Open your wallet a little wider

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This article originally published in The Daily Record September 7, 2016. 

And in other news, effective August 1, 2016, fines and civil money penalties for violations of several federal laws and regulations increased significantly. I’ll bet you didn’t know anything about that did you? Possibly because the implementation of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (the “IAA”) received less fanfare than a sale on Thanksgiving turkeys at Wegmans.

According to a memorandum from the director of the Office of Management and Budget, the IAA amends the Federal Civil Penalties Inflation Adjustment Act of 1990, “to improve the effectiveness of civil monetary penalties and to maintain their deterrent effect.” Included in the updated IAA, signed into law in November 2015, is a requirement for an initial catch-up adjustment effective no later than August 1, 2016, followed by annual adjustments of the civil penalty amounts beginning in January 2017. Yes, you read that right, the “catch up” adjustment effective August 1, 2016, will then be adjusted for inflation less than six months later.

Also, in true bureaucratic fashion, there’s a formula to determine which penalties apply to which violations based on when the violation occurred, and when the penalty is being assessed:

  • Civil penalties assessed before August 1, 2016 were charged under the old schedule, regardless of when the violation occurred;
  • Civil penalties assessed after August 1, 2016, for violations that occurred on or before November 2, 2015, are likewise charged under the old schedule; and
  • Civil penalties assessed after August 1, 2016, for violations that occurred after November 2, 2015, are charged under the increased penalty schedule.

Here are just a few of the new and improved penalties that employers will now be paying.

Fair Labor Standards Act Penalties

Under the Fair Labor Standards Act (“FLSA”), the U.S Department of Labor’s Wage and Hour Division (“WHD”) is authorized to impose a monetary penalty of up to $1,894 (an increase of $794 from the previous maximum penalty of $1,100) for each repeated or willful violation of the FLSA’s minimum-wage or overtime requirements. Under most circumstances the assessment is a per-person penalty based on the number of employees paid in violation of the FLSA. As you might imagine, “willfulness” is subjective and based on the WHD investigator’s determination. The determination is based in whether the employer knew it was in violation, or acted with “reckless disregard” for its responsibilities under the FLSA. Further, a violation may be considered “repeated” for the purpose of assessing penalties even where it is not factually or legally the same as an earlier violation. For example, an employer’s minimum-wage violation in a previous WHD investigation may be the basis for assessing civil penalties in a later investigation where overtime violations are found. 

Also under the FLSA, an employer may be assessed a penalty of up to $12,080 (an increase of $1,080 from the previous maximum fine $11,000) for employing a minor under the age of 18 in an occupation that violates the FLSA’s child-labor restrictions. Child-labor violations resulting in a serious injury or death may be assessed a penalty of up to $54,910 (an increase of $4,910 from the previous maximum $50,000 penalty). Further, the FLSA calls for doubling the penalty for repeated or willful violations, meaning a potential assessment of up to $109,820.

Also important for employers to note, the WHD issued updated workplace posters under the FLSA and the Employee Polygraph Protection Act (“EPPA”). These revised posters, effective August 1, 2016, are a result of the IAA. Also, as a clear reflection of the WHD’s enforcement priorities, the updated FLSA poster includes a statement about properly classifying workers as independent contractors or employees, and it adds a section on the rights of nursing mothers to receive reasonable break time to express breast milk. If you haven’t updated the employment posters, or the all-in-one employment poster in your workplace within the last couple of months, you’re missing some required updates.

OSHA Penalties

Before I discuss the increased penalties implemented by the Occupational Safety and Health Administration (“OSHA”), let’s review some of the recent changes announced by the Agency. I know that many employers have not had the experience of being inspected by OSHA, or if inspected, have received relatively minor citations and penalties. For most, potential OSHA issues are not high on the list of immediate concerns. However, based on some recent changes announced by the Agency, it may be time to rethink both ongoing compliance efforts as well as the company’s policies and practices as they relate to safety and health.

