Tag: compliance

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Severance pay & final paycheck laws by state (2025)

Astronaut holding a paycheck

Summary

  • There are no state or federal laws regarding severance pay.

  • Organizations might consider implementing severance pay agreements to improve employer-employee relations, boost employer branding, strengthen retention and acquisition, and avoid legal disputes. 

  • While there are no federal or state laws in relation to severance pay, there are state laws on when an employee’s final paycheck is to be processed. – More

Have you ever considered the critical role that severance pay plays in protecting your organization and its employees during workforce transitions? Severance pay refers to the financial compensation provided by an employer to an employee upon termination of employment. It is typically based on factors such as length of employment and employment contract terms. 

Click here to see final paycheck laws

Severance benefits provide the terminated employee with a vital safety net, offering financial support and stability for people until they find a new job. They also offer significant benefits for organizations. 

Severance pay helps maintain employee morale and fosters a positive work environment during challenging workforce transitions. By including severance pay as part of your compensation package, you demonstrate your commitment to supporting employees and enhancing the organization’s reputation as a compassionate and responsible employer.

What does the law say about severance pay?

Neither federal nor state laws in the United States mandate severance pay. The U.S. Department of Labor clarifies that “severance pay is a matter of agreement between an employer and an employee (or the employee’s representative),” with no requirement under the Fair Labor Standards Act (FLSA).

However, it’s important to note that certain circumstances may trigger legal requirements related to severance pay. One such regulation is the Worker Adjustment and Retraining Notification (WARN) Act. The WARN Act applies to businesses with a certain number of employees and requires employers to provide advance notice of plant closings or mass layoffs. While the WARN Act doesn’t specifically mandate severance pay, it may come into play in situations where employers fail to comply with the required notice period.

Employers should know the WARN Act’s provisions and seek legal advice to ensure compliance when contemplating workforce reductions or closures. Although severance pay is not universally mandated, employers must navigate these potential legal considerations and make informed decisions to uphold fairness, ethical practices, and employee welfare if they are to offer it as an employee benefit.

Should your organization consider offering severance packages? 

In the absence of any state or federal law, is it worth offering severance packages to soon-to-be former employees? There are a number of pros and cons to including severance agreements in your company policies. Understanding these can help you make an informed decision that aligns with your organization’s values and goals.

The benefits of offering severance pay include the following:

  1. Employee transition support: Severance pay provides employees with a cushion to manage the transitional period between jobs. It can help cover expenses such as job search costs, the continuation of health insurance, and retraining and facilitate a smoother transition to new employment.
  2. Positive employer-employee relationships: Providing severance pay builds trust and fosters a positive relationship between employers and employees. It sends a message that the organization cares about its workforce beyond just their time of employment, strengthening loyalty and engagement. This positive relationship can increase productivity, employee satisfaction, and a more supportive work environment overall.
  3. Talent acquisition and retention: Offering severance pay as part of your compensation package can attract top talent to your organization. Prospective employees may view it as a sign of a supportive and compassionate workplace, increasing their interest in joining your team. Moreover, existing employees may feel more secure and committed, knowing that the organization values their well-being, potentially reducing turnover rates.
  4. Mitigation of potential legal risks: Although it’s not part of any employment law, offering severance pay can help mitigate potential legal risks. By providing a fair and structured severance package and establishing clear terms for separation in your employee handbook, you minimize the likelihood of unpleasant legal disputes.

The drawbacks of offering severance pay include:

  1. Financial impact: Severance pay can be a significant financial commitment for organizations, especially during large-scale layoffs or restructuring. Considering the potential costs and ensuring that offering severance packages aligns with your budgetary constraints is essential.
  2. Setting a precedent: Offering severance pay may establish a precedent for future terminations or workforce transitions. Establishing consistent HR policies and guidelines is crucial to avoid perceived inequalities or inconsistencies in severance package offerings.
  3. Impact on retention and turnover: While severance pay can support departing employees, it may also inadvertently encourage voluntary turnover. Some employees may view the availability of severance pay as an opportunity to leave the organization, potentially impacting retention efforts.

Webinar: How to Increase Manager Retention

Ultimately, the decision to offer severance packages should be based on your organization’s unique circumstances, values, and long-term objectives. By carefully considering the pros and cons, you can strike a balance that supports both your employees and your organizational goals.

Scenarios where severance pay might be beneficial

Severance pay is a valuable resource for employers and employees during workforce transitions. By exploring these scenarios, we can shed light on the benefits of severance pay and its role in supporting employees during critical moments of job loss or transition.

  • Workforce reductions or layoffs: During times of downsizing, layoffs, or restructuring, offering severance pay can help ease the financial impact on affected employees. It provides them with a lump sum or structured payments based on their service length, helping bridge the gap between jobs and maintain a sense of financial security.
  • Employment termination without cause:  When terminating an employee without cause, offering severance pay can mitigate the potential legal risks associated with such terminations. It demonstrates fairness and goodwill, providing a financial cushion to support the employee during their job search or transition period.
  • Non-compete and confidentiality agreements: In situations where employers require employees to sign non-compete or confidentiality agreements, offering severance pay can provide a financial incentive for departing employees to uphold their obligations, protecting the employer’s business interests.

It is important to note that the applicability and specifics of severance pay may vary based on the employer’s policy, employment agreements, and applicable federal and state laws for things like insurance benefits, unemployment benefits, non-compete clauses, and unused vacation. It is good practice to consult employment attorneys to ensure compliance and fairness.

Final paycheck laws

While there are no specific federal or state laws mandating severance pay, “final paycheck” laws surrounding termination of employment vary between states. Final paycheck laws dictate the timing and requirements for providing employees with their last paycheck after leaving a job.

Final paycheck laws refer to the legal regulations employers must adhere to when issuing final payments to employees leaving their positions. These laws cover aspects such as the timeframe for payment, differentiating between voluntary resignations and involuntary terminations, and whether accrued vacation time should be included in the final payment. The specifics of these laws can vary significantly from state to state, so it’s crucial to understand and comply with the regulations that apply to your jurisdiction.

To assist you in navigating the intricacies of final paycheck laws, we have compiled a comprehensive table outlining the specific requirements and guidelines for each state in the US as of 2023. In the table, we have differentiated between situations where an employee resigns voluntarily or if they are fired. For more in-depth information, click on the respective state hyperlinks. 

State Final wages (voluntary resignation) Final wages (if employee is fired)
Alabama N/A N/A
Alaska Paid by the next scheduled payday that is at least three (3) working days after their last day worked. Within three (3) working days of termination (not counting weekends and holidays)
Arizona Paid by the next scheduled payday Within seven (7) business days or the next payday (whichever is sooner)
Arkansas Paid by the next scheduled payday Paid by the next scheduled payday. If employers fail to do so within seven (7) days of the next regular payday, they must pay double the wages due
California Within 72 hours or at the time of quitting (time periods may vary by industry) Immediately
(time periods may vary by industry)
Colorado Paid by the next scheduled payday Immediately 
Connecticut Paid by the next scheduled payday Paid by the next business day if discharged or fired. Next regular payday if laid off.
Delaware Paid by the next scheduled payday Paid by the next scheduled payday
District of Columbia Within seven (7) business days or the next payday (whichever is sooner) Paid by the next business day
Florida N/A N/A
Georgia N/A N/A
Hawaii Immediately or next scheduled payday, depending on date of final notice Immediately or next business day
Idaho 1) Within ten (10) working days or the next payday, or 2) if the employee requests an earlier payment in writing, it must be within 48 hours of receiving the request (whichever is sooner) 1) Within ten (10) working days or the next payday, or 2) if the employee requests an earlier payment in writing, it must be within 48 hours of receiving the request (whichever is sooner)
Illinois Paid by the next scheduled payday Paid by the next scheduled payday
Indiana Paid by the next scheduled payday Paid by the next scheduled payday
Iowa Paid by the next scheduled payday Paid by the next scheduled payday
Kansas Paid by the next scheduled payday Paid by the next scheduled payday
Kentucky Paid within fourteen (14) days or the next scheduled payday (whichever is later) Paid within fourteen (14) days or the next scheduled payday (whichever is later)
Louisiana Paid by the next scheduled payday or within fifteen (15) days (whichever is sooner) Paid by the next scheduled payday or within fifteen (15) days (whichever is sooner)
Maine Paid by the next scheduled payday Paid by the next scheduled payday
Maryland Paid by the next scheduled payday Paid by the next scheduled payday
Massachusetts  Paid by the next scheduled payday or, in the absence of a regular payday, the Saturday that follows an employee’s resignation Immediately
Michigan Paid by the next scheduled payday. For employees engaged in any phase of the hand harvesting of crops, final pay must be given within 1 working day of termination. Paid by the next scheduled payday. For employees engaged in any phase of the hand harvesting of crops, final pay must be given within 1 working day of termination.
Minnesota Paid by the next scheduled payday that’s at least five (5) days after an employee’s last day but no more than 20 days after their final day Within 24 hours of receiving a demand from employee
Mississippi N/A N/A
Missouri N/A Immediately
Montana Paid by the next scheduled payday or fifteen (15) calendar days (whichever is sooner) Immediately (within four hours or end of the business day, whichever occurs first)OR

