows the laws of the state issuing the IWO with regard to:

  • The amount of the child support payments,
  • Payment of fees and other charges, and
  • The state disbursement unit where payments are directed.

Conversely, you generally follow the laws of the state where the employee works with regard to:

  • The time to begin withholding,
  • The time to begin payments,
  • The maximum allowable disposable income limit,
  • Limits on administrative fees, and
  • Other terms and conditions.

FAQs About Child Support Withholding

Besides the basics of garnishments, other questions often come up. Here are some of the ones addressed on the HHS website.

  1. When does withholding of child support begin?
  2. An employer must start child support withholding no later than the pay period beginning 14 days after the IWO is mailed.
  3. Can an employer charge its employees for this withholding responsibility?
  4. Yes. Most states allow employers to charge an administrative fee, subject to a maximum set by the state. However, the fee must come from the employee’s allowable disposable income, not the child support payment.
  5. Where does an employer submit the withholding?
  6. Typically, it is sent to the state disbursement unit, unless otherwise notified. The appropriate unit will be listed on the IWO. Payment may be made electronically or by check.
  7. When does an employer have to send the payment?
  8. An employer must remit the payment within seven business days of the date when wages are paid. Note that some states impose a due date that is even sooner.
  9. What is the length of time for the payments?
  10. Employers must continue to withhold child support until they are officially ordered to stop. If the employee terminates employment for any reason, such as quitting or being fired, the employer should notify the child support enforcement agency. Other rules may apply under state law.
  11. Can withholding be increased if requested by the employee?
  12. Yes. An employer may withhold amounts above the CCPA limit, depending on company policy and state law. Alternatively, an employee may send additional payments to the child support agency for arrears or to avoid accrual of overdue payments.
  13. What happens if a company acquires another company that has IWOs for its employees?
  14. An acquiring company assumes the same legal obligations as the acquired company. It should continue to honor the IWOs, but notify the issuing child support agency as soon as possible about the acquisition and its intent to continue the withholding. Depending on state law, new IWOs may be required.
  15. What happens if an employer fails to withhold the required child support?
  16. If an employer doesn’t properly withhold and remit mandated child support, it is subject to penalties. These may include repayment of the amount of the child support plus penalties and fines. In addition, the state may impose certain fees on the employer.

You can find the full list of FAQs here and more information is available here.

Rely on your payroll advisors to provide the necessary guidance in this area and to fully comply with federal and state laws.

Related Posts

Posted on Nov 17, 2017

Most employers believe their employees expect to work past age 65. A recent survey by the Transamerica Center for Retirement Studies states that one reason for staying on the job longer is that so many older workers experience a shortfall of retirement savings. Another is that many employees don’t want to go cold turkey on the social interaction, stimulation, and sense of accomplishment they get from work. 

More than 80% of surveyed employers say they support the idea of employees working past 65. But only about a third of them allow staff members to downshift from full- to part-time status  ― also known as “phased retirement.” This may change as employers recognize the need to keep experienced workers on board longer.

Employees who welcome the opportunity to switch to part-time work may be even more productive after the change. And employers can benefit greatly by having these seasoned employees available to transfer their skills and job knowledge to the younger workers who come after them.

Labor Shortages

Labor shortages in certain fields and geographic regions also play a role in the changing retirement landscape. The Government Accountability Office (GAO) recently issued a study on phased retirement programs, noting that “Industries with skilled workers or labor shortages are motivated to offer phased retirement because their workers are hard to replace.”

The GAO study also cited data from the Society for Human Resource Executives (SHRM). A member survey stated that phased retirement programs are common among employers with technical and professional workforces. Overall, 5% of SHRM members offer such programs.

And while some employers examined by the GAO had to clear a few regulatory hurdles — specifically structuring benefits in a way that doesn’t violate ERISA anti-discrimination regulations — employers “were able to address various design and operational challenges,” according to the report.

Variety of Models

The study found an assortment of approaches that employers are taking. Here are examples of phased retirement programs used by four unidentified companies:

Example 1: Workers work 80% of full-time for 80% of full-time pay.