Examples include OSHA’s recently announced Electronic Recordkeeping Rule. Effective in 2017, this rule requires many employers to electronically report injury and illness data. Once reported, the information will be available to the public on the OSHA website. In addition, with this Rule the Agency now considers several common employer policies and practices to be retaliatory, as they discourage employees from reporting injuries. Therefore, employers should no longer:

  • Establish or maintain incentive programs which reward employees for no recordable workplace injuries and illnesses;
  • Establish or maintain rules requiring employees who do not immediately report workplace injuries to be disciplined; or
  • Automatically conduct post-accident drug testing of injured employees.

Along with the changes discussed above, OSHA has increased its maximum penalties by 78 percent! The top penalty for serious violations has increased to $12,471 (up from $7,000), and the maximum penalty for willful or repeated violations is now $124,709 (up from $70,000).

Form I-9 and Immigration-Related Penalties

One change that has been on the horizon for some time is an update to the Form I-9. The expiration date on the I-9 currently in use has long past (March 31, 2016). Once again, with no updated form provided by U.S. Citizenship and Immigration Services (“USCIS”), employers are instructed to continue using the expired form until further notice.

Updated right on time were employer penalties for a number of immigration-related violations, and some of them are significant. 

Although most employers are not unlawfully employing undocumented immigrants, following unfair immigration-related employment practices, or committing document abuse or fraud, the penalty increases are worth noting. Depending on the circumstances, the minimum penalty for unlawfully employing undocumented immigrants is $539 (up from $375), with the more serious offenders facing a new maximum penalty of $21,563. Employers found to have unfair immigration-related employment practices now face penalties ranging from a minimum of $445 (up from $375), to a new maximum penalty of $17,816. Document abuse penalties now range from a minimum of $178 (up from $110) per violation, with the maximum now reaching $1,782 (up from $1,100) per violation. Employers committing document fraud face penalties ranging from the minimum of $445 (up from $375) for a first offense, with a maximum penalty of $8,908 for subsequent violations.

Finally, one of my favorite areas, Form I-9 penalties. As a result of the IAA, the minimum penalty for Form I-9 “paperwork violations” (substantive or uncorrected technical violations) increased from $110 to $216 per form, with the maximum per-form penalty increasing from $1,100 to $2,156! As a reminder, penalties are normally assessed based on the percentage of I-9 forms with substantive errors, including the failure to prepare an I-9 form for an employee. For example, an employer with 100 employees, and an error rate of 9 percent may be assessed a minimum fine of $1,944. If the employer’s error rate is 50 percent, penalties may total $91,800. With a second or third offense, that same employer may face penalties of $107,800 or more! 

What can employers do?

Every employer should take the time to review areas of potential exposure and liability. For example, are any employees misclassified as exempt and paid a salary? Is every nonexempt employee paid overtime at 1½ times their regular rate of pay for all time worked over 40 hours each workweek? Are any employees working “off-the-clock,” including working through meal breaks, without pay? Does the organization have a policy of automatically conducting post-accident drug testing of injured employees? Are all I-9 forms free from errors? (Very unlikely, in my experience an average employer’s Form I-9 error rate exceeds 50 percent.)

If areas of concern are uncovered, work with an attorney or other qualified professional to correct the issues. Reclassify employees, correct overtime errors, prohibit off-the-clock work – disciplining employees if necessary, change inappropriate policies, and correct I-9 errors. A good faith effort can go a long way in limiting future exposure and penalties.


Posted by Frank CaniaPresident of driven HR A USA Payroll Company

Please feel free to contact me at frank@drivenhr.com, or 855-672-4142 with questions or for more information.


Disclaimer: This content is for informational purposes only, does not constitute a legal opinion, and is not legal advice. The facts of each situation should be considered and analyzed individually. Therefore, you should always consult with competent employment counsel regarding any issues discussed here. 

Click HERE to learn more about Frank Cania, author of Employers’ HR Advisor.

Where did you get your employee handbook?

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This article originally published in The Daily Record August 2, 2016. 

Before you read this article, take out your employee handbook. (If you don’t have an employee handbook, skip the article for now and call me immediately.) Now think back to the last time any of the policies were updated. (If you’re having a hard time remembering, you can finish the article, then call me as soon as you are done reading.) Did the company hire an attorney specializing in employment law, or an HR consulting firm specializing in regulatory compliance, to create your current employee handbook? Was it written by your internal HR department using the old handbook as the basis? Or did you, the accounting/finance manager, risk manager, receptionist, or (insert the correct title HERE) use an online template, or handbook that a friend or relative got from another company?