In presence of a written policy that extends the time for payment, the wages may not be delayed beyond the next payday or fifteen (15) calendar days (whichever is sooner)
Nebraska Paid by the next scheduled payday or within two (2) weeks (whichever is sooner) Paid by the next scheduled payday or within two (2) weeks (whichever is sooner)
Nevada Paid by the next scheduled payday or within seven (7) days (whichever is sooner) Within three (3) days
New Hampshire Paid by the next scheduled payday or within 72 hours (if employee gives notice of at least one pay period) Within 72 hours of time of termination
New Jersey Paid by the next scheduled payday Paid by the next scheduled payday
New Mexico Paid by the next scheduled payday, unless there’s a written contract stating a designated period Within five (5) days after termination. But if pay calculation is based on tasks or commissions, final paycheck must be paid in 10 days.
New York Paid by the next scheduled payday Paid by the next scheduled payday
North Carolina Paid by the next scheduled payday Paid by the next scheduled payday
North Dakota Paid by the next scheduled payday As agreed upon by both parties. If there’s no agreement, the employee must pay via certified mail at an address designated by the employee.
Ohio Next regular payday or within 15 days of termination, whichever comes sooner. Next regular payday or within 15 days of termination, whichever comes sooner.
Oklahoma Paid by the next scheduled payday Paid by the next scheduled payday
Oregon Immediately if the employee gave 48 hours’ notice. Otherwise, within five (5) days or the next scheduled payday (whichever comes first) Next business day
Pennsylvania Paid by the next scheduled payday Paid by the next scheduled payday
Rhode Island Paid by the next scheduled payday or paid within 24 hours if the termination is a result of the liquidation, merger, disposal, or moving of the business out of state. Paid by the next scheduled payday or within 24 hours if the termination is a result of liquidation, merges, disposing of the business or moving the business out of state.
South Carolina Within 48 hours or the next scheduled payday — not to exceed 30 days Within 48 hours or the next scheduled payday — not to exceed 30 days
South Dakota Paid by the next scheduled payday or when employee returns any company property Paid by the next scheduled payday or when employee returns any company property
Tennessee Paid by the next scheduled payday or within 21 days (whichever occurs last) Paid by the next scheduled payday or within 21 days (whichever occurs last)
Texas Paid by the next scheduled payday Within six (6) days
Utah Within 24 hours Within 24 hours
Vermont Paid by the next scheduled payday, or, if there is no regular payday, the following Friday  Within 72 hours
Virginia Paid by the next scheduled payday Paid by the next scheduled payday
Washington Paid by the next scheduled payday Paid by the next scheduled payday
West Virginia Paid by the next scheduled payday Paid by the next scheduled payday
Wisconsin Paid by the next scheduled payday Paid by the next scheduled payday or 24 hours if the termination is due to a merge, company liquidation, or ceasing business operations
Wyoming Paid by the next scheduled payday Paid by the next scheduled payday

Get final paychecks right with Workforce.com

Regardless of the reason why you’re issuing a final paycheck, may it be due to voluntary resignation or laying off employees, you need to get their final paychecks right – from computation to timely release. However, it can get complicated because of varying state rules. 

Webinar: How to Tackle Critical Workplace Issues

Workforce.com’s payroll platform ensures that final paycheck computations are correct according to applicable state rules. It also takes into account everything that goes into that final paycheck, from deductions, accrued PTOs, time worked all within the scope of your company policies and that of the state or federal government. 

Saying goodbye to employees, regardless of the circumstances, is never easy. Workforce.com helps lighten the administrative load, ensuring a smooth offboarding process and fostering an amicable end to the employment relationship.

Discover how Workforce.com can simplify payroll and HR processes for your hourly teams. Book a demo today. 

This information is for general purposes only and should not be considered legal advice. While we strive to keep it updated, laws and regulations can change at any time. It’s always a good idea to consult with a legal professional or relevant authorities to compliance with the most current standards.

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Employees using cell phones for work? Here’s how California employers must pay up

Summary:

  • In California, reimbursing employees for work-related personal cell phone use is more than just a perk. It’s the law.
  • Compliance with cell phone reimbursement laws may be challenging as there are ambiguities about reasonable compensation amounts.
  • Employees can use software like Workforce.com on computers to perform administrative work duties, avoiding the need for cell phone reimbursements.
  • Compliance-specialized HR software like Workforce.com can also handle distributing reimbursements and stipends if needed.

The lines between personal and professional mobile phone use are becoming increasingly blurred. Many employees use their personal devices for work-related purposes, whether answering emails, calling clients and team members, coordinating projects, or accessing company portals. If this is the case, who should foot the bill?

California addresses this overlap with Labor Code 2802, a law that attempts to clarify who should cover the costs of using a personal cell phone for work purposes.

So what does this law entail, and how does it protect employers and employees? Let’s take a closer look to help you navigate this legal dilemma in the Golden State. 

What is California Labor Code 2802?

California Labor Code 2802 mandates that employers fully reimburse employees for any job-related expenses they may incur; this includes all costs related to using a personal cell phone for work duties. This law protects employees and ensures employers are not sidestepping operating expenses.

So, if your employees use their cell phones to call clients, communicate with suppliers, manage company platforms, or perform other job-related activities, they may be entitled to reimbursement – depending on your state.

Clearly, this is more than just a job perk. It’s the law, and employers in California must comply. But this is much easier said than done due to the ambiguous nature of the way the labor code was written. The critical question here is how to measure what qualifies as reasonable compensation. And how do you even begin to job-cost phone-related activities?

The Cochran vs. Schwan’s Home Services Case

If your employees have unlimited call minutes, do you still need to reimburse them for cell phone use? Yes, you should. The court decision for Cochran vs. Schwan’s Home Services case reiterates why this is the case. 

In this class action suit, the plaintiff claims that California Law 2802 is violated because they use their cell phones for work-related calls in their job duties for a food delivery business but are not reimbursed for such costs. However, the defendant argued about the appropriateness of the class certification. According to them, the employees have varying reimbursement claims. They also countered that some employees didn’t incur additional costs because they were on a plan with unlimited minutes or included in a family plan.

The California Court of Appeals ruled that employees are still entitled to reimbursement even if they’re on a mobile plan with unlimited minutes or a family plan. The issue is about properly reimbursing employees for using their personal cell phones to perform work duties and not about whether or not employees incur additional expenses on top of their plan for making work-related calls. Since the employer benefits from these calls, they should cover the expense as part of their business operations.

So, the next question is how much? The court didn’t mandate a specific amount by which employees must be reimbursed, making the ruling pivotal for this piece of California law and the employers that must comply. Such uncertainty makes it even more challenging for employers to determine how much they should reimburse employees for cell phone usage.

How do you calculate reasonable reimbursement?

Since the law doesn’t state an exact dollar amount or formula by which you should reimburse employees for cell phone use, how do you identify that sweet spot?
According to a study by Oxford Economics and Samsung, most company reimbursements for mobile expenses range between $30 to $50 per month. On average, the monthly amount is $40.20 per employee. In addition, 98% of companies surveyed provide full or partial stipends to cover employee mobile expenses.

The reasonable reimbursement or stipend amount depends on your operations and how crucial mobile devices are for your employees’ tasks. According to the same study, 53% of executives said employees need mobile phones to do their jobs well, and 57% said mobile devices are key to getting work done.

Figure out how much of your employee’s screen time is devoted to work. For instance, if 50% of their daily phone usage is spent on job-related activities, you can consider providing a stipend or reimbursement equal to half of their monthly plan.

On the other hand, you can opt for exact reimbursement based on their usage if they can highlight specific line items in their phone bill that are directly related to work. However, this can be challenging since most mobile plans are bundled or have unlimited call minutes or data.

The key to determining a reasonable reimbursement amount is to ensure that you’re reimbursing what employees are due while still not overpaying.

What are the methods for reimbursement?

As with the amount, the law lacks specificity regarding how employers should distribute reimbursements. At the end of the day, it is really up to the employer.

One way is to follow a standard reimbursement process through HR. Staff submit receipts and documentation so that the employer can compensate them based on what’s stated in their invoice. However, this can cause additional admin work for both the employer and employee. 

To simplify things, an employer ditch the reimbursement method in favor of a monthly stipend to cover cell phone-related expenses. But what happens if the cell phone expense exceeds the allotted stipend? In this case, it’s always good to have a backup reimbursement process in place. It is also worth noting that overspending is a very real risk with a stipend since expenses aren’t being explicitly tracked.  

In short, for simplicity and less headache, go for a stipend. To avoid the risk of overspending, choose a reimbursement process.

Of course, employers could avoid all of this hassle by simply giving employees work phones on a separate company phone plan. However, this is obviously expensive and requires additional IT and security support. This option should really only be considered for the most obvious use cases where cold calling is a routine part of the job.

When should employees receive the reimbursement?

This is also determined by the employer and usually weighed against factors such as how often cell phones are used for work. It can be distributed monthly, quarterly, or annually or along with payroll.

Are cell phone reimbursements taxable? 