  • Primary advantages: Retention of workers and development of future leaders and the ability of the employer to do workforce planning.
  • Who is eligible: U.S. employees at least 55 years old with 10 or more years of service who have achieved or exceeded performance expectations and have management’s permission.
  • Hours reduction allowed: 20%.
  • Length of phased retirement: Any length of time is permissible assuming program standards are met and the manager approves.
  • Knowledge transfer: Workers spend time transferring knowledge, skills and expertise. For each year the worker participates, he or she creates a proposal that includes a knowledge transfer plan with recommendations on how it will ensure business continuity.
  • Effect on health benefits: None.
  • Effect on 401(k) plan: The employer contribution is based on a worker’s full-time salary.

Example 2: Workers and managers develop a structured plan to transfer knowledge and transition to retirement within two years.

  • Primary advantages: Helping the company with workforce planning by encouraging workers to inform the company about their retirement plans and to help transfer their knowledge before they retire.
  • Who is eligible: All workers at least 60 years old who have been employed by the company for five years or more and have permission from their managers and the human resources department.
  • Hours reduction allowed: Automatic approval to reduce work hours by 20% to 50%. Those wishing to work less than 50% may submit a request to do so, though they would lose eligibility for health benefits.
  • Length of phased retirement: From six months to two years.
  • Knowledge transfer: This is a large program component, with many tools and guidelines.
  • Effect on health benefits: Benefits remain the same as for full-time employees (with the caveat above for those wishing to work less than 50% of full-time).
  • Effect on retirement benefits: No plan contribution formula change, but pay upon which the employer contribution is based changes in proportion to the worker’s reduced salary.
  • Other: The employer maintains a group of standby workers to fill in throughout the company if a spike in work demand occurs.

Example 3: Phased retirement program is available to workers in units that have implemented the program.

  • Primary advantages: Worker retention and knowledge transfer, training and mentoring of remaining staff.
  • Who is eligible: At management’s discretion. Can begin at any age.
  • Hours reduction allowed: Participants typically work 60% of full-time.
  • Knowledge transfer: An expectation that participants will mentor or train staff, but there’s no formal program to ensure that this happens.
  • Effect on health benefits: If employee works more than 60% of full-time, no reduction in benefits. Health benefits stop at age 65 for all workers.
  • ·Effect on retirement benefits: None.

Example 4: Workers must transition into full retirement within three years.

  • Primary advantages: Participants gain the ability to adjust to full retirement by reducing their workloads gradually while still contributing to their business units.
  • Who is eligible: Certain workers who are age 57 or older and have completed at least 10 years of service.
  • Hours reduction allowed: 25% to 50%.
  • Length of phased retirement: A maximum of three years.
  • Knowledge transfer: No such requirement.
  • Effect on health benefits: None.
  • Effect on retirement plans: Employer contributions are proportionally reduced during phase-out period.

These examples illustrate some of the diversity of existing phased retirement programs. If you’re not sure how beneficial such a program would be for your business, perhaps launch one on a trial basis and then assess the results. Also, keep in mind that navigating the legal and regulatory implications of implementing such a program ― particularly with respect to employee benefits ― requires guidance from a qualified attorney.

Related Posts

Posted on Oct 9, 2017

The U.S. Department of Labor’s Wage and Hour Division (WHD) has announced that the minimum wage rate for federal contractors will increase from $10.20 per hour to $10.35 per hour, effective January 1, 2018.

Background Information

On February 12, 2014, President Obama signed Executive Order 13658 which established a minimum wage rate for federal contractors. The executive order required parties who contract with the federal government to pay workers performing work on or in connection with covered federal contracts at least:

  • $10.10 per hour beginning January 1, 2015; and
  • An amount determined by the Secretary of Labor in accordance with the methodology in the executive order, beginning January 1, 2016, and annually thereafter. The rate was increased to $10.15 per hour, effective January 1, 2016 and $10.20, effective January 1, 2017.

Tipped Employees

The executive order also requires annual adjustments to the minimum cash wage rate for tipped federal contract employees. The WHD has announced that the minimum cash wage for tipped employees performing work on or in connection with a federal contract will increase from $6.80 per hour to $7.25 per hour, effective January 1, 2018.

The contractor must increase the cash wage paid to a tipped employee to make up the difference if a worker’s tips combined with the required cash wage of at least $7.25 per hour don’t equal the hourly minimum wage rate for contractors as noted above. Certain other conditions must also be met.