I have lost count of the number of times I’ve heard, “our employee handbook is absolutely great! It was originally written for XYZ Company, and they would never risk compliance issues.” Or, “I found a template online for $99. The website said it is compliant with all federal employment regulations, and the labor laws for all 50 states.” That claim reminds me of an old Saturday Night Live skit. “Shimmer, it’s a floor wax and a dessert topping!” I just saw it on the Internet, so it must be true.

So, why does all of this matter? There has always been an abundance of reasons for companies to have a well-written and up-to-date employee handbook, both from the employee relations and regulatory compliance standpoints. For better or worse, most companies have something they refer to as their employee handbook. It’s the “well-written and up-to-date” piece that escapes many employers. As I explained to a client recently, if an employee consults with an attorney about a perceived workplace issue, one of the first things the attorney will ask to see is the employee handbook. At that point the danger of having poorly-written employment policies increases exponentially. The attorney isn’t going to just look at the policies related to the initial complaint, they are going to look for any policies that could have a negative or unlawful impact on their client’s employment. Conversely, if an employee files a complaint with a government agency, or initiates a lawsuit, the adjudicator is going to focus on the specific policy or policies related to the complaint. If that policy doesn’t contain the appropriate language, the employer’s defense becomes much more challenging. For example, it may not be sufficient to have the at-will employment statement only in the introduction to the employee handbook, when the employer’s disciplinary and attendance policies are the specific policies at issue.

Employers have another reason to be concerned about their employee handbooks. Over the last few years, employment policies have been increasingly scrutinized by a federal agency that many employers incorrectly believe has no jurisdiction over them, the National Labor Relations Board (“NLRB”). As the agency responsible for enforcing the National Labor Relations Act (“NLRA”)–legislation that covers most private sector employers, including manufacturing, retail, professional and nonprofessional services, hospitality, not-for-profit organizations, and health care, regardless of the number of employees and whether the employees are represented by a union–the NLRB has taken a particular interest in employee handbooks.

When reviewing employment policies, the Board looks to identify those that, in its opinion, interfere with, restrain, coerce, or prohibit employees from freely exercising their (Section 7) rights under the NLRA. Further, an employment policy may be found to have a “chilling effect” on the exercise of those rights if the NLRB determines that employees may reasonably believe the policy prohibits protected activities. The determination is not based on how the policy is actually applied, or even how it is interpreted by management or employees, it is based on how the Board thinks a reasonable employee would interpret the policy. For example, the NLRB has identified policies prohibiting offensive, disruptive, and/or harassing workplace behavior; policies prohibiting publishing false or derogatory statements about management; and policies against employees walking off the job as having a chilling effect. The NLRB has also made clear its view that employers are responsible for using policy language that prevents misunderstandings that could result in a chilling effect.

Before we look at some examples of the guidance and decisions coming from the NLRB regarding employment policies, I believe it is necessary to warn you that this information has caused many employers to spontaneously shout obscenities and other inappropriate words and phrases. If you are prone to doing so, I suggest reading the remainder of the article out of the earshot of anyone who may be offended. 

Confidentiality

I address these policies first because confidentiality is one of the most common concerns for employers. Confidentiality policies should be evaluated to determine whether they are narrowly written to protect legitimate business interests, or over-broad and may be interpreted as discouraging or forbidding employee discussions of terms and conditions of work, including wages, hours, and working conditions. According to the NLRB, policies that prohibit employees from disclosing or sharing employee lists, contact information, personnel files, employee handbooks and policies, and pay and benefits information are unlawful.  The board takes a similar position on policies prohibiting discussions of “customer or employee information,” including employee “phone numbers and addresses;” policies requiring confidentiality of “private or internal” conversations; and policies prohibiting discussions about “work matters,” or any employer information that is “not public.”