Cell phone reimbursements are not considered income or an amount added to an employee’s wage, but they cover expenses for cell phone use for business purposes. So, technically, they are not part of an employee’s earnings. However, they are usually considered non-taxable as long as they are given for “substantial non-compensatory business reasons,” as stated by the IRS.

Again, the key here is to ensure that employees determine a reasonable amount to reimburse. For instance, if your employee’s monthly bill is $100 and you pay $105 as reimbursement for cell phone use, the excess of $5 should be returned to you, or they would need to file it as income, which can be taxable.

The essentials of a reimbursement policy

The key to complying with the California Labor Code 2802 is to have a policy in place. As you create this for your organization or revisit your existing rules, you must ensure that it covers the following: 

  • Who’s eligible for reimbursement? Look at your operations and determine which roles rely heavily on their personal cell phones to get work done. For instance, employees who usually work at the company headquarters with access to company resources are less likely to use their mobile plan than those who work in various locations and are more likely to use their cell phones for work-related purposes while on the go. 
  • What type of usage warrants reimbursement? Specify what work-related tasks done on mobile entails because it’s best to define what constitutes business and personal use. Typically, work-related usage includes company calls, emails, and accessing company platforms.   
  • What is the documentation needed? List the documents employees must submit, such as receipts, invoices, or billing statements.
  • How will the reimbursement be computed? State clearly in your policy whether you will reimburse down to the cent or assign a stipend. 
  • How will the reimbursement process go? Detail the steps involved so that your employees will know how to proceed. 

When you create a reimbursement policy, see that you’re using clear language and be specific as much as possible. Keep it accessible to all employees, and make sure to update it if need be. 

Other states with reimbursement laws

There is no federal law that requires employers to reimburse employees for work-related expenses. However, the FLSA states that you might need to if those expenses cause wages to go down below minimum wage. 

Aside from California, here are other places that have laws on reimbursing employees for work-related expenses:

District of Columbia – DC Municipal Regulations Section 7-910

On top of wages, employers must also “pay the cost of purchasing or maintaining any tools required of the employee in the performance of the business of the employer.”

Illinois – Illinois Wage Payment and Collection Act Section 9.5

An employer must pay back an employee for any necessary costs or losses the employee has while doing their job and directly related to work for the employer. ‘Necessary costs’ include all reasonable expenses or losses required for the job that mainly benefit the employer.

Iowa – Iowa Code 2024 Section – 91A.3(6)

Any expenses an employee has that are approved by the employer must either be paid back before they’re spent or within 30 days after the employee submits an expense claim.

Minnesota – Minnesota Statute 174.24 Subd. 5

Once employment is ended, employers must reimburse the total amount deducted directly or indirectly for any items listed in the previous subdivision except for uniform or clothing rental and maintenance by motor vehicle dealers. Once reimbursed, employers can ask the employees to return any items they the employee provided reimbursement for. 

Montana – Montana Code 39-2-701

An employer must cover an employee’s necessary expenses or losses that happen while doing their job or following the employer’s orders. 

New Hampshire – New Hampshire Revised Statutes Section 275:57

If an employee spends money for work-related expenses at the employer’s request, and these expenses aren’t normally covered by the employee’s wages or advance payments, the employer must reimburse them within 30 days after the employee provides proof of payment.

New York – New York Labor Law Section 198 C – Benefits or Wage Supplements

Besides any other penalties, if an employer agrees to pay benefits or wage supplements to employees, but fails to make the payments within 30 days, they can be charged with a misdemeanor.

North Dakota – North Dakota Century Code Section 34-02-01

An employer must reimburse an employee for any necessary expenses or losses from doing their job or following the employer’s orders, even if those orders were illegal, unless the employee knew they were illegal at the time.

Pennsylvania – Unreimbursed Business Expenses

Some employees might be able to subtract certain job-related expenses from their state income tax. Qualified expenses may include travel and mileage, certain mobile phone use, and office supplies. 

South Dakota – South Dakota CL 60-2-1

An employer must cover any necessary expenses or losses an employee has while doing their job or following the employer’s orders, even if the orders were illegal, unless the employee knew they were illegal at the time.

Seattle – Wage Theft Ordinance

Seattle employers must pay employees on a regular pay day. Compensations include wages, tips, and reimbursements for expenses incurred on behalf of the employer. 

Massachusetts

While Massachusetts law doesn’t explicitly mention about expense reimbursement, the state’s Attorney General strongly recommends employers to cover necessary and unavoidable employee expenses. 

Handle cell phone reimbursements with ease

Worried about cell phone reimbursement logistics? Maybe it is time you consider leaving it to the experts.

Workforce.com is a powerful HR tool that covers time and attendance, scheduling, and payroll — helping you comply with obscure labor laws every step of the way. Employees can check their shift schedules, clock in for work, update their direct deposit information, and much more, all in one place. 

Workforce.com is uniquely equipped to handle all things related to California labor compliance, including cell phone reimbursements. Within the system, you can easily classify employees eligible for reimbursement with special tags, provide them with a way to upload necessary documentation, and ensure that they receive their reimbursements.

Worried about a scheduling and time clock app adding to your reimbursement bill? Think again. Workforce.com offers flexibility since staff can access it from computers too—devices not tied to personal cell phone plans. This can help minimize or even eliminate the need for cell phone reimbursements entirely.  Regardless of how big your HR team is, you can rest assured that crucial admin tasks are taken care of. 

Discover how Workforce.com can help you with payroll, reimbursements, and more. Book a demo today. 

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Employee or contractor? 6 worker misclassification FAQs

Astronaut Dog Thinking

Summary

  • Misclassifying full-time employees as independent contractors can lead to legal and compliance issues down the line. 

  • There are a number of ways to determine whether or not a worker should be classified as an employee or contractor. 

  • Aside from seeking legal counsel, employers can use workforce management solutions to stay compliant with labor laws and properly classify workers. 

The number of freelancers and independent contractors is growing steadily in the United States. McKinsey found that approximately 58 million American workers, or 36% of the American working population, consider themselves to be independent workers. This figure is expected to reach 90.1 million by 2028. 

With this rise in contractors in recent years, worker protection laws are shifting to reduce incorrect worker classification.

Worker misclassification is when a company hires individuals as self-employed or independent contractors to carry out the tasks of a full-time worker. 

To learn more about the misclassification of employees and its implications, we spoke with Hinshaw & Culbertson law partner Aimee Delaney.

What exactly is worker misclassification?

“Misclassification is a term that is used when an employer incorrectly identifies an individual or position as an independent contractor when the individual is really an employee,” said Delaney. 

According to Delaney, there are a number of circumstances that can motivate employers to classify individuals as contractors: 

  • Independent contractors are not subject to state and federal wage laws, which means they are not entitled to overtime if they work over 40 hours a week. 
  • An employer does not have to pay the employer portion of payroll taxes and does not make withholdings for an independent contractor. 
  • An independent contractor is also not entitled to benefits such as workers’ compensation or unemployment benefits from the organization that the individual contracts with. 

“Misclassification does not require bad intent to be a violation,” said Delaney, “so even if it was an honest mistake, it can still present a violation of law.”

Delaney added that the definition of an employee, as opposed to an independent contractor, lies with the employer. It should evaluate whether it has employees on the payroll who are performing the same work and function as the independent contractor. A good follow-up to that question is will the independent contractor be performing the main work of the business.

“Answering these questions in the affirmative is usually a sign of trouble,” Delaney said. “So if I run a home health business and have a staff of 25 home health workers but want to bring on three more as independent contractors, you are probably well on your way to misclassification.”

Delaney said the home care and home health industry can suffer from labor shortages. While trying to use independent contractors to address a shortage of workers may be tempting, it can also be risky, she said.

“Staffing agencies would be a better resource in that scenario, as it avoids the misclassification issue,” Delaney said. “You may not be able to avoid a joint employer issue, but at least you should avoid the misclassification issue.”

Why does employee misclassification matter?

Employee misclassification is bad for business, bad for workers, and bad for the public sector. According to the U.S. Department of Labor (DOL), misclassified employees lead to lost government contributions that should be going towards things like state unemployment insurance and workers’ compensation insurance.  

While employers might attempt to incorrectly classify their employees to avoid having to deal with tax withholding, the financial and reputational consequences of doing so greatly outweigh the savings.

Workers who carry out the role of employees but are contracted as freelancers are not entitled to the same rights and benefits. They are not eligible for things like paid vacation and sick leave and can be laid off much more easily.  

Independent contractors are also responsible for paying their own Social Security and Medicare through the Self Employment Tax (SET).

How do employers typically classify a permanent employee versus an independent contractor? 

When an employer hires a permanent employee, that person is expected to devote their full workday to the tasks they are given by the employer. Permanent employees cannot work for other organizations at the same time. 

The employment relationship between a company and an independent contractor, on the other hand, is of a different nature. According to Delaney: 

An employer will typically only have an independent contractor for some type of special project that falls outside of the normal business conducted by the operation. For example, a law firm may need to upgrade its document management system and retain a third-party vendor as an independent contractor to complete the project. The contractor is not performing the work of the law firm, the law firm does not exercise control or supervision over the vendor and only controls the ultimate product. This concept is also separate from the concept of temporary staffing, which relies on the use of temporary workers that are employed by a third party.