Minimum Wage for Other Employees

The minimum wage amount  listed above is only for federal contractor employees. Under the Fair Labor Standards Act (FLSA), the federal minimum wage for covered non-exempt employees who aren’t employed by federal contractors is $7.25 per hour. Many states and municipalities also have their own minimum wage laws. If your business operates in a state or municipality that has a higher minimum wage than the federal level, your employees are entitled to the highest rate.

What Employers in Some States Must Pay

Some examples of states with minimum wage per-hour rates currently higher than the federal rate are Washington ($11.00), Massachusetts ($11.00), Oregon ($10.25), Connecticut ($10.10), Vermont ($10.00), Arizona ($10.00), Rhode Island ($9.60), New York ($9.70), Colorado ($9.30), Maryland ($9.25), Maine ($9.00), Michigan ($8.90), West Virginia ($8.75),South Dakota ($8.65), New Jersey ($8.44), Illinois ($8.25), Florida ($8.10) and New Mexico ($7.50).

Some states have different minimum wage rates for large and small employers and impose other requirements. For example:

  • In California, the minimum wage is $10.00 for employers with less than 25 employees and $10.50 for those with 26 or more.
  • Large employers in Minnesota (defined as enterprises with annual receipts of $500,000 or more) have a minimum wage rate of $9.50 per hour while small employers (enterprises with annual receipts of less than $500,000) have a minimum wage rate of $7.75 per hour.
  • In Ohio, employers with annual gross receipts of $299,000 or more must pay $8.15 per hour and those with annual gross receipts under $299,000 must pay $7.25 per hour.
  • In Nebraska, employers with four or more employees have a minimum wage of $9.00 per hour.
  • Nevada requires employers that provide no health insurance benefits to pay $8.25 per hour and employers that do provide health insurance benefits to pay $7.25 per hour.

Federal and State Tipped Employee Rules

An employer of a tipped employee is required to pay $2.13 an hour in direct wages if:

  • That amount plus the tips received equals at least the federal minimum wage,
  • The employee retains all tips and the employee customarily, and
  • The employee regularly receives more than $30 a month in tips.

Many states also have their own laws related to tipped employees. Again, if an employee is subject to both federal and state laws, he or she is entitled to the law that provides the greater benefits. Some states (including California, Oregon, Nevada, Montana, Minnesota and Alaska) require employees to pay tipped employees the full state minimum wage.

Contact your Cornwell Jackson payroll advisor if you have questions about minimum wage issues in your situation.

Related Posts

Posted on Aug 2, 2017

Whether a claim is unfounded or not isn’t apparent until it’s investigated, of course. But if statistics from the Equal Employment Opportunity Commission (EEOC) provide any insight, it’s worth noting that retaliation claims — the most common form of complaint — rose by 6% last year.

These claims involve allegations that employers took adverse action against employees who filed discrimination complaints. When an employer is found to have retaliated against a worker who files a complaint, that employer is culpable, even if the original discrimination charge proves to be invalid.

Only about one-third of retaliation charges addressed last year were determined to have had a “reasonable cause,” a fact which hasn’t changed much since the year 2000. Fighting such claims is time-consuming and disruptive, but generally necessary to avoid being stigmatized as a “bad” employer, not to mention to avoid incurring expensive penalties.

Going to the Mat

A recent federal case illustrates how far an employer might have to go to defeat an unfounded discrimination claim. A U.S. citizen of Arabic descent was given a low performance rating, and complained to the HR department that a supervisor had made a racially offensive remark. The employee was placed on a performance improvement plan, and claimed that the plan was in retaliation for his complaint about that remark.

He was transferred to another department, and two months later received another poor performance review. In keeping with company policy, the employee’s performance was later evaluated by a committee, which ultimately upheld the new supervisor’s negative review. The employee was terminated shortly thereafter.

The EEOC concurred with the employee’s retaliation claim, but the employer appealed the case to a U.S. District Court for the Southern District of Texas, which rebuffed the EEOC. The EEOC then sought help from the 5th Circuit Court of Appeals, which upheld the District Court’s ruling, seven years after the employee made his first retaliation complaint.

Lessons Learned

Needless to say, few employers have the legal budget or the appetite to stick to their guns fighting such a case all the way up to a federal appellate court. But the actions that the employer took ultimately brought vindication, and now offer important lessons to others. Here’s a quick summary of what happened in this case, which reveals why the employer may have prevailed.