Play Nice at Work

Like it or not, policies that prohibit “negative” or “inappropriate” employee discussions have been found to be unlawful by the NLRB. In addition, a policy stating, “don’t pick fights” online was determined to be unlawful because employees could believe it prohibits “protected discussions with their coworkers.” However, even the NLRB has got to draw the line at harassing behavior, right? Wrong. In fact, the NLRB found a policy prohibiting “insulting, embarrassing, hurtful, or abusive comments about other employees” was unlawful because “debate about unionization…is often contentious and controversial,” and the policy may be understood as “limiting [employees’] ability to honestly discuss such subjects.” The Board came to the same conclusion when reviewing a policy that required employees “show proper consideration for others’ privacy and for topics that may be considered objectionable or inflammatory.” The NLRB determined that it was unlawful because the “discussion of unionization … can be an inflammatory topic.”

Employers, Mind Your Own Business 

In a recent case, the NLRB’s General Counsel (“GC”) took issue with the wording of a policy prohibiting employees from conducting personal business at work. The GC determined that, because the policy “bans employees from all of [the employer’s] property except when conducting [the employer’s] business,” it “unlawfully restricts off-duty employees from engaging in protected activity; and it prohibits protected activity during nonworking time.”

Social Issues 

For my last example, I’m pulling from another recent case involving the Cy-Fair Volunteer Fire Department (“Cy-Fair”). In this case the NLRB determined that various policies, including the Cy-Fair social networking guidelines violated the NLRA because the language used may lead a reasonable employee to believe that they were prohibited from organizing or engaging in concerted activity.

The Cy-Fair social networking guidelines prohibited the use of its logos, names, pictures, or accounts of activities without prior approval. (Sound like any of the policies in your employee handbook?) Based on its review, the Board determined that a reasonable employee may believe that they, or a union, were not permitted to seek support from other employees, or publicize a dispute with Cy-Fair by using its name or logo on their clothing or literature.

What Now?

Employers I talk to are confused and angry about what many believe is a one-sided interpretation of the law, seemingly based on out-of-context, “non-real-world” interpretations of employee handbook policies. As a general rule, employers draft and enforce employment policies to ensure a fair, productive, and safe workplace; promote a respectful work environment; provide employees with useful information; and protect the company. Given the Board’s current stance on employment policies, it’s clear that employers have reason to be concerned that the policies they rely on may be under scrutiny.

Now that you’ve gotten all of those expletives out of your system, it’s probably time to have your employee handbook reviewed and revised. It could save you a lot of headaches later.


Posted by Frank CaniaPresident of driven HR A USA Payroll Company

Please feel free to contact me at frank@drivenhr.com, or 855-672-4142 with questions or for more information.


Disclaimer: This content is for informational purposes only, does not constitute a legal opinion, and is not legal advice. The facts of each situation should be considered and analyzed individually. Therefore, you should always consult with competent employment counsel regarding any issues discussed here. 

Click HERE to learn more about Frank Cania, author of Employers’ HR Advisor.

Final words on the FLSA…NOT!

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This article originally published in The Daily Record July 6, 2016. 

It’s difficult to remember a time when a part of almost every presentation and conversation with clients, peers, friends, and even some family members didn’t include talk of the “white-collar” exemptions to the Fair Labor Standards Act (“FLSA”). First we talked about what the proposed changes to the overtime rule might be. Then, once the proposed rule was issued, we dissected every aspect and discussed trends in the almost 300,000 comments submitted to the Department of Labor (“DOL”). Once the comment period closed, many of us became office chair prognosticators in an attempt to prepare anyone within earshot for what was likely to come whenever the final rule was released. Would the minimum salary threshold be more or less than the proposed $50,440? How could the DOL seriously consider changing the duties test to require exempt employees spend at least 50 percent of their time on exempt duties (the “California” rule)? When would the final rule be published? Once published, how long would employers have to prepare before the effective date? Opinions and predictions were as abundant as cottonwood fluff in the spring.

The market for DOL-focused crystal balls disappeared on May 17, 2016, when the White House and the DOL announced details of the final rule the night before its official release. Or did it? We still don’t know what impact the final rule will have on businesses both small and large. So I, for one, will not be offering my deluxe model orb to the first sideshow huckster that offers me $20. (Although an offer of $50 might be a different story entirely.)

