Category: Legal

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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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The PWFA: What Employers Must Know

oil painting of pregnant lady

Summary:

  • The Pregnant Workers Fairness Act (PWFA) mandates employers to provide reasonable accommodations to pregnant and qualified employees. At the very least, reasonable accommodations could mean time off, including scheduling changes and temporary reassignments.
  • The EEOC’s final regulation for the law will go into effect on June 18, 2024.
  • An efficient workforce management solution can help with compliance and managing accommodations. 

The Equal Employment Opportunity Commission (EEOC) issued the final regulation to carry out the Pregnant Workers Fairness Act (PFWA) that will go into effect on June 18, 2024. Designed to protect the rights of pregnant employees, the PWFA mandates that businesses provide reasonable accommodations to pregnant workers, similar to those provided under the Americans with Disabilities Act (ADA). Understanding and implementing the PWFA not only helps you stay compliant with federal law but also promotes a supportive and inclusive work environment. 

Here’s a quick rundown of the PWFA and how you can best comply.  

What is the PWFA?

The PFWA law requires employers to provide reasonable accommodations to qualified employees. It took effect in June 2023, but the EEOC recently issued the final regulation to implement it. 

It protects employees who have known limitations. Under the law, these refer to physical and mental conditions related to, affected by, or arising from pregnancy, childbirth, or related medical conditions. 

The law applies to public and private sector employers with more than 15 employees. 

What does reasonable accommodation exactly mean?

Basically, these are adjustments or changes in the work environment that would help qualified employees. The most obvious accommodation would be providing time off for treatments, doctor’s appointments, and childbirth, but it could be other things. Some examples include: 

  • Flexible break times for drinking water or using the restroom
  • Changes in work schedule
  • Temporary reassignment
  • Providing equipment or modifying a workstation
  • Assigning light duty
  • Offloading some essential functions of the job

Employers are required to provide such accommodations as long as it would not cause any undue hardship to the organization. Under the law, undue hardship means “a significant difficulty or expense.”

The law also has provisions that provide safeguards that ensure qualified employees will get the adjustments that are right for their condition. For instance, employers can’t force employees to take reasonable accommodations aside from what both parties previously agreed on.  

While providing time off for qualified reasons is acceptable, employers can’t force employees to take leave when they can implement adjustments to keep them working their shifts. For instance, if a pregnant employee works a cash register and can’t stand for long hours, it would be non-compliance for employers if they forced the employee to take time off when they could provide a stool to keep the employee comfortable while working.

Under the PWFA, employers are also not allowed to deny an opportunity and punish employees for requesting reasonable accommodations. Coercing employees who are exercising their rights and people who help them do so is also prohibited under the law. 

Who are qualified employees under PWFA?

Qualified employees under the PWFA are those employees who can perform their duties and fundamental tasks with or without reasonable accommodation. Most employees would meet this requirement because they would most likely be able to perform their essential functions when they’re provided adjustments at work. 

But what if core work functions or duties need to be adjusted, such as when an employee can’t perform a task? Employees can still be qualified, provided that their inability is temporary and that they can return to their essential functions in the near future. For instance, if the job requires an employee to operate heavy equipment, employers may modify their task to only involve light work. 

Tips for complying with the PWFA

Complying with the PWFA is not just a legal obligation. It’s also about promoting a more inclusive work environment and improving retention. Here are some practical tips for implementing it in your organization.

Establish a process for PWFA

It’s all about communication and transparency. Employees must be aware of the law and how they can qualify and practice their rights under it. A process with a clear set of guidelines is essential. 

Obviously, it all starts with employees letting management know of their condition. Employees should know who to inform to get the ball rolling. Aside from their immediate supervisors, who else do they need to notify? 

The guidelines should also include the type of information qualified employees need to provide. However, it’s important to note that it’s not mandatory under the law to present medical records to request for reasonable accommodation, especially when the condition is very apparent. For instance, there is a need for schedule modifications because of morning sickness or the need for bigger uniforms down the line. 