  • The negative review didn’t happen until about 10 months after the employee had joined the company, suggesting that he was given plenty of time to prove himself.
  • The employer took the worker’s original discrimination complaint seriously, and transferred him to another department. The purpose of the transfer wasn’t to concede any wrongdoing on the original supervisor’s actions, but to give the worker an opportunity for a fresh start.
  • After the second supervisor gave the employee a negative review, a committee was formed to assess that review.

By taking all these measures, it was abundantly clear that the employer proceeded with intention and hadn’t acted rashly. But knowing when to “go to the mat” to defend your company against an unfounded claim isn’t always so clear.

Tips from the EEOC

Here’s what the EEOC says when it comes to developing a strategy for your company, which may help you nip employment discrimination claims in the bud.

General policies should:

  • Train human resources managers and all employees on Equal Employment Opportunity (EEO) laws.
  • Implement a strong policy based on EEO laws that’s embraced from the top levels of the organization.
  • Train managers, supervisors and employees on the policy’s contents, then enforce it and hold them accountable.
  • Promote an inclusive culture in the workplace by fostering an environment of professionalism and respect for personal differences.
  • Encourage open communication and early dispute resolution, which may minimize the chance of misunderstandings escalating into legally actionable EEO problems. An alternative dispute-resolution (ADR) program can help resolve EEO problems without the acrimony associated with an adversarial process.
  • Establish neutral and objective criteria to avoid subjective employment decisions based on personal stereotypes or hidden biases.

When it comes to recruiting, hiring and promoting employees, keep these principles in mind. It’s important to:

  • Implement EEO practices designed to widen and diversify the pool of candidates considered for employment openings, including positions in upper-level management.
  • Monitor for EEO compliance by conducting self-analyses to determine whether current employment practices disadvantage people of different races or treat them differently.
  • Analyze the duties, functions and competencies relevant to jobs. Then create objective, job-related qualification standards related to those duties, functions, and competencies and consistently apply them when choosing among candidates.
  • Ensure that selection criteria, such as education requirements, don’t disproportionately exclude certain racial groups. The exception might be if the criteria are valid predictors of successful job performance and meet the employer’s business needs.
  • Make promotion criteria available for employees to read, and also make sure job openings are communicated to all eligible employees.
  • Instruct outside agencies that you may use for recruitment not to search for candidates based on race or color. Both the employer that made the request and the employment agency that honored it would be liable.

Adopt a Policy

And finally, to minimize the chances of facing any harassment charges, adopt a strong anti-harassment policy, periodically train each employee on its contents, and vigorously follow and enforce it. The policy should include:

  • A clear explanation of prohibited conduct, with examples;
  • A detailed complaint process that provides multiple, accessible avenues of complaint, and a prompt, thorough, impartial investigation;
  • Assurance that the employer will protect the confidentiality of harassment complaints to the extent possible, and protect employees from retaliation;
  • A reasonable expectation that the employer will take immediate and appropriate corrective action if it’s determined that harassment has occurred.

The above may appear to be a daunting “to do” list, particularly if you haven’t yet given much thought to avoiding discrimination in your workplace. But every long journey begins with a single step, and the sooner you take that step, the lower the probability that you’ll wind up with a figurative knock on the door from the EEOC.

Related Posts

Posted on Aug 1, 2017

Presumably you have a holiday and vacation policy already in place. But what if it’s not working well for your company or your employees?

For example, if it’s vague, you may have to make decisions on the spot when an employee asks for days off at a time that is inconvenient for you and possibly for other members of your team. That can result in hard feelings if you have to say no, or extra work for you and others if you feel compelled to approve the request.

In constructing a policy, while it’s useful to consider what a perfect world would look like from your perspective, it’s also essential to begin with considering what other employers in your labor market are doing. That way you can be sure you’re reasonably competitive without giving away the store (see “Is Your Holiday Policy Competitive” below).

Vacation Request Procedures

A solid vacation policy will spell out the requirements for submitting time-off requests. For example, you might choose to give employees greater freedom to choose days off the further in advance they make the request. The more lead time you have to plan around vacation schedules, the less of a burden an employee’s absence imposes on you and your team.