Although there are several things I don’t need a crystal ball to see, let’s put this time-tested tool to work.

The first thing I see are countless small employers, and several not-for-profit employers, who are convinced that the FLSA – and consequently the changes in the overtime rule – don’t apply to them. The fact is that the FLSA applies to almost every employer, either through enterprise coverage or individual coverage. Enterprise coverage applies to employers with two or more employees and $500,000 in annual dollar volume of sales or other business revenue. Examples of activities triggering individual coverage include employees engaged in interstate commerce (which includes making phone calls and/or sending mail, invoices, payments, emails, etc. out-of-state; handling goods, or even transaction records for good that have traveled across state lines; and even cleaning an office where interstate transactions occur), the production of goods for commerce, or closely-related processes/occupations directly essential to such production, or domestic service. I think you get the picture.

Next, I see employers who believe that salaried employees don’t have to be paid overtime. The truth is, unless employees paid a salary meet all of the requirements to be exempt from the FLSA overtime rule, they must be paid overtime for all time worked over 40 hours in a workweek.

There are other employers who believe that as long as employees want to be paid a salary and forego overtime, or similarly the employees agree with the pay practice, that makes it ok. In reality, if an employer’s pay practices are not in compliance with the FLSA, regardless of whether the employees are satisfied with the practice, and in some cases have even signed a statement to that effect, the practice is still unlawful and the employer risks significant liability. (This belief led an employer to adopt a policy and practice requested by employees of providing them with “comp time” in lieu of overtime pay. An audit uncovered this, and other FLSA violations, resulting in thousands of dollars in back overtime wages and penalties due to the employees.)

The reason I use the deluxe model crystal ball is because it not only shows me the negative stuff, but also the things employers can do when faced with challenging regulatory issues.

The fact is that, barring some unlikely intervention, the updated overtime rule will go into effect on December 1, 2016. The biggest issue for most employers is the significant increase in the salary threshold for white-collar exemptions to $913 per week ($47,476 annually). For New York employers that’s an increase of $238 per week ($12,376 annually) from the current state minimum salary requirement. If an exempt employee’s salary is less than the federal threshold on the effective date, the employer will have two choices; increase the salary to meet or exceed the threshold, or reclassify the employee as nonexempt, which consequently will make the employee eligible for overtime compensation. But, that choice is not as limiting as it may first appear.

Option 1: If the employee rarely works more than 40 hours each workweek, calculate the hourly wage rate by dividing their weekly salary by 40 hours. For example, a salary of $687 / 40 hours equals $17.18 per hour. The employer then has the option to not allow the employee to work overtime, or for those rare weeks where the employee does work over 40 hours, pay time-and-a-half for the overtime. In this case the overtime rate calculation is $17.18 x 1.5, which equals $25.77.

Option 2: If the employee’s workweek is regularly more than 40 hours, calculate the rates necessary to keep the employee’s weekly wage the same. For example, if the employee regularly works 50 hours per week, their straight and overtime rates should equal approximately $687 for the week. In this case an hourly rate of $12.50, with the resulting overtime rate of $18.75 ($12.50 x 1.5) will ensure the employee makes the same weekly wage. (($12.50 x 40 hours) + (18.75 x 10 hours) = $687.50.)

Option 3: The fluctuating workweek (a.k.a. salaried nonexempt) is the most complex choice from the available options. This approach requires paying the non-exempt employee a salary which represents their straight-time rate for all hours worked in the workweek. That means the employee’s salary amount represents the “one” in the “one-and-one-half” calculation for overtime purposes. So, for the time worked over 40 hours in the workweek, the employee is paid an additional one-half of their regular rate. This rate is calculated by dividing the salary amount by all of the time worked in the workweek. Under a true fluctuating workweek scenario, the employee’s regular hourly rate decreases as the number of hours worked increases. Also, there are two requirements to keep in mind. First, the employee’s regular rate must never fall below the applicable minimum wage, and the employee must receive their full salary each week.