However, employers may request medical documentation to confirm that the level of reasonable accommodation requested is appropriate. This pertains to work changes that warrant a suspension of one or more essential functions, such as if the employee must avoid exposure to certain chemicals or has a temporary inability to operate heavy equipment. In addition, employers should keep medical records confidential.

Train your managers

Much of the work around complying with PWFA is between the managers and frontline staff. Ensure your managers and supervisors are equipped to implement the law and identify qualified employees. Access to materials about the law and their role in implementing it can help them navigate it better. It also helps to familiarize them with other related laws, such as the Family and Medical Leave Act (FMLA), the Americans with Disabilities Act (ADA), and the Pregnancy Discrimination Act (PDA). 

Stay on top of compliance with a workforce management platform

Navigating the PWFA will be less challenging when you have a system that helps you stay on top of it. 

On paper, it sounds simple to provide accommodations to pregnant and qualified employees under the law. However, it’s a more complex situation on the ground. Workforce.com can help run your team efficiently in compliance with PWFA, or any labor law for that matter. Here’s how: 

  • Accurate scheduling – When an employee is qualified under PWFA and needs scheduling changes, you can set qualifications so that you will be notified if you accidentally schedule them for shifts or stations that are inappropriate for their current condition.
  • Accessible handbook and training guides – Workforce.com’s HRIS makes it easy for your frontline teams to access the employee handbook and other materials they need, such as your policy on PWFA. This can come in handy should your employees need to clarify any points in your policies or rules.
  • Easy way to stay on top of last-minute shift changes – In case qualified employees face an emergency that compels them to miss a shift, managers can quickly offer the vacant shift to available staff through Workforce.com’s shift bidding functionality.
  • A feedback platform for improving operations – Workforce.com has a shift feedback that prompts employees to rate their shifts. Use this to see if reasonable accommodations are still appropriate and to gauge how the rest of the team feels about the current setup.


The PWFA is a significant step to ensuring that pregnant workers can get the support they need in the workplace. Compliance can be challenging, but the right platform can simplify the process for you. With Workforce.com, you can reduce administrative burden, track accommodations, manage documentation, and ensure that all employees are treated fairly. Discover how Workforce.com can help you stay on top of every stage of the employee life cycle, from hiring to payroll. Book a call today. 

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New Labor Laws Taking Effect in 2023

US court house

The new year is fast approaching, and with its arrival comes a host of new labor laws that will impact millions of workers and their employers across the nation. Being aware of these changes prior to their implementation will allow for all parties affected to make a smoother transition heading into 2023.

New Year, New Minimum Wage

One such change to be on the lookout for this January is an increase to the minimum wage across various states. While the federal rate will continue to hold steady at $7.25 per hour, numerous states have established their own rates, which in some cases far exceed the federal amount that has gone unchanged for the past 13 years.

Whether due to inflationary pressures or phasing in statutory increases, minimum wages will be going up across the nation. From Maine’s bump to $13.80/hour to Washington’s boost to a nationwide high of $15.74/hour, these increases will all go into effect in 2023. 

In some states, however, it’s not so cut and dry. New York, for instance, incorporates different minimum wages for different parts of the state and different industries. So, while a New York City construction worker earning minimum wage can expect to make $15 per hour at the start of the new year, a construction worker doing similar work in upstate New York will command just $14.20 per hour. 

Another important consideration for employers to keep in mind for minimum wage changes next year is that they won’t all necessarily kick in on January 1. Several states will be enacting their wage changes at some point later in the year, including Connecticut (June 1), Oregon (July 1), Florida (Sept. 30), and Hawaii (Oct. 1). 

Finally, when it comes to the federal minimum wage, some exceptions apply under specific circumstances to workers with disabilities, tipped employees, full-time students, and workers under 20 years of age in their first 90 consecutive calendar days of employment. 

