From the HR Pros at Richard A. Beauchemin, CPA/Carolina Accounting & Tax Service, PLLC
Federal, state and local laws require employers comply with all labor laws and including those governing compliance to wage and hour laws. Wage and hour requirements apply to all employers regardless of size. Failure to comply can result in litigation brought forth by employees or agency investigations. Critical to compliance is understanding the fundamentals of wage and hour requirements. Here are some basic requirements for compliance but in no way a complete list.
Minimum Wage Requirements
All employees must make minimum wage. Because the state and federal minimum wage limits can differ, an employer must pay the highest minimum wage whether that is the state minimum or federal minimum wage. If an employee earns tips, an employer can pay less than the minimum wage; however, the tips plus the wages must meet or exceed the minimum wage.
The seven day "work week" must be specified for overtime calculations. You cannot vary the pay period or work week to avoid paying overtime hours.
Overtime must be calculated and paid correctly based on the "regular" rate of pay.
Because overtime calculations can vary between federal and state requirements, you will have to make sure you conform to the daily/weekly overtime requirements for both federal and state laws governing overtime pay.
You are not required to pay exempt employees overtime, however they must meet the definition of an exempt employee under the Fair labor Standards Act (FLSA) and your states relevant requirements. You will want to familiarize with the overtime exemption criteria and remember that simply because an employee is paid on a salaried basis does not automatically disqualify the employee from entitlement to overtime compensation.
Employee Time Tracking
Accurate time tracking and time reporting records are important. Train non-exempt staff and supervisory personnel on the requirements to accurately complete time reporting records such as time sheets.
An alternative to hand written time sheets and time reporting data, is an Employee Time and Attendance systems. A Time and Attendance system, allows you to accurately track employee hours.
In addition to providing you with access to electronic database that stores employee time records, they offer a significant Return on Investment (ROI). It is not uncommon for even a small company with fewer than 25 employees to be able to save thousands of dollars per year.
An electronic timekeeping where you can run labor reports with custom dates, allow you can match time records to payroll reports. This is a life saver when responding to an agency's investigation or litigation for violation of wage laws.
Secure and maintain signed timesheets for all non-exempt employees verifying their hours worked for at least three years.
Make sure that any state specific requirements for "Direct Deposit" are followed if you provide "Direct Deposit"
Many companies are moving toward a paperless payroll, using "Direct Deposit" and giving employees access to a web portal to view their paystub and W2. If you intend to move towards a paperless payroll, make sure you conform to your state's requirements.
Any non-standard deductions to paychecks such as uniform expenses, expenses for tools, etc. need to be authorized in writing by employees and are in conformance with your state's wage and hour regulations.
Federal and state agencies are examining closely how employers classify workers with an increased emphasis on employers that use 1099 workers. Make sure you properly classify workers as either W2 employees or 1099 workers in accordance to IRS and your state requirements. Failure to comply can result in large penalties and you owing back taxes for payroll taxes not paid if workers are reclassified from 1099 contractors to employees.
Critical to the success of a company is compliance to all federal, state and local laws. Although we often focus on tax compliance, labor laws as well wage and hour compliance is equally important. To assist you we have a number of guides and resources available. Our Resource Library page includes a list with descriptions of each. On the page is clickable link to request any guide or checklist available. All information is available at no charge.
By the HR Pros of Richard A. Beauchemin, CPA/Carolina Accounting & Tax Service, PLLC
"You're Fired!" If you have ever said that to an employer (unless you are Donald Trump and filming the reality show "The Apprentice"), you should be prepared to pay for your now former emploee's unemployment claim. If an employee walks out and therefore terminates employment voluntarily, you may still be required to pay for unemployment. Confusing? You bet.
Terminations are part of the employment life-cycle. A voluntary termination results when an employee chooses to resign. An involuntary termination results when an employer fires, discharges, or lays off (due to budget, workforce reduction, or business cloture issues) an employee.