For example, if the employee works 55 hours in the workweek and receives a weekly salary of $695, the calculation would be as follows:

                        $695 / 55 hours = $12.64 regular hourly rate

                        $12.64 x 0.5 = $6.32 “half-time” O/T rate

                        $6.32 x 15 O/T hours = $94.80 O/T amount

                        $695 + $94.80 = 789.80

If the employee works 45 hours the following week, their pay will be $733.60.

One of the primary reasons employers avoid the fluctuating workweek method is that it can get complicated. In order to make weekly payroll calculations less complicated, and still take advantage of the benefits this method has to offer, employers can modify the formula by fixing the half-time rate at a set amount. Using the example above, divide the employee’s salary by 40 hours ($695 / 40 = $17.38), multiple by 0.5 ($17.38 x 0.5 = $8.69), and use the result as the employee’s half-time rate regardless of the number of overtime hours. Under this scenario, if the employee works 55 hours, they would receive $825.35 (($695 + ($8.69 x 15) = $825.35). If the employee works 45 hours the following week, they will receive $738.45 (($6.95 + ($8.69 x 5) = $738.45).

Final words on the FLSA? I think not.


Posted by Frank Cania, President of driven HR – a USA Payroll Company

Please feel free to contact me at frank@drivenhr.com, or 855-672-4142 with questions or for more information.


Disclaimer: This content is for informational purposes only, does not constitute a legal opinion, and is not legal advice. The facts of each situation should be considered and analyzed individually. Therefore, you should always consult with competent employment counsel regarding any issues discussed here. 

Click HERE to learn more about Frank Cania, author of Employers’ HR Advisor.

Is Pastafarianism Half-Baked?

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This article originally published in The Daily Record June 8, 2016. 

In my last article I set the table for a discussion about religious accommodation by asking you to imagine a scenario unfolding in your workplace. In your Monday morning staff meeting an employee, Jordan Blake, joyously announces that she is a follower of the Church of the Flying Spaghetti Monster (“FSM”), and has legally changed her name to Rigatoni – just Rigatoni. Then she explains that, as a follower of FSMism, one of her self-adopted religious practices is to wear a colander on her head from sunrise to sunset each day. Realizing that wearing a colander may violate the company’s professional dress code, Rigatoni requests a religious accommodation. Then Patrick Rum, Rigatoni’s co-worker and friend, announces that he is also a follower of FSMism, has legally changed his name to Bucatini, and will also be wearing a colander on his head every day. Continue reading

Have You Seen My Dress Colander?

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This article originally published in The Daily Record May 4, 2016. 

You may or may not be able to tell by my last name, but I am Italian-American. Our family name in Italy is LuCania, which my great-grandfather had shortened to Cania when he immigrated here with his wife and children, as a way to be more “American.” As an HR professional I know I’m not supposed to proliferate stereotypes. However, as an Italian-American there are a few stereotypes that I fully embrace. For example, I love pasta! Bucatini, rigatoni, orecchiette, fusilli, and of course spaghetti – I love them all! I am convinced pasta was created through divine intervention.

At this point you must be wondering: 1) what pasta has to do with HR; and 2) if I have recently replaced the basil in my pesto with another leafy plant? Continue reading

Compliance-side HR – a strong stomach required

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This article was originally published in The Daily Record April 5, 2016.

It’s a rough time to be on the compliance side of human resources, and the immediate future isn’t looking much brighter. Don’t get me wrong, short of selling t-shirts and drinks with interesting names on a tropical beach (alongside my wife, of course), there is nothing I would rather be doing. Let me explain… Continue reading

Employers should stop and look both ways at the intersection of FMLA and ADA

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This article was originally published in The Daily Record March 3, 2016. 

A couple of months ago a new client called wanting an explanation of the Family and Medical Leave Act (“FMLA”), did it applied to her small business, and if so, how to handle an employee’s request for leave. Knowing that the client has at least 50 employees all located within a 75 mile radius, I explained that the FMLA provides up to 12 workweeks of unpaid leave (26 weeks for military caregivers), benefits protection, and job reinstatement to eligible employees who experience an FMLA-qualifying event or condition. Based on the situation, the remainder of our discussion focused primarily on leave for an employee’s own serious health condition. Continue reading