Whatever rates are finalized in each state for 2023, employers must be ready before the end of the year to meet the new minimum wage requirements and understand the rules and regulations unique to their state. Failure to observe newly implemented wage laws can result in a multitude of fines and penalties.

New Labor Laws Across the Nation

It’s not just minimum wage laws that will see changes in the year ahead. A host of new labor laws and amendments will also be initiated throughout the United States in 2023, and depending on what state you’re in, the changes can be substantial. Below are just a select few that can have a significant impact on those involved.

California

California has some of the strictest labor laws in the country, and that continues to be the case heading into 2023. An amendment to the Pay Transparency Law will now require employers to provide the pay scale for any job applicant or current employee upon request. And, employers with more than 14 employees must include the pay scale for a position in any job posting, including those positions listed on third-party sites. Employers will also need to maintain records identifying the job title and wage rate history for each employee throughout their time at the company.

Lastly, fast-food chains in the Golden State will need to read up on how to comply with the upcoming establishment of a fast-food council, depending on whether or not the referendum seeking to delay the bill is successful come December 4th. 

Colorado

Doing business in Colorado? Get ready for the Paid Medical and Family Leave (PFML) to begin next year. Employees who meet the eligibility requirements will now be able to receive 12 weeks of paid family and medical leave funded through a payroll tax paid by both employers and employees in a 50/50 split. The paid leave needs to be funded before any employee is able to take the leave. Employers and employees will start paying into PFML in 2023, and the earliest workers will be able to take this paid leave is January 1, 2024.

New York

While New York already has an established Paid Family Leave, a noteworthy change has been made to it beginning in 2023. As of the new year, the list of family members for whom eligible workers can take Paid Family Leave to care for will include siblings with serious health conditions. This includes biological siblings, adopted siblings, step-siblings, and half-siblings. The family members requiring care won’t even have to live in the state of New York.

Final Thoughts

There are myriad new and amended labor laws that will be going into effect throughout the U.S. in the coming year. Being aware of the ones your business may be subject to can help minimize the likelihood of costly fines and potential labor lawsuits down the road. Every effort should be made to stay on top of labor legislation that must be followed. 

No doubt, workers across the country will be rejoicing in the new labor laws set for 2023 that benefit them in a variety of ways. Employers may not be quite as jubilant with these changes, but must nevertheless find ways to accommodate these newly imposed laws while continuing to grow their business.

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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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California’s push for a 32-hour workweek explained, and how to prepare

Summary:

  • California is considering a 32-hour workweek bill for businesses with over 500 staff

  • 4 day weeks have been tested in Japan and Iceland with great success

  • Employers could suffer higher overtime and hiring costs as a result of the bill

  • Prepare for a 32-hour workweek by reassessing your workforce management

Californian workers may want to hold off on posting their apartments on Craigslist and hightailing it in UHauls to Austin – a select group of them might be due for a shorter workweek in the near future.

A new bill is currently working its way through the Californian legislature proposing a 32-hour workweek for businesses with over 500 employees. AB 2932 requires that “work in excess of 32 hours be compensated atthe rate of no less than 1 1/2 times the employee’s regular rate of pay.” In addition, all work going beyond 12 hours a day or seven days a week is paid at double an employee’s regular rate of pay.

The bill also prohibits employers from reducing an employee’s regular rate of pay as a consequence of the change in workweek hours. 

Backed by four Democrat cosponsors, the groundbreaking bill would reportedly affect nearly 2,600 Californian businesses. Central to the idealogy behind the bill is that people will work less time while earning the same compensation that came with a traditional 40-hour workweek, all while increasing job satisfaction and productivity. 

While burnt out US workers everywhere are most likely salivating at this legislative development, many businesses owners may have their misgivings – and rightfully so. With a colorful history engulfed in debate over the past few years, the proposed 32-hour workweek in the US deserves to be unpacked a little. 

What’s the upside? 

In light of the “Great Reshuffle” and the persisting labor shortage, it is evident that workers share a growing sentiment of burnout and distaste for the current employment landscape. People are prioritizing pursuits beyond their careers and opting for more and more remote work in the days since the pandemic.