The  California law Assembly Bill 5 (AB-5) clarifies the difference between employee and contractor in the state. The California Supreme Court requires the use of the ABC test, outlined on the ca.gov website, which assigns three conditions that must be met to consider an employee as an independent contractor:

  • The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
  • The worker performs work that is outside the usual course of the hiring entity’s business; and
  • The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
(Source: https://www.labor.ca.gov/employmentstatus/abctest/)

Also read: Ease compliance concerns with workforce management software

What is the advantage for employers to classify their workforce as independent contractors? 

Some employers think worker misclassification is worth it because contractors are more affordable. But Delaney says the risks involved outweigh the perceived benefits:

“There is no advantage to employers if the classification is not correct, because the risk and liability will generally outweigh any benefit. If the classification is appropriate, the advantage is often a lower cost with a known end date. As noted above, independent contractors are not subject to state and federal wage laws, so they are not subject to the minimum wage and overtime requirements.”

What should employers know about defining their workforce to avoid misclassification? 

“Employers must be aware of the key concepts and tests that are applied to determine whether independent contractor status is appropriate,” says Delaney. “These are the tests that will get used by the Labor Department, the Equal Employment Opportunity Commission (EEOC), the IRS, etc. In some form or fashion, these tests all look to the level of control exercised by the organization over the individual and the economic realities of the relationship.”

If you are using the services of independent contractors, Delaney recommends that you carry out regular audits to make sure that you are doing so in a compliant way. If you do find cases of misclassified employees, you will also need to assess whether any overtime wages are owed to them.  

Also read: What employers and HR should expect from new Labor Secretary Marty Walsh

Is employee misclassification a growing trend in wage and hour/overtime violations? If so, why is that?

The wage and hour laws stipulated in the Fair Labor Standards Act (FLSA) do not apply to independent contractors. Because of this, companies with misclassified workers are often found guilty of breaking wage and overtime violations.

If a worker is found to be misclassified, their employers might end up owing them significant amounts of money in back wages. 

Stay compliant with a workforce management tool

Navigating federal and state laws around labor codes and employee classification can be tricky. The language is complicated and misinterpreting it can lead to mistakes that break the bank and your reputation. So when in doubt, seek legal advice. 

Workforce.com can help with our powerful wage and hour compliance platform. It accounts for federal, state, and regional wage laws when paying salaries, even in situations where your staff might be distributed around the country. And most importantly, an automated workforce management system helps you maintain an accurate paper trail for whenever external audits come knocking. With detailed labor records, you can rest assured that misclassification accusations will never catch your organization off guard. 

Book a demo today to keep your time tracking and scheduling air-tight. 

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Is your employee attendance policy and procedure fit for purpose?

Summary:

  • Lateness and absenteeism are early warning signs of a deteriorating attendance policy. — More

  • No-call, no-shows are becoming increasingly prevalent. Every organization needs a clear-cut procedure to mitigate the repercussions of them. — More

  • Automating the way you collect attendance data helps solidify your attendance policy. — More

Dealing with employee attendance can be tricky. You need your team to respect your company’s start time and adhere to predefined work hours. And you need to implement corrective action in the case of tardiness and no-shows. Any disciplinary action needs to be taken at the time and level that best suits your work environment and culture. 

Employee absenteeism and tardiness are bad news for any business and can reduce overall productivity and work quality. 

This is where having a comprehensive employee attendance policy is essential. It informs your employees of what is expected from them, and it helps your human resources team adhere to predefined discipline processes. 

The rise of remote and hybrid work due to the COVID-19 pandemic has made it even more complex to define and monitor work schedules. Businesses that already have company attendance policies will likely need to revise them to take these changes into consideration.     

Lateness is your early warning system

A one-off instance of lateness may be understandable, but if it becomes a recurring problem, it can be an early warning of potentially serious issues with a worker, team, or department.

Tardiness is the most common time and attendance issue facing businesses. Studies have shown that, on average, a quarter of US employees report being late for work at least once a month. Younger employees are more likely to struggle with punctuality — 38% of those aged 34 or younger are late once a month or more. On the other hand, only 14% of workers aged 44 or older turn up late to work at least once a month. Almost half of US employers — 43% — fire employees for lateness each year.

The key is not to focus on individual instances of lateness but instead identify problematic patterns and prevent them from becoming systemic. For example, there may be a specific employee who is persistently late. You may notice a particular department or location with repeated poor timekeeping. Using time and attendance software makes these patterns easy to spot and gives you data-backed insight into the problem.

Your employee time and attendance policy and procedures should insist that employees who are running late inform their manager within a clear time frame. Your policy should also clarify what frequency of lateness will incur penalties and what the disciplinary response will be. Given that lateness is so endemic, some companies build some leeway into their tardiness policy, allowing a 10-minute grace period before an employee is officially marked as late.

As long as managerial leniency doesn’t undermine your attendance policy, there are benefits to reaching out to persistently late employees to see if the company can help resolve the issues causing their problems. Implementing flexible work, such as shift swaps, can help with employee retention and reduce lateness.

 

Webinar: How to Drive Engagement

 

Absences require a nuanced approach

The cost of staff absence is much more visible than the cost of lateness. In January 2022 alone, 7.8 million US workers were absent from work due to health-related issues, such as injury, illness, or medical appointments. This is significantly higher than the 3.7 million workers who took sick leave a year earlier.   

At a strategic level, dealing with individual absences requires a nuanced approach. While granular attendance data is great for identifying problems, it should always be backed up with direct staff communication.

The latest US government statistics on employee absence show that the average absence rate nationwide was 3.2%. Excessive absenteeism above the national average suggests a problem with company culture. Either employees are unhappy in their work, or they are getting too comfortable with exploiting ineffective managerial attendance policies. 

The more detailed your data, the more precisely you’ll be able to identify the problem areas. If your company’s absence rate is noticeably lower than the average, say around 1.5%, that may not be cause for celebration. People will get sick, and the hidden risk of low absence rates suggests these sick people feel unable or afraid to request excused absences for sick days and are bringing their illness to work.

Know your absence rate

If you’re not using time and attendance software to keep track of your absence rate, it can easily be worked out by dividing the number of days or hours lost to absence by the number that should have been attended, then multiplying the result by 100. 

For example, an employee who is expected to complete 260 workdays per year but is absent for five of those days would have an absence rate of 1.9%. The same formula applies to individual workers, departments, or the whole business. You can now compare your absence rate to the national average to see how your business is faring.

Absence rates should always be considered in the context of absence frequency. For example, one worker may be off for 10 consecutive days. Another worker may call in sick on 10 Fridays during the year. Both would have the same absence rate, but the frequencies tell different stories — the first worker may have been seriously ill, while the second likes to have a long weekend. Your procedure should empower managers to take that into account when deciding what action to take.

That’s why it’s important to clarify which types of leave and absence you consider legitimate in your employee attendance policy. The policy should also specifically state how much warning employees are expected to give if they can’t come to work. For example, they should get in touch before 9:30 a.m. or at least an hour before they’re meant to clock in. You may require a doctor’s note after a certain amount of sick days, or you may have a different policy for emergencies or jury duty, for example. 

Of course, the day-to-day implementation of your absence policy will always be down to the manager’s discretion, but setting clear guidelines will prevent confusion on both sides. You will also need to familiarize yourself with and adhere to local, state, and federal laws, such as the Family and Medical Leave Act (FMLA). This allows eligible employees to take unpaid and job-protected leave for certain medical situations. 

“No call, no shows” are the worst-case scenarios

A “no call, no show,” also known as an unexcused absence or unscheduled absence, is when an employee simply doesn’t turn up for their scheduled shift and gives their manager no warning. These are the most serious of all attendance infractions. The lack of notice exacerbates all the costs and inconveniences of a normal absence, which means it needs to be treated especially carefully and thoroughly.

In an economy struggling to deal with phenomena such as the Great Resignation and quiet quitting, maintaining regular attendance is more crucial than ever. There are 10.3 million job openings in the US right now, with hospitality and other shift-based roles especially affected. 

Team members with low employee morale have never been more empowered to simply walk away — sometimes without even going through a formal resignation procedure.

If an employee fails to show up for work on consecutive days with no contact, that is considered job abandonment and is widely seen as reason enough to fire them. Be sure to make it clear in your policy exactly how many days absent will count as abandonment. Three is generally considered standard, but check state case law for any local precedents that have been set.

Therefore, your employee attendance policy needs to be explicit about repercussions for a no-call, no-show absence. Some companies make it cause for immediate termination. Others use progressive, points-based discipline measures that usually go from a verbal warning to a written warning and eventual termination. Be careful assuming the worst, however. For a first-time offense, communicate with the employee. It may just be a hangover, or it could be an issue with a family member. Be firm, but check the facts before dropping the hammer.

Employee attendance policies and procedures protect your business

Once you have closed the gaps in your employee attendance policies and procedures, apply them consistently. Penalizing workers for lateness while always letting a manager leave early sets a bad precedent that can backfire. The more airtight your policies and procedures and the more accurate your attendance data, the less risk of legal exposure for your business.