Workers who make last-minute requests should know that they may be turned down. To avoid misunderstandings, define what your company means by last minute. Depending on the complexity of your scheduling, it could mean two days in advance, or two weeks or even more.

It’s also important to set a policy that establishes priority, when more than one employee asks for vacation leave for the same period of time. If three key people from a six-member department all want to take the last two weeks of August, who gets priority?

Basic prioritization systems include seniority, and first-come-first-served, or some combination of those two.

A third option is a rotational scheme. This involves having a team agree to make their vacation scheduling requests at the same time. Employees are randomly assigned a number indicating place in the request sequence, such as a number between one and six for a department of six.

The six employees then get to make their vacation requests according to the number they choose. But the employee who drew the number one moves to the end of the line (to number six) in the next round, number two moves up to number one, and so on.

Optimal Timing

If your company experiences annual slow periods, you may choose to encourage employees to take vacations during slow periods. That encouragement could take the form of a requirement that half of employees’ vacation time be used during such slow periods. However, for employees with children, school vacation schedules will be a major consideration, and you’d want to be as accommodating as possible for those workers, without leaving yourself open to an accusation of favoritism.

Some companies elect to go into a “hibernation” mode during a traditionally slow period, and essentially shut the place down, requiring employees to use most of their vacation days at that time. This is a common practice in several European countries. Employees plan around it, and nobody is left holding the bag, having to pick up the slack caused by other employees’ vacation schedules.

Cooperative Approach

Finally, if your workforce is cooperative and flexible (or you’re working to make it so), consider trying a collective process for setting vacation schedules. In other words, let a team work things out among themselves, taking into consideration each other’s needs and priorities, as well as the effectiveness and productivity of the team as a whole. Your role is to stay out of the discussions as much as possible, empowering team members to come up with their own solutions.

Potential benefits of this approach:

  • Fostering teamwork,
  • Experiencing minimum disruption to team workflow, and
  • Avoiding having to play the role of heavy.

Remember, establishing a vacation and holiday policy involves a balancing act between the operational needs of the business and employees’ desires. The process may be more of an art than a science. It’s up to you to find that proper balance.

Is Your Holiday Policy Competitive?

According to the Society for Human Resource Management (SHRM) 2017 survey, most employers pay a premium to employees when they are asked to work on holidays. Among those that do, 40% pay double-time wages to non-exempt workers, and 21% pay time-and-a-half.

Relatively few allow employees to take a floating holiday — that is, the opportunity to pick an alternative day off to a standard holiday, such as taking July 5 off instead of July 4. Similarly, only about 18% allow full-time employees to swap holidays, for example, take Chinese New Year’s day off in lieu of January first.

In case you’re wondering how your company’s holiday policy stacks up to other companies, here are the results of a 2017 SHRM survey, entitled Holiday Recognition Prevalence.

 

Percentage of surveyed employers recognizing
these holidays
Thanksgiving 97%
Friday after Thanksgiving 75%
Christmas Day 95%
Christmas Eve 62%
Week between Christmas and New Year’s Day 15%
Labor Day 95%
Memorial Day 93%
July 4 93%
New Year’s Day (Sunday in 2018) 98%
Monday after New Year’s Day (2018) 72%
Easter Sunday 51%
Good Friday 27%
Martin Luther King Jr. Day 39%
Presidents’ Day 34%
Veterans’ Day 19%
Columbus Day 11%

Related Posts

Posted on Jul 31, 2017

Sexual harassment on the job remains a problem in many workplaces.

And most often, charges are filed by female employees against males. But in a recent case, the Tenth Circuit U.S. Court of Appeals rejected a district court’s ruling that a man’s sexual harassment charges against a female supervisor were improperly handled. The appeals court sent the matter back for further review.

Facts of the Case

A male mechanic for a trucking firm sued his employer for sexual harassment caused by his direct supervisor, a female who also was a shareholder in the firm. The employee alleged that he was fired because he refused to have sexual relations with the woman.

The mechanic completed the intake questionnaire that’s required in order to file a claim with the Equal Employment Opportunity Commission (EEOC). He checked the boxes for “Sex” and “Retaliation” as the reasons for his claim, as well as writing out “sexual harassment.”