Questions still remain on how to address this national grudge against the traditional 9 to 5, and the 32-hour workweek is just the latest attempt at a solution. Working fewer hours in a week is obviously an attractive prospect and would most likely help return people to the workforce at first glance. 

The 32-hour workweek is nothing new, however. Backed by 4 Day Week Global, workweeks under 40 hours have been pushed in the countries all across the world for years, partially implemented at times with great success. 

Microsoft Japan tested a 4-day workweek for a month in 2019. They saw a rise in productivity, with sales per employee increasing by 40%. They also experienced cost savings with 23.1% less electricity used and 58.7% fewer pages printed. Honestly, I’m surprised that a Microsoft office even printed paper to begin with – well done I guess. 

In Iceland, two combined trials saw 1% of the country’s entire workforce try a four-day workweek from 2015 to 2019. Participating public service and local government organizations had their employees work about 35-36 hours a week. As a result, work-life balance was significantly improved and now 86% of Icelandic people work shorter weeks.

Icelandic workers in the trial also became more productive, eliminating unnecessary weekly meetings and reducing time spent on necessary ones. 

Okay, so it’s looking like three-day weekends in the Cali sun are coming soon to a cubical farm near you, right? 

Not so fast. 

What’s the downside? 

Chief among the concerns for a 32-hour workweek would be the financial burden on employers. The California Chamber of Commerce says that AB 2932 could be a” job killer” and could make hiring and talent acquisition more expensive. 

There is also the issue of who the bill is really benefitting. Only businesses with over 500 employees would be impacted. That means, with businesses totaling around 1.6 million statewide, only 0.2% of Californian businesses would actually get a 32-hour workweek. 

The 32-hour week may only be realistically utilized by white-collar office workers as well, not by frontline people in blue-collar industries as touted by the politicians sponsoring AB 2932. As such, the bill (and the 32-hour workweek more generally) is seen as out of touch and catering to the controlling upper class who can afford to take an extra day off. 

Restaurant workers and emergency responders don’t have this luxury as they face constant and unpredictable demand, on top of a crippling labor shortage. This of course leads to issues in overtime. 

Remember those trials in Iceland I mentioned earlier? Well, among emergency responders, overtime increased with reduced workweek hours. While in other industries, a shorter workweek tends not to lead to any change in overtime, it would be naive to think all industries would benefit the same way from a three-day weekend. 

With the 32-hour workweek bill in California, overtime hours could become a major issue for some businesses, especially if expanded to include smaller businesses on the frontline. Employers will not want to deal with the new 32-hour overtime cut-off as it will most likely raise their labor costs as workers learn to adjust their productivity to fit all work within a four-day window. 

An expensive learning curve to say the least.

Preparing for 32-hour workweeks 

If 32-hour workweeks are indeed about to become the norm in the US, employers will need to adapt. Reassessing workforce management practices is step one. It’s also step two, three, and four. Maybe even five. Managerial areas like scheduling, time tracking, and payroll will all have to become more efficient. Here are the three areas to focus on:

Control labor costs

32-hour workweeks will bring all kinds of labor cost troubles, particularly with overtime. Managers should have their scheduling and time tracking synced so that they receive alerts when employees reach or are approaching overtime. Scheduling software should also help managers avoid overtime and prioritize regular hours. 

Timekeeping systems will need to operate with pinpoint accuracy to mitigate time theft and overspending on wages. Things like geo-fencing, photo identification, and a live time clock feed prove tremendously useful in this area.

Cut back on administrative time

We all spend too much time crunching numbers, sitting in meetings, and managing logistics. With 32-hour workweeks, this needs to change. 

Just as Iceland did, businesses will have to eliminate unnecessary meetings and make important ones more efficient. Meetings are a major time waster for many businesses and will only hinder productivity during a shorter workweek. They need to be faster. 