Having an explicit procedure to follow is particularly important when job terminations are involved, as this is an area where unfair dismissal suits can become public and messy. For example, in 2020, there was a high-profile case of a Boeing employee who was given a “last chance agreement” following repeated attendance infractions. The employee then took time off and didn’t return to work afterward. He was fired, but he sued, saying he had been fired for taking the leave, not his attendance record.

Evidence of repeated clear infractions of an established policy, backed up by incontrovertible evidence of repeated lateness or non-attendance, was what convinced the 3rd Circuit Court to dismiss the case against Boeing—and the same combination of policy, procedure, and data is your best defense against this kind of suit as well.

Collecting good attendance data helps keep your policy airtight

Workforce.com can not only gather that attendance data automatically, but it can also alert managers to staff that repeatedly fail to show up on time. This automation gives managers actionable data they can use to stay ahead of frontline issues. 

Webinar: How to Reduce Absenteeism

If you are ready to see what Workforce.com can do to help your time and attendance policy, book a call with us today or try the platform for free. 

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Wage and Hour Laws in 2022: What Employers Need to Know

Whether a mom-and-pop shop with a handful of employees or a large corporation staffing thousands, complying with certain state and federal labor laws is required of every business. Failure to adhere to these rules and regulations set forth by the government can lead to significant penalties and fines, not to mention plenty of bad publicity. It’s also possible for workers to file a complaint against their employers, which could result in a costly lawsuit. 

For these reasons, it’s critical for employers to familiarize themselves with the Fair Labor Standard Act (FLSA) – the labor law established to ensure employees are compensated fairly for the work they perform. This law governs such workforce practices as minimum wage, overtime pay, meal breaks, rest periods and sick leave.

While wage and hour laws are nationally enforced, they do vary from state to state, and can often change. Staying current with the latest changes in the laws that apply to your business will not only help you avoid hefty fines, but also help maintain a harmonious work relationship with employees. So, what exactly is the federal wage and hour law?

Minimum Wage

Simply put, all employees covered by the Fair Labor Standard Act must be paid at least the minimum wage. At the time of this writing, federal minimum wage laws set the minimum wage at $7.25/hour. Many states, however, have their own minimum wage requirements that call for more than the federal amount, and these amounts can vary significantly. For instance, the state minimum wage in Nebraska is $9/hour, while in New York it is now $14.20/hour.

Presently, 30 states and Washington D.C. have minimum wages above the $7.25 federal minimum wage. Only five states have not adopted a state minimum wage: Alabama, Louisiana, Mississippi, South Carolina and Tennessee. Two states, Georgia and Wyoming, actually have a minimum wage below $7.25/hour. One thing is universal, however, and that is any covered non-exempt employee will always be entitled to the highest minimum wage amount available to them.

It should be noted that there are some exceptions to receiving the federal minimum wage. Employees who collect the bulk of their pay in tips usually can be paid a lesser minimum wage than $7.25/hour. On the federal level, the tipped minimum wage is $2.13/hour. However, some states have a higher tipped minimum wage, and some states call for tipped employees to be compensated the same minimum wage as non-tipped employees. Additionally, employees under the age of 20 may be paid a minimum wage of $4.25 per hour for their initial 3 months of employment, or until they reach 20 years of age. After such time, they must be paid the regular minimum wage rate.

Earlier this year, another exception to the federal $7.25 minimum wage rate was made. The Biden administration directed its agencies to increase the minimum wage for federal employees to $15 an hour. The new policy, which took effect Jan. 30, 2022, will give a significant pay raise to approximately 70,000 federal workers. 

Overtime Pay

Along with a minimum wage, employees must be provided additional compensation apart from their standard work hours. This is considered overtime pay, and according to the US Department of Labor, employers must pay covered non-exempt employees at least one and a half times their standard pay in the event they work more than 40 hours in a single workweek. There is no limit to the number of hours employees aged 16 and older can work in any given workweek. However, the FLSA does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest. 

While not every employee’s workweek has the same start and end dates, they all have the same parameters in that they are fixed and regularly recurring periods of 168 hours — seven consecutive 24-hour periods. A workweek can begin at any hour of any day. In addition, different workweeks can be set up for different employees or groups within the company. In most cases, any overtime payment earned during a given workweek must be paid on the regular pay day for the week in which the wages were earned.

Exempt vs. Non-exempt Employees

Since ONLY non-exempt employees are eligible for overtime pay, it’s important to identify the qualifications needed for this status. According to the Department of Labor, any covered employee who earns less than $35,568 per year, or $684 per week, is entitled to overtime pay for work performed in excess of 40 hours during one workweek. Further qualifying classifications of non-exempt employees include those that are directly supervised by a manager, and those not in an executive, administrative, professional, or outside sales position.

An exempt employee on the other hand is not subject to the same rules and regulations established by the FLSA. Those in this classification do not have to be paid overtime for extra hours worked during a given workweek. To hold exempt status, employees must earn in excess of $35,568 annually and their work must fall under an executive, professional, administrative, or outside sales category. 

The inability to distinguish non-exempt from exempt employees can negatively affect business in a variety of ways, including fines and penalties, regulatory enforcement action, and employee lawsuits for failure to pay overtime. In some cases, reclassifying an employee from exempt to non-exempt (or vice versa) is called for, but it can be a tricky path to navigate. 

For instance, a non-exempt employee whose status is changed to exempt may be angered by no longer being eligible to earn overtime pay. On the other hand, an exempt employee who is reclassified as non-exempt may see the change as a bump down in status at the company. Before making any changes to an employee’s status, management should take the time to explain the reasoning behind the decision. Whichever status an employee is given, they are still equally entitled to such additional protections as the Family Medical and Family Leaves Act, the Occupational Safety and Health Act, American’s with Disabilities Act, and even file for worker’s compensation. 

Final Thoughts

Better understanding the wage and hour laws your business is subject to can certainly help safeguard against costly fines and potential lawsuits. State labor law guides can serve as an excellent resource to determine the rules and regulations required in your area. 

Working with skilled HR and workforce management professionals is another effective way to help navigate the minefield of these unique and ever-changing laws, as is receiving legal advice from attorneys well-versed in all types of labor law. The ultimate goal is to always stay on top of the necessary labor legislation that must be followed. 

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The 10-minute guide to 2021 labor law compliance

Labor laws are a potentially lethal minefield for companies, particularly in today’s turbulent labor market, as the cost of labor law compliance failures can be enormous.

Labor law fines tend to stack per infraction so with large employee numbers the financial risk can grow exponentially, as with the recent high profile example of New York City suing Chipotle (https://edition.cnn.com/2021/04/29/business/chipotle-nyc-lawsuit-labor-law/index.html) for $151 million over 600,000 labor law violations accumulated within the city. In Tennessee, a home health care provider misclassified fifty workers as independent contractors rather than employees and was hit with a $358k penalty (https://www.workforce.com/news/worker-misclassification)by the Department of Labor to make up back wages and overtime.

Ignorance of the law is no defense, so even in situations where labor law compliance is complicated by different federal, state, and city rulings, it’s up to companies to stay on top of what is required. In situations where federal and local laws differ (i.e., the state minimum wage is higher than the federal), companies are expected to adhere to whichever is most stringent (i.e., they would have to pay the higher state minimum wage, not the federal).

It’s all too easy to make labor law compliance mistakes, but awareness of your responsibilities and impeccable record keeping will help to protect your company. Here are the key areas to keep in mind.

Minimum wage

Minimum wage laws are getting a lot of attention at the moment, with President Biden’s executive order raising the salary for federal workers to at least $15 per hour being seen by many as a prelude to a nationwide rise in minimum wage levels. Compliance with these laws can seem cut and dried, but there are aspects unique to some industries that you should be aware of if they affect you.

For example, industries where workers earn tips have a unique minimum wage law to follow, called Minimum Tipped Wage. “Minimum tipped wage makes it quite a bit more complicated,” says Workforce’s chief strategy officer Josh Cameron. “In hospitality or anything where you earn tips, you can pay the staff a minimum wage much lower than the normal one. So it would be $7.50 an hour if they’re not tipped, but it’s $2.50 if it’s tipped. As long as they get enough tips to get them over that—it’s called the tip credit—then they can receive the lower $2.50 per hour from their employer.”

There are reasons to keep on top of minimum wage laws beyond the threat of fines. For example, 29 states currently require a minimum wage higher than the federal standard, and you are obliged to pay the higher sum. Underpaid workers are unlikely to show any loyalty to a company, and underpayment can cause PR problems as well. “An underpayment scandal can bring companies to their knees,” says Andrew Stirling, head of product compliance at Workforce.com. “Customers can decide to take their business elsewhere. People are less likely to visit a restaurant or shop that has been reported for underpaying their people.”

Paid and unpaid breaks

One of the areas of labor law compliance with the least clarity is breaks for workers, making it especially important for companies to err on the side of caution. The legal requirements can be found on the Department of Labor website, but there are significant areas of ambiguity to watch for:

  • Federal law does not require companies to offer lunch or coffee breaks.
  • Where short breaks are allowed by a company, short breaks (i.e., toilet use) of up to 20 minutes should be paid.
  • Breaks of 30 minutes or longer (i.e., lunch) are considered outside of workable hours and do not need to be paid.
  • Waiting time or on-call time does not count as a break and should be paid.