In response to questions seeking more detailed explanations, the employee wrote “see attached,” referring to a six-paragraph statement he had prepared. The attachment concluded with the statement that he was terminated because he refused to agree to the supervisor’s sexual advances and rejected all such efforts by her.

Change of Form

Apparently, however, the EEOC didn’t receive the attachment, so it used a charge form based on the questionnaire alone. This form laid out the basics of the allegations, which were:

  • The mechanic was subjected to sexual remarks by his supervisor.
  • He complained about the sexual harassment to the general manager and other owners.
  • Nothing was done before the supervisor terminated his employment.

The charge, however, didn’t specify the information that was included in the attachment about unwanted sexual advances.

The EEOC issued a right-to-sue letter and the mechanic sued in federal court. He initially made two claims:

  1. “Quid pro quo” harassment, which occurs when a worker suffers an employment action such as termination for refusing a supervisor’s demands for sex, and
  2. Hostile environment harassment, which occurs when a course of conduct makes a work environment abusive.

He later dropped the hostile work environment claim.

The U.S. District Court dismissed the claim as being deficient because the charge form didn’t include the missing attachment spelling out the quid pro quo allegations. Undaunted, the mechanic appealed.

Different Outcome

The Tenth Circuit Court of Appeals was more sympathetic to the man’s plight. It determined that the charge form contained sufficient allegations to trigger an investigation into:

  • What the sexual remarks were
  • Why the employee was fired, and
  • Whether the two events were connected.

The court noted that the Supreme Court cautioned that the quid pro quo and hostile environment forms of sexual harassment aren’t “wholly distinct claims.” Instead, they’re shorthand for different ways in which such harassment can occur (see Ellerth, 524 U.S. at 754).

The appeals court refused to require that the charge be more specific about the type or form of harassment alleged. (Jones v. Needham , 2017 BL 159166, 10th Cir., No. 16-6156, 5/12/17 )

Background Information

The case highlights the two main types of sexual harassment that are subject to legal action under Title VII of the Civil Right Act:

1. Quid pro quo harassment. This occurs when employment decisions are determined by whether or not a person submits to sexual advances or demands. For instance, an employee may lose a promotion, a plum assignment or even his or her job if he or she doesn’t give in.

Specifically, unwanted sexual advances, requests for sexual favors or other verbal or physical conduct of a sexual nature constitute quid pro quo sexual harassment if:

  • Submission to such conduct is either explicitly or implicitly made as a term or condition of employment, or
  • Submission to or rejection of such conduct is used as the basis for employment decisions.

2. Hostile work environment. In this case, sexual harassment conduct makes the workplace intimidating, hostile or offensive to the point where it unreasonably interferes with an employee’s work performance.

In considering whether or not an environment is “hostile,” the courts will weigh several factors, including:

  • Whether the conduct was verbal, physical or both,
  • How frequently the conduct occurred,
  • Whether the conduct was hostile or patently offensive,
  • Whether the alleged offender was a coworker or supervisor,
  • Whether others joined in the harassment, and
  • Whether the harassment was directed at more than one individual.

Timing of a Claim

According to the EEOC, a hostile environment generally doesn’t result from a single incident or a few isolated incidents, unless the conduct is egregious. But a claim of sexual harassment is bolstered if the complaint is made soon after the event, even if it’s made after the worker quits or is fired.

Despite the distinctions between these two types of harassment, neither term is found in either Title VII or its regulations. It’s up to the EEOC to establish if there are grounds for a claim.

It’s a Woman’s (and a Man’s) World

Sexual harassment charges typically involve complaints by a female worker about a male coworker or supervisor.

However, as this case shows, sexual harassment may cross gender and sexual orientation lines. According to the Equal Employment Opportunity Commission (EEOC), both the victim and the harasser can be either a woman or a man and the victim and harasser can be the same sex.

Although there are no exact statistics on the number of men being sexually harassed at work by women or how many actually file claims for sexual harassment, it’s likely that the cases filed with the EEOC represent a fraction of the total number of incidents. Some men may choose not to report sexual harassment or file a claim with the EEOC because they’re embarrassed or afraid of being subject to ridicule.

Nevertheless, claims by males clearly are on the rise. The EEOC reports that

92% of all claims in 1990 were filed by women as opposed to 83% in 2015, representing a 9% increase in claims filed by men in 25 years.

 

Related Posts