Scheduling should also be faster – even as fast as a single click. Wasting time on manually filling out rudimentary spreadsheet schedules is an artifact of the 40-hour workweek era. Nobody has time for that. 

Timesheets should also flow much faster into payroll. This can be achieved by auto-approving correct timesheets and flagging those with discrepancies. Approving time and correcting errors shouldn’t last ages; it needs to be done in the blink of an eye so payroll can do its job and businesses can keep things moving. 

Increase productivity

Employers should use demand data, labor forecasting, and employee preference metrics to quickly build out shifts to maximize productivity, lower wage costs, and keep people under 32 hours a week. Blindly scheduling employees for shifts without seeing these metrics right in front of you increases the risk of placing employees where they aren’t needed or where they aren’t as productive. 

Managers should also work to save time and money when replacing open shifts last minute. Use a simple shift replacement tool via mobile app to help fill open shifts with the most cost-effective employees, while also letting employees quickly swap shifts between themselves.

 

It remains to be seen whether or not California passes the 32-hour workweek bill. If it does, one can only assume more states will follow. In the meantime, please continue to drag yourself out of bed on Fridays and push the Sisyphean boulder up the hill. 

Shorter workweeks are on the horizon. Your workforce management needs to adjust. Reach out to us to find out more about how to increase productivity and reduce wasted time. 

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Restaurant Tipping Laws [Federal + State]

Business owners in the restaurant industry are in a unique position when it comes to employee tips. As an employer, it is important to create a fair system for employees that makes sure employees are rewarded for their service, and also comply with IRS regulations.

There are a lot of nuances when it comes to federal and state wage laws and restaurant owners have a responsibility to implement policies that are legal yet rewarding for staff. Consider these two strategies to ensure your business remains fair but compliant.

What are tips?

Tips are optional payments received by employees from customers, typically in exchange for good service. Tips make up a large part of earnings as approximately $36.4 billion is earned in tips by tipped workers annually. A tipped employee is an employee that earns more than $30 a month in tips.

What does the law say about tips?

The law around tips differs on the federal, state and local levels. However, there are characteristics that remain the same throughout:

  • A tipped employee is an employee that earns more than $30 a month in tips
  • Employees who do not earn tips —also known as “non-tipped employees” (cooks, cleaners, dishwashers etc) must be paid the minimum wage
  • Tips are considered wages
  • Tips are strictly the property of the employee— there is no legal arrangement where an employer receives part of an employee’s tips. This is considered wage theft.

Federal Law

Federal law concerning tips is dictated by the Fair Labor Standards Act (FLSA) as mandated by the Department of Labor (DOL). This law tackles wages, work hours and minimum wage requirements.

You are required to pay $2.13 per hour in direct wages on the basis that what your employee earns in tips will equal the federal minimum wage. For example, your waiter works 30 hours a week and receives $200 in tips for that week. Your employee’s earnings look like this: $2.13 x 30= $63.90 ( which is called the cash wage) plus the tips of $200, which brings the total to $263.90. Their hourly wage works out to $8.79, (earnings divided by total hours) which exceeds the federal minimum wage.

In another week, your waiter works a 30-hour week again, but this time only receives $100 in tips. The waiter’s earnings look like this: $2.13 x 30=$63.90 plus the tips of $100, making the total $163.90. The hourly wage is $5.46. This does not exceed the federal minimum wage, so you must pay the waiter a tip credit to fill the gap and fulfill the minimum wage requirement ($7.25).

Tip crediting is the process of applying the tips towards your employee’s wage to ensure you are paying the full amount. In the example above, the $5.46 hourly pay does not meet the minimum wage, so the employer must fill that gap by paying the waiter an additional $1.79 per hour.

State Law

It is always important to check your local state laws on the Department of Labor (DOL) website.

Some states such as Minnesota, Oregon and California —do not allow tip credits under any circumstances. In California, the minimum wage is $14 per hour for employers that have more than 26 employees and $13 per hour for employers with 25 and below employees. Employers in these states must pay the full state minimum wage to their employers. Therefore your employees receive tips on top of their wages.