“There’s this gray area,” says Josh Cameron. “Say you take a break for 21 minutes, is that paid or unpaid? Is it okay to make that unpaid? If you’re a lawyer looking at this, it’s really an opportunity because you can say, ‘This employee always had a 23-minute break, always had an 18-minute break, and they never got paid for it. Maybe they should have been.’ That’s something that employers should really be aware of and keep an eye on.”

This is an area where accurate and exhaustive employee data can really help, and if your company still relies on timecards and manual spreadsheets or pen and paper logs to track breaks, you could be leaving yourself open to big problems in the future.

Paid and unpaid leave

Thirteen states, plus Washington DC, currently require private companies to offer paid sick leave. The Families First Coronavirus Response Act added an additional responsibility for companies with less than 500 employees to allow workers to take paid time off if infected with COVID-19, to isolate following contact with an infected person, or to care for a family member. The same act also introduced a tax credit to offset the loss for affected companies.

California, New Jersey, Rhode Island, and Washington have all passed laws that also require paid family leave, and President Biden’s administration has set its sights on a federally mandated period of 12-weeks paid leave that would allow, for example, parents to take time off to care for newborn babies or other family needs.

For now, the only federal law involving medical and family leave is the Family and Medical Leave Act, which requires employers with more than 50 staff to offer 12 workweeks of unpaid, job-protected leave in a 12-month period for:

  • The birth of a child, adoption, or fostering of a child
  • A seriously ill spouse, child, or parent
  • A serious health condition that makes the employee unable to perform the essential functions of his or her job
  • Any qualifying exigency arising out of the fact that the employee’s spouse, son, daughter, or parent is a covered military member on “covered active duty;” or Military Caregiver Leave—26 weeks in a 12-month period to care for an injured or seriously ill spouse, son or daughter, parent, or other next of kin who is a covered service member

This is an area of labor law compliance that is only going to become more prominent in the coming years, so shrewd managers should ensure they are on top of current requirements, which are largely dependent on where you operate and how many staff you have, and be prepared for change.

Healthcare

Another area of labor law that has been fraught with political debate, the Affordable Care Act requires that if an employee works more than 30 hours a week over any single year look-back period, then the employer must provide health insurance. While the ACA is a federal law, the portion of the medical insurance that the employer has to pay is determined by the state. In New York, for example, the employer must pay 80%.

The 30 hours a week cut-off requires particularly careful management where shift workers are concerned, as their hours may fluctuate over time. “This whole area is a big pain point,” explains Josh Cameron. “It’s a very difficult conversation to have with an employee that has become eligible for healthcare, then loses that eligibility the next year. Taking it away from someone feels very harsh to the employee.”

Keeping track of employee hours and keeping accurate records is yet again a vital part of compliance for companies here. Qualifying for healthcare is a strong motivator for retaining staff, but for those companies that are concerned about shouldering the additional costs, Workforce.com can be calibrated to warn managers when employees reach the 30 hours threshold and can even prevent managers from publishing schedules that extend past 30 hours.

Predictive scheduling

A recent addition to the labor law conversation, predictive scheduling laws – also sometimes known as “fair workweek” – place restrictions on how shifts are assigned and require companies to give advance notice of new schedules.

Two states – Vermont and Oregon – and eight municipalities – San Francisco, Berkeley, Emeryville, San Jose, Seattle, New York City, Chicago, and Philadelphia – have passed such laws, and more states and cities are considering legislation in this area. The specifics of the laws vary from region to region, but the core principles are:

  • A minimum notice period for upcoming schedules (usually two weeks) with compensation for workers who are not given enough notice of their schedule or changes to that schedule
  • A ban on “clopening,” meaning that a staff member working the closing shift cannot be scheduled to work the opening shift the next day
  • Mandatory rest periods that vary from between 9 to 11 hours between shifts

Failing to maintain compliance with these laws is expensive. The Chipotle example mentioned earlier, in which NYC sued the fast-food chain for $151 million, was caused by hundreds of thousands of predictive scheduling infractions across its many locations in the city.

Even if your business is not based in a state or city with predictive scheduling laws, it is still worth adopting the principles behind them. Partly because these laws may yet impact your business, but also because they have had a notable improvement on staff retention and job satisfaction.

Discrimination laws

There are thankfully few employers looking to openly discriminate in their hiring processes these days, but you should still be aware of which groups the law applies to when hiring and firing, as well as setting the terms of employment and how much people are paid.

  • The Equal Opportunity in Employment Act covers all the areas of discrimination that are forbidden. This concise PDF from the Department of Labor spells out everything employers should know.
  • The Americans with Disabilities Act (ADA) applies to companies with 15 or more employees and makes it illegal to discriminate in employment on the basis of a person’s disability. This also requires companies to make “reasonable accommodation” to allow a disabled person to work there, including making modifications to the working environment to not only allow disabled people to work there but also participate in the application process.
  • Ever since the Civil Rights Act of 1964, there have been several laws and amendments which make it illegal to discriminate against anyone because of their Ethnicity, Gender, Race, or Religion. Nationality is also a protected category, so, for example, it would be illegal not to hire someone because they were from Poland, regardless of their race or ethnicity.
  • The Age Discrimination in Employment Act offers protection to employees and applicants on the basis of their age. This law applies to anyone aged 40 or older, a far younger cut-off than many companies realize.

Labor law compliance is easier with good record keeping

If this all seems like a lot to keep track of, you’re not alone. The USA has relatively light-touch regulations for businesses compared to Europe, for example, but that doesn’t mean the task of staying compliant with labor laws can’t feel overwhelming—especially if you’re new to management and dealing with all of this legislation for the first time.

Regardless of which law is involved, one of the recurring causes of labor law breaches is poor record keeping. There’s one surefire way to ensure that your labor law compliance is rock solid, and that’s to keep excellent data. While it’s possible to maintain your records the old-fashioned way, with paper and pen or spreadsheets, the potential for human error is high.

When the cost of non-compliance can be so steep, using dedicated staff management software like Workforce.com to track staff hours and automatically flag labor law compliance issues offers much-needed peace of mind.

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Q&A: Excelling in defense of employers sued for wage and hour violations

employment law, Idalski

When employment law giant Seyfarth announced the arrival of partner Annette A. Idalski to its Labor & Employment department and Wage Hour Class & Collective Actions practice group, they were clearly adding someone who was used to winning high-stakes cases.

Since she began practicing employment law in 1995, Idalski has gained hundreds of successful outcomes defending employers against lawsuits brought by employees involving independent contractor status, wage and hour compliance, discrimination, and whistleblower complaints. Idalski was named among the Top 50 Women Lawyers in Georgia and was quoted in a profile as saying, “I strive for excellence and do not tolerate mediocrity. My clients hire us to win and we do everything in our power to make that happen.”

Following her move in May to Seyfarth, Idalski spoke via email with Workforce Editorial Director Rick Bell for this Q&A.

Workforce: What should employers do to avoid wage and hour violations?

Annette A. Idalski: Employers should draft and disseminate a policy clearly stating how nonexempt employees must record their time including time off for meal periods or breaks in service. It is also advisable to describe with particularity in the employee’s offer letter how the employee will be classified and to explain how the employee’s pay will be calculated including overtime pay and bonuses. Employees should sign their offer letter to acknowledge that he or she understands how his or her pay is calculated.

Workforce: The Department of Labor is once again stepping up enforcement, particularly in its wage and hour division. How are you counseling clients to boost their compliance?

Idalski: Employers should be quick to correct any mistakes that they identify as a result of wage compliance audits, or employee complaints. Proactive employers who make an effort to come into compliance before a DOL audit will fare much better with DOL investigators and could avoid penalties such as liquidated damages.

Workforce: Are you a believer that guidance from the Department of Labor is a stronger deterrent of wage and hour violations than enforcement?

Idalski: Yes. In my opinion, the DOL should focus more on teaching and training companies rather than trying to find violations. The majority of employers want to do the right thing. They want to comply with the law and would be receptive to “help” and “guidance” from the DOL. Unfortunately, the DOL has not focused on guidance and has over the years focused on enforcement which has caused many employers to fear the DOL rather than see the department as an ally.

Also read: Worker misclassification leads to $358K penalty for home health care provider

Workforce: Do any of your clients record time and attendance and overtime manually? What are the compliance challenges facing employers using a manual, paper-based system versus an automated system? 

Idalski: Yes, some clients record time and attendance and overtime manually. The compliance challenges facing employers who prefer a manual, paper-based system rather than an automated electronic system is most often inadvertent loss of the paper documents and less accurate reporting of hours worked, which can result in violations of the FLSA. For example, if an employee is required to keep track of his or her paper timesheet, the individual may lose it and then attempt to recreate the timesheet which, of course, may not be accurate. If litigation later ensues, the employer is left with missing timesheets and incomplete records. Further, employees who are manually recording their time may forget to do so on a daily basis and prepare all of their timesheets weekly or when the employer requires him or her to turn them in. Therefore, employers who use a paper-based system must have strict rules for compliance which include preparation and submission of all hours worked, start and end times, and breaks on a daily basis. Employees should also be required to sign their timesheets attesting to their accuracy.