If employers do involuntary terminate, they should determine if unemployment benefit claims may apply and prepare to defend accordingly if the benefits are granted. Eligibility criteria impacts how unemployed benefits may be awarded. Some of the criteria for eligibility for unemployment benefits includes whether the terminated employee:
- Became unemployed through no fault of his or her own (e.g., job elimination or reduction in force)
- Earned sufficient wages with the company or during the claimants base year
- Is available for new work
- Is actively seeking work
An individual may become disqualified for unemployment benefits if her or she:
- Was fired for misconduct or a clear violation of company policy
- Quit without cause (e.g., walking off the job because of a disagreement with a colleague)
- Returned back to the same job to work
- Turned down a suitable job offer during the unemployment period
- Participated in a strike or work stoppage caused by a labor dispute
- Received Social Security benefits, severance pay, workers compensation payments, state disability benefits, or a private pension
- Made false claims or omitted information on his or her unemployment claim
In addition, the weekly benefit amount is generally determined by the total wages paid to the employee by his or her employer(s) during the "base" period. The base period typically consists of a minimum amount of work completed within the last five quarters of a calendar year prior to the initial filing for benefits and the amount of earnings during the base period.
Sometimes, employers futilely try to avoid addressing unemployment insurance claims. Now, if you know the employee was discharged through no fault of his or her own, save some time and do not appeal the claim. In other situations, it may be worthwhile to appeal a claim when the employee was terminated for issues such as misconduct, policy violations, or a general unwillingness to perform work.
The benefit to employers in defending the claim may result in the employer tax rate being lowered ot not increased. Your employer unemployment tax rate is directly impacted by the number of successful claims charged to your account.
If you do opt to dispute an unemployment claim, ensure you have gathered all records that may influence the denial or awarding of an unemployment claim, such as performance management evaluations, disciplinary notices,/letters, individual complaints, investigation information (if theft, harassment, or workplace violence was an issue), witness statements if applicable, etc. Ensure all paperwork is also ready for the state unemployment agency in a timely manner. If paperwork is delayed, there is a chance the former employee may end up winning the battle by default or forfeiture.
Of course, having clear HR policies, systems, procedures and proper documentation in place is critical to fight false claims or prevent lawsuits.
When starting a new employees get started on the right foot with our Free Copy of our New Hires Checklist.
Last month, North Carolina joined a growing list of states that require or will eventually require employers to use the Federal E-Verify system to check an employees Social Security number at the time of hire.
The NC law passed the legislation on June 18, 2011 and was signed into law by Governor Perdue on June 23, 2011.
What is E-Verify
The program is administered by the Department of Homeland Security in partnership with the Social Security Administration, and was set-up as a voluntary program for employers. The E-Verify system allows employers, via access to an on-line system, to verify that a worker is authorized to work in the United States.
Phase-In for New NC Law
The law will be phased in over the next three years. Currently state agencies and universities are using the E-verify system. Listed below are the phase in dates for other NC businesses and public employers to use the E-Verify System.
- October 1, 2011 - Municipal and county workers.
- October 1, 2012 - Employers with more than 500 employees
- January 1, 2013 - Employers with more than 100 employees but less than 500 employees
- July 1, 2013 - Employers with more than 25 employees but less than 100 employees.
E-Verify Requirement Spreading Throughout Country
In spring of this year, the US Supreme Court upheld Arizona's 2007 employment verification law requiring businesses to use the federal E-Verify System. This ruling paved the way for other states to move forward with their E-Verify laws.
In addition, a bill, put forth by Committee Chairman Lamar Smith (R-Texas), to make E-Verify mandatory for all employers throughout the US is currently being considered for approval by the US House Judicial Committee. If approved by the House Judicial Committee the bill would move to floor of the US House of Representatives for consideration and launch a national debate on the matter.
While this is considered and debated at the federal level, states are moving ahead with their E-Verify laws. Just this year alone nine additional states have already passed new laws that will phase-in some type of E-Verify requirements for employers.
Human Resouces Compliance Critical for Businesses
As additional requirements, such as this, are implemented, It will be important for the Human Resources (HR) departments of companies to maintain good accurate record keeping. Failure to comply with requirements such as a states E-Verify requirements or the federal I9 requirement, will result in fines and could lead to criminal charges.
The E-Verify and I9 requirement are two ways for employers to protect themselves from hiring and placing undocumented workers on their payroll. Good record keeping and documentation showing compliance will eliminate unnecesaary problems for you as an employer.