Although wage laws require employers to ensure that employees’ tips bridge the gap to make the $7.25 per hour minimum wage, it may improve employee morale and reduce turnover to go beyond that rate of pay. Especially now, when there’s a labor shortage, attracting restaurant employees is difficult and workers are demanding better working conditions. It’s not uncommon to see workers walking out or refusing to work for such low wages.

How are taxes reported on tips?

Tips are subject to employment taxes including Federal Insurance Contributions Act, (FICA), Federal Unemployment Tax Act, (FUTA) and Federal income tax withholding. This makes you liable for different payroll and tax obligations. You must pay the employer’s portion of FICA and FUTA taxes. This can influence your decision on which tipping policy to implement for your staff. Here’s the basics of tax reporting on tips:

  • Your employees are responsible for reporting all cash tips to you if they exceed over $30 and this must be done by the 10th of the following month of when the tips were received. For example, a waitress earned $550 in tips in February, so this needs to be reported to the manager by March 10th.
  • It is important you create an open environment for your employees to declare their tips to you, so you can fulfill these tax obligations.
  • If your employee refuses to report their tips to you, you are not liable for the employer’s share of FICA until the IRS is notified.

What are the options for tip policies in restaurants?

As a restaurant owner, here are three tip policies you could implement:

Everyone keeps their tips

Each employee keeps the amount of tips they earned at the end of the shift. Whilst this is a straightforward policy, it can be considered unfair. Only customer-facing staff (waitstaff and bar staff) would receive tips, this excludes back of house staff like dishwashers and bussers—who are also integral to the hospitality industry. This policy could lead to less back of house employees as they do not see any extra benefits.

Tip splitting or tip sharing

Tip splitting involves splitting the tips between tipped and non-tipped employees based on hours worked or by role-based percentages. Tip sharing is voluntary and there are no guidelines or laws. This policy ensures all employees receive tips, creating a fair environment.

Tip splitting can be confusing from a payroll perspective because you have to ensure your non-tipped employees receive the minimum wage plus their tips (which will also be taxed). Plus you have to ensure that you are applying the correct tip credits to the tipped employees’ wages even though their tips are being split. You also want to ensure that the non-tipped employees are not out-earning the employees who actually earn the tips due to the tip credit rules.

Tip pooling

Tip pooling consists of collecting the tips earned during a shift and evenly distributing the tips at the end of the shift. The tip pool is shared between both front and back staff.

Tip pooling is covered by the FLSA. You cannot apply a tip credit to employees’ wages who share tips with non-tipped staff, therefore you must pay the full minimum wage. For instance, normally you can apply a tip credit to the front-of-house staffs’ wages. But if they are part of a valid tip pool agreement where they will be sharing their tips with back of house staff, you cannot apply tip credits.

This policy is equitable, employees receive a fair hourly wage and the tips are also shared amongst all employees. But tip pooling may not be a sustainable solution when there are slow periods and you are operating with less turnover. Your staff may be disappointed that their tips are being split when there are fewer tips going around.

Which is best: tip splitting or tip pooling?

From a compliance perspective, tip pooling may be the best option. It is easy to calculate the tips and wages—you can easily keep up with your employee earnings. Everyone is earning the minimum wage plus tips, there are no calculations for tip credits.

A tip pooling policy also might help you attract staff—you are offering a benefit to prospective employees. A fair wage plus the potential of earning tips for all staff. However, it might be a good idea to let your employees choose which policy they want to be implemented. This gives your staff a voice and agency to set the conditions that they want to work under.

Manage tip calculation headaches

Whichever policy you decide to implement, the bad news is there are some calculations waiting for you. The good news is, workforce management software can help. Oftentimes you can connect it to your POS system, set the percentage of tips to be shared, and your employees automatically get what they’re owed based on hours worked. Learn more about how proper time and attendance tracking can help you manage tip calculations by contacting us. We’d love to talk you through it.