Workforce: Is it generally an oversight when employees are misclassified?

Idalski: Yes. The majority of the time, misclassification occurs because the employer is well intentioned but simply made a mistake. For example, the employer may not know all of the tasks or the frequency of the tasks that an employee performs and may make classification decisions based on job titles and job descriptions rather than actually interviewing employees regarding their job tasks and the time it takes them to complete those tasks. Very rarely do employers intentionally misclassify employees.

Workforce: Do you look at the Labor Department as an adversary?

Idalski: On rare occasions yes. But not the majority of the time. The Department of Labor has an important role in ensuring that employees are paid fairly. While I have dealt with overzealous DOL investigators from time to time as well as investigators that I did not agree with regarding their application of the facts to the independent contractor (e.g., Gate Guard Services v. Hilda Solis) and exemption tests, most investigators simply want to ensure that employers are following the law, that they understand the law and that employees are legally paid.

Workforce: You’ve had some major victories in defending against wage and hour claims. What case are you proudest of?

Idalski: I am very proud of all our client’s victories. The case that has had the most significant positive impact on the energy industry (and other industries using similar models) is Parrish v. Premier Directional Drilling. The Fifth Circuit recognized that directional drillers were independent contractors and not employees. While this case concerned directional drillers, the court’s analysis can be applied to a myriad of oil field positions, and as such, has preserved the oil and gas industry’s business model. Given the fluctuations in demand for labor in the oil and gas industry, independent contractors are routinely used. If this business model were deemed illegal, it would be very difficult if not impossible for oil field services companies and oil and gas companies to operate successfully. I am very proud to have helped the energy industry in this way.

Also read: Oilfield pipeline inspectors working across 40 states awarded $3.8M in back wages

Workforce: How do you get people to look past, “big bad company cheating employees of their hard-earned pay” and realize that the company was in compliance after all?

Idalski: In the oil and gas industry in particular, workers who are classified as exempt from overtime or as independent contractors earn hundreds of thousands of dollars per year and are highly compensated. Those that are classified as independent contractors write off expenses, pay very little, if any, taxes, and enjoy the freedom to accept or reject projects offered to them. So when these workers file overtime claims against companies, it does not take long for juries or judges to understand that oftentimes it is the worker that is trying to take advantage of the company rather than the company taking advantage of the worker. It is unconscionable that a worker earning over $100,000 annually and who pays very little in taxes is entitled to overtime pay. Clearly, the public policy behind overtime pay was to ensure the lowest paid workers were not being overworked and taken advantage of. The overtime laws were not intended to overcompensate six-figure wage earners. These same facts play out in other industries as well such as cable, construction and drivers offering rides to the public.

Workforce: What is your guiding mantra, or philosophy, when defending an employer against a wage and hour complaint?

Idalski: If my client’s practices are legally compliant with the FLSA and/or state wage laws, I encourage them not to settle but to fight and win. When they do, they rarely are sued again, and in the long run it is the best financial decision. Further, it helps the industry and other companies because positive precedent is established that supports their business model. Companies who are innocent and settle because they worry about defense costs oftentimes double or triple their litigation expenses because they are deemed an easy target by plaintiffs’ lawyers. This is not to say that an innocent company should never settle because sometimes it makes sense depending upon their business. More often than not, settling negatively impacts companies.

Workforce: What compliance trends should employers expect to see under Labor Secretary Marty Walsh?

Idalski: Unfortunately, Marty Walsh and the Biden administration are not proponents of independent contractor status and favor the employer-employee relationship. Highly compensated workers will suffer with this approach as they stand to benefit from the tax advantages and flexibility of their independent contractor status. And we can expect the DOL to be focused more on enforcement and penalties and less on guidance. Liquidated damages will almost certainly be automatic if the DOL finds violations.

Workforce: Besides the independent contractors issue, in your crystal ball, what other employment law trends should employers be aware of over the next four years?

Idalski: Employers should be prepared for COVID-related litigation, especially during the next 12 months. This litigation may well include allegations by employees that the employer did not create a safe working environment by requiring and policing  the wearing of masks which resulted in the employee contracting COVID and post-COVID related illnesses.  Employers who do require vaccinations or reward employees who are vaccinated over employees who are not vaccinated could face discrimination claims.  Finally, given social pressures and issues facing the nation, employers should be prepared for an increase in Title VII race and retaliation claims. To avoid this risk, employers should re-examine diversity training and enforcing positive and accepting working relationships among employees and management.

Book a demo today to see how to build schedules, manage labor costs and ensure labor compliance with Workforce.com’s No. 1 employee scheduling software.

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Logistics company ordered to pay $120K for wage and hour violations, must implement timekeeping system

timeclock, wage and hour, schedule, timesheet rounding

A Southern California logistics provider was ordered to pay $120,000 in overtime back wages to 388 employees and also must implement a timekeeping system to shore up compliance issues.

Following a recent finding of the Department of Labor affirmed by a federal court in California, an additional $2,000 penalty also was assessed to the employer, Global One Logistics, by the department’s Wage and Hour Division to address the employer’s willful violations of the Fair Labor Standards Act. Employees were told to record only eight hours of labor each day regardless of how many hours they actually worked, according to a May 24 Labor Department press release.

Maintain accurate timekeeping

The court ordered Global One Logistics, which provides warehousing and distribution services for the home fashion and apparel industry, to implement a reliable timekeeping system that allows each employee to accurately record their daily start and stop times, the Labor Department stated. The order also instructed the employer to not alter or manipulate time or payroll records to reduce the number of hours actually worked and not to encourage or pressure workers to underreport hours worked, the statement said.

Aimee Delaney, partner at law firm Hinshaw & Culbertson, said that while the timekeeping order is not unusual, the FLSA places an obligation on employers to maintain accurate time records for its employees. It does not dictate a specific method, but there must be accurate records maintained, she said. 

“Digital time and attendance systems do deter manipulating time and payroll records, particularly if you are comparing to handwritten timesheets,” Delaney said.

 ‘Willful’ wage and hour violations

Investigators found the employer willfully failed to pay employees overtime at time-and-one-half their regular rates of pay when they worked more than 40 hours per week, according to the Labor Department. In addition to requiring employees to falsify the number of hours they worked each day, the employer also paid for the unrecorded hours in cash at workers’ straight-time rates, the Labor Department stated.

A “willful” violation under wage and hours laws has specific meaning and consequences, said Delaney. If a violation is found to be willful, the statute of limitations for the claim goes from two to three years and there are additional penalties, such as the $2,000 levied against the employer, she said.

Aimee Delaney, wage and hour violation
Aimee Delaney, partner at law firm Hinshaw & Culbertson.

“When used in the FLSA context, a violation is willful if the employer either knew or showed reckless disregard for whether its conduct was prohibited by the FLSA,” Delaney said.

Employers who purposefully manipulate payroll records in an attempt to avoid their legal obligations will be held accountable by the Labor Department, said Wage and Hour Division Assistant District Director Rafael Valles in West Covina, California.

“The outcome of this investigation serves as a reminder to all employers to review their pay practices to ensure they comply with the law and as a reminder to workers that they have the right to be paid for all of the hours that they work.”

Compliance is an organizational responsibility

Minimizing the risk of wage and hour and overtime violations falls on several departments and various roles within the organization. Managers in particular often are on the frontline with workers and should be familiar with compliance and timekeeping requirements.

“They know and are often the assigner and approver of overtime,” Delaney said. “Managers certainly bear a responsibility for knowing the state and federal requirements and not directing employees to do something out of compliance with those requirements.” 

Human resources and payroll departments often have higher-level oversight and compliance responsibilities. HR may not always be aware of specific timekeeping violations occurring day to day but can ensure that managers are properly trained. 

Also read: Using software to simplify payroll and overtime

“HR should also be aware if unusual or significant hours are being worked, which may prompt a review or audit to ensure employees working the additional hours are properly paid,” Delaney said. “Payroll is often simply a function of processing pay for what is reported on the time records. However, payroll certainly has a role to play in ensuring that all reported hours are paid correctly, including the correct overtime premiums.”

Labor Department enforcement

Delaney also pointed out that “off the clock” violations are among the clearest abuses of state and federal wage and hour laws.

“It literally means you are requiring the employees to work while not recording their time, which means they will not be paid,” she said. “Under the FLSA, non-exempt employees must be paid for all hours worked. Employers also have an obligation to maintain accurate time records.”

She added that this case isn’t necessarily a predictor of tougher Labor Department enforcement of wage and hour laws. The violations presented in the facts were blatant violations of fairly established wage and hour rules, she said. 

“Once violations are found, the Labor Department is always going to ensure enforcement to get the employees paid the wages owed,” she said.

Time and attendance software takes the headache out of tracking your hourly employees. Workforce.com has automatic systems in place to help you streamline your processes, save time and protect your bottom line. Book your demo today.

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What employers and HR should expect from new Labor Secretary Marty Walsh

Department of Labor Secretary Marty Walsh

Recently confirmed Labor Secretary Marty Walsh will be the first union member to head the U.S. Department of Labor in half a century.

Given Walsh’s extensive union background, labor-management issues such as the unionization push among employees at an Amazon warehouse in Alabama will be front and center during his tenure as the Labor Department’s new leader. It’s also expected that Walsh’s leadership of the agency will prompt a crackdown in the enforcement of wage-and-hour laws and workplace safety regulations, among other worker-friendly policies.

According to a post on law firm Fisher Phillips’ blog shortly after Walsh was nominated in January to lead the Labor Department, “Many view Marty Walsh as a leader who aims for pragmatic solutions to problems and strives for unity and consensus-building. His first allegiance, however, will be toward workers. ‘Working people, labor unions, and those fighting every day for their shot at the middle class are the backbone of our economy and of this country,’ Walsh said in a tweet soon after Biden announced him as the nominee. ‘As Secretary of Labor, I’ll work just as hard for you as you do for your families and livelihoods. You have my word.’ ”

Kevin M. Young, a partner in labor and employment in Seyfarth’s Atlanta office, Jason E. Reisman, co-chair, Labor and Employment Practice Group, for Blank Rome in Philadelphia, and Christopher D. Durham, partner in Duane Morris’ Employment, Labor, Benefits and Immigration Practice in Philadelphia, offered their thoughts on what employers should expect as Walsh begins his tenure as the new Labor secretary.

Aggressive enforcement

Durham said employers can expect the Labor Department to more vigorously enforce employment laws through audits, investigations and court actions against employers, contrasting with the Trump administration’s focus on securing employer compliance through education, outreach and other less adversarial means. 

“These shifting enforcement priorities will be supported by regulations and sub-regulatory guidance that is more protective of employee rights than the generally business-friendly interpretations of the prior administration,” Durham said. “We have already seen examples of this regulatory shift in the DOL’s moves to undo the prior administration’s regulations on joint employer status and tipped-employee wages.”

Also see: Simplify labor compliance with accurate time and attendance tracking

Young pointed out that while the Labor Department under Trump was not as light on employers as some might assume — the Wage & Hour Division set a new record for back wages recovered in 2019 — it took a softer approach than previous administrations on the topic of damage enhancements. Liquidated damages, which is a penalty in an amount equal to back wages owed, were taken off the table in all but the rarest cases, he said.

“The new administration has reversed course on that issue, and it’s likely that other enforcement measures will reenter the picture, too,” Young said. “It’s not clear yet whether the number of investigations will increase — that depends on the budget as much as anything else — but employers should certainly be preparing for more aggressive investigations than in past years.” 

Reisman said that although Walsh was confirmed with strong bipartisan support, employers should expect his reputation as someone who is a consensus-builder to be tested early with so many critical items on his agenda, including the pandemic response and some critical Trump-era regulatory initiatives.

Employers also should expect there to be an ongoing clash between the age-old tensions that exist between the Labor Department when operated under a Republican administration and under a Democratic administration. 

“There is no question, given Walsh’s labor background and leadership of the building trades, that he will be a staunch supporter of workers’ and unions’ rights,” Reisman said. “He will not want to alienate his base of union support, or that of President Biden, especially in light of Biden’s promises to empower workers and unions.”

Employers can expect a return to a Labor Department that resembles and likely surpasses the enforcement efforts of the Obama administration, Reisman said. The DOL will be back on the trail of finding violations and holding employers accountable. 

“The focus will be less on assisting with compliance and educating employers and more on the gotcha game of penalizing employers who — knowingly or unknowingly — are not in compliance with the laws the DOL enforces,” he said.

Enforcing wage-and-hour and overtime violations

Nowhere will the shift in Labor Department enforcement priorities and positions be felt more by employers than enforcement of the Fair Labor Standards Act’s overtime and minimum wage requirements, Durham said. 

“I expect the number and scope of audits conducted by the DOL’s Wage & Hour Division to increase substantially, and that the DOL will not be as willing to settle violations for less than ‘make-whole’ relief for affected employees,” he said. “In addition to back wages, the DOL is more likely to insist that employers pay liquidated damages when settling a wage-and-hour investigation, and the DOL likely will increase the use of civil monetary penalties as a potent deterrent to send a message to employers.”

Also read: Wage and hour violations cost restaurant $697,000

Employers should expect a return of the enforcement tools of the past, liquidated damages being almost automatic as penalties in wage-and-hour investigations, Reisman added. “We expect more willfulness assertions by the DOL, which allow a back wage look-back period of three years, rather than two. And, yes, the use of civil money penalties will be used more broadly as a tool than in the last four years.”

Minimum wage and the tip credit

Young said that the new administration clearly supports increasing the federal minimum wage. And there’s also little doubt that the benefit of any increase will apply for tipped workers.

“The question here is whether the FLSA will continue to allow a portion of a tipped employee’s minimum wage to come in the form of tips,” he said. “A recent federal legislative proposal would remove this so-called tip credit, requiring restaurants to directly pay the full minimum wage to each tipped employee, without credit or concern for the amount of tips they earn on the job. If passed, this could have a seismic impact on a restaurant industry that operates on thin margins and has spent most of the last year on life support.”

Supporting fair workweek and predictive scheduling

Fair workweek laws have swept the nation and in particular the retail, fast food and hospitality industries over the past decade or so, Young said. These laws are likely on the radar of Biden and Walsh.

One recently took effect in the president’s back yard (Philadelphia), and another has been the focus of lobbying efforts in Walsh’s home state of Massachusetts, Young noted.

“Instituting this sort of reform at the federal level would require an act of Congress,” Young said. “After all, the DOL can’t make new law, only interpret and enforce what’s on the books, and I don’t get the sense that this sort of measure is among Democratic lawmakers’ core labor priorities.” 

Also read: The fair workweek squeeze on employer scheduling

In the past couple of years multiple local jurisdictions including Chicago, Seattle and San Francisco passed predictive scheduling laws, with more such laws likely to hit the books in the coming years, Durham said.  

Absent new legislation at the federal level, it is highly unlikely the Labor Department will impose requirements similar to these laws because the FLSA generally does not impose requirements on employers related to scheduling employees, he added. 

“However, one way in which the DOL could enhance the financial benefit to employees of such laws would be to take the position that certain penalties under predictive scheduling laws, such as penalties for shift cancellations or other scheduling changes with insufficient notice to employees, need to be included in the regular rate of pay for purposes of calculating overtime under the FLSA,” Durham said. “The DOL’s current position, set forth in a Fact Sheet published in December 2019, is that most such penalty payments do not need to be included in the regular rate of pay.”

Reisman also questioned whether the Labor Department will have the time or resources to make its way far enough down its priority list to fair workweek/predictive scheduling regulations, or what its authority would be in seeking an impact in that realm. 

Still, he added, “Anything that would entail a nationwide policy or regulation such as paid leave could be well-received by many employers if it serves to preempt state and local laws and regulations that have created an almost unmanageable web of compliance pitfalls for multi-state employers.”

Labor law enforcement can strike your business at any time. Ensure simplified and automated compliance to federal, state and local labor regulations and avoid costly penalties. Book a demo and see Workforce.com’s powerful compliance tools in action.

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Labor Department fines, penalizes contractor $100K for falsified overtime records

employment law, labor law, overtime records

Recent wage and hour violations by a New Hampshire contractor is a signal to other employers that they should review their workforce management policies and overtime records for compliance with federal, state and local labor laws.

Facades Inc., a commercial exterior surfaces applicator-installer in Hampstead, New Hampshire, falsified pay records to cover up its failure to pay employees the required overtime wages they earned, according to a U.S. Department of Labor investigation.

The Labor Department’s Wage and Hour Division recovered $87,360 in back wages owed to 28 Facades Inc. employees. It also assessed a civil money penalty of $19,516 to address the willful nature of the violations, which included the employer’s falsification of payroll records, according to a DOL press release.

Check your workforce management policies

Small business owners have numerous priorities, and accurately managing payroll and time and attendance policies should always remain at the top, as the Facades case shows. Effectively tracking employee hours with an automated workforce management solution will clean up compensation and support compliance practices.

Investigators found Facades Inc. violated the Fair Labor Standards Act when it paid straight time for overtime hours worked by employees and concealed those payments as “reimbursements” in payroll registers. Rather than recording and paying for overtime hours at time-and-one-half workers’ regular rates of pay, the employer recorded only up to 40 hours in their records and masked their straight time payment for any additional hours, the release stated.

“Workers deserve to get paid all the wages they have earned, and our enforcement of the law ensures that happens,” said Wage and Hour Division District Director Daniel Cronin in Manchester, New Hampshire. “In this case, the employer attempted to conceal illegal straight-time-for-overtime payments. In addition to being held accountable for back pay, the employer paid a significant civil money penalty. Other employers should use the outcome of this investigation as an opportunity to review their own pay practices to avoid violations like those found in this case.”

Automate your processes to avoid penalties

Employees deserve their paychecks on time and to be accurately compensated for the time they spend working. Automated payroll practices help eliminate delays, improve compliance and minimize costly errors.

With employment contracts, timesheets, benefits and labor laws, there are a lot of factors involved in payroll that can result in miscalculations. Workforce.com’s payroll integration solution connects with more than 50 payroll systems to ease compliance and enhance efficiency. 

Ask for a demo of Workforce.com’s powerful time and attendance platform today and see how to make workplace compliance effortless and effective.