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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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Workplace things COVID has not changed: You can still fire dishonest employees

Suppose an employee leaves work claiming COVID-like symptoms. He then calls off work for the next two weeks, claiming he is quarantining at home at his doctor’s recommendation.

Can you fire the employee during that quarantine period? Does your opinion change if you learn during the quarantine that the employee’s doctor never recommended the quarantine and the employee lied about receiving that recommendation?

Those are the basic facts of O’Bryan v. Joe Taylor Restoration, and upon which a federal court jury in southern Florida recently entered a verdict in favor of the employer.

O’Bryan’s lawsuit claimed that his employer had denied him paid sick leave under the FFCRA during his quarantine and retaliated against him for seeking paid sick leave. The employer uncovered his dishonesty when it saw a discrepancy between the alleged note ordering the quarantine and a later note authorizing his return to work.
COVID has altered a lot about the workplace. Thankfully, however, the ability of an employer to fire a dishonest employee has not been one of them.
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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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Hospital employees are about to lose a vaccination lawsuit against their employer in spectacular fashion

vaccination, workplace

Some 117 employees have sued their employer, Houston Methodist Hospital, over its requirement that all employees receive the COVID-19 vaccine.

According to ABC News, the hospital gave its employees a June 7 deadline to get vaccinated or face suspension and termination. The employees allege that their employer is “illegally requiring its employees to be injected with an experimental vaccine as a condition of employment.” The lawsuit adds that the hospital’s vaccine requirement violates the “Nuremberg Code and the public policy of the state of Texas.”

In a statement, hospital CEO Dr. Marc Boom said, “It is unfortunate that the few remaining employees who refuse to get vaccinated and put our patients first are responding in this way. It is legal for health care institutions to mandate vaccines, as we have done with the flu vaccine since 2009. The COVID-19 vaccines have proven through rigorous trials to be very safe and very effective and are not experimental.”

Dr. Boom is 100 percent correct; the hospital’s policy is legal. Here’s why, and why this lawsuit will fail spectacularly.
1. The EEOC expressly says that mandatory vaccine policies are 100 percent legal (as long as an employer makes allowances to accommodate employees whose underlying disabilities, sincerely held religious beliefs, practices, or observances, or pregnancy prevents them from getting vaccinated). Because I’ve seen zero references that any of the 117 plaintiffs are claiming an ADA or Title VII violation, I conclude that the hospital has met its legal obligations in this regard. (Note, however, that Texas is considering pending legislation that would make “COVID-19 vaccination status” a protected class under its employment discrimination law.)
2. Public policy actually favors as many individuals getting vaccinated as possible. Just ask the Biden White House, the CDC, the EEOC, OSHA, just about any other government agency, and even the State of Texas (although its governor did sign an Executive Order prohibiting government entities from compelling that anyone receives a COVID-19 vaccine administered under an emergency use authorization). Note also that there are efforts underway in states across the country (e.g., Ohio) to prohibit a business from mandating vaccines or permitting individuals to decline a required vaccine based on medical contraindications, natural immunity, or reasons of conscience.
3. The Nuremberg Code is not a thing, at least not in this context. In fact, there’s been a lot of chatting lately about the Nuremberg Code as a justification to refuse vaccine mandates. It’s wrong and it’s offensive. It’s a set of research ethics principles for human experimentation created as a result of the Nuremberg trials at the end of World War II. It was a reaction to the medical atrocities committed by Dr. Josef Mengele and other Nazis during the war, with the intent of protecting people from suffering similar atrocities. To compare Nazi war crimes to a life-saving vaccine that has been tested and vetted is the height of disgusting selfishness.
Bottom line: If you want to mandate that your employees get vaccinated as a condition of employment, you are legally in the clear to do so, subject to reasonable accommodation exceptions under the ADA for disabled employees, and under Title VII for employees’ sincerely held religious beliefs, practices, or observances, and for pregnant employees. Any other gripes, complaints, or objections by employees are just smokescreens that you can legally ignore, at least for now.