To assist you we have compiled a Guide to E Verify. In the guide we include all the states that currently require or will be phasing in E verify requirements. Just click the button below to obtain your free E Verify Guide.
Last week in, our posts, Payroll, Hiring, New Employee and Why I9s are important, Part 1 and Part 2, we highlighted how important I9s are. Today Laurie Seagull posted an article on CNNMoney.com, 1,000 firms targeted in illegal hiring crackdown. Her article underscores the importance of having each employees' I9 properly filled out and on file.
Gillian Christensen, a public affairs spokesperson from The U.S. Immigration and Customs Enforcement (ICE), released a written statement regarding the increased number of I9 audits: "the inspections will touch on employers of all sizes and in every state in the nation, with an emphasis on business related to critical infrastructures and key resources."
The articles goes on to highlight the importance of this issue:
"The audit surge is an effort to crack down on employers who hire illegal immigrants, an issue Secretary of Homeland Security Janet Naploitano began focusing on in April 2009. "
Christensen's released statement, in the article, is quoted further: "As part of that strategy, we radically stepped up the use of I9 audits. Basically they were barely doing them."
As we pointed out in Part 1 of our post, by law it is the employers responsibility to:
- Verify the identity and eligibility of employment in the US for each worker hired.
- Maintain a file for all I9s which can be provided to investigators upon request.
The I9 only takes a few minutes to fill out while the consequences of not filling out and having I9s on file is extremely high...why run that risk.
To help organize your employee files and highlight the forms that, by law, you must complete and have on file we put together a New Hire Forms Checklist that you can download for free.
The court granted final approval to an $85-million settlement in a wage and hour lawsuit against Wal-Mart brought about by employees. This settlement is one of the largest wage-and-hour class suits in the US history and was brought about because of poor practices, procedures and policies by Wal-Mart.
The crux of the lawsuit, was that employees had been uncompensated for hours worked. According to the lawsuit, employees were required to work through lunch breaks, rest breaks, pre and post shifts and overtime without compensation. It also alleged that Wal-Mart manipulated time cards.
As part of the settlement Wal-Mart is required to use an electronic timekeeping system and have written policies and procedures in place as safegards to insure compliance with wage and labor laws.
Every business that has employees may be exposed to a Wal-Mart type lawsuit, albeit not as large as the one filed against Wal-Mart.
Businesses should take advantage of this teachable moment. Below are some of my take away messages from the Wal-Mart situation.
Understand the Law
There are strict labor laws governing minimum wage, rest breaks, and overtime. Overtime is one of the areas that is least understood and the area that employers try to circumnavigate. One argument or justification that employers try to use is the total number of hours worked in a pay period, rather than what the law clearly states, and that is overtime accrues on a week to week basis, regardless of the pay period.
If you pay your employees biweekly, you must pay OT as soon as an employee works more than 40 hours in a work week. For example, if an employee works 45 hours one week and 35 hours the next, you cannot pay the employee 80 hours at his regular rate for that pay period. The law requires that you pay him 75 hours of regular pay plus 5 hours overtime. If you do not, you may find yourself under the scrutiny of the Department of Labor for violating overtime laws and be the subject of lawsuits by your employees.
Have Clear Written Policies that Align with State and Federal Labor Laws
Be sure to understand, not only the Federal labor law but also the State and local labor laws. When writing your policies make sure they align with all labor laws.
Make Sure Your Policies and Procedures Are Outlined in an Employee Handbook
By having a clearly written HR employee handbook and reviewing it with each employee, your employees will know and understand your policies and procedures for handling compensation, breaks, overtime, as well as all other policies that could lead to an unwanted lawsuit.
Make Sure You provide Frontline Managers and Supervisors with Training Regarding Your Company's Policies and Procedures
If your policies and procedures, are not understood or your managers and supervisors do not know how to execute them, then they are not worth anything. The key is to make sure they are clearly communicated and enforced in accordance with the company's written policies and not enforced according to a manager's or supervisor's interpretation.
Use an Electronic Timekeeping Systems to Track Employees Hours and Electronically Store Employee's Timesheets
In addition to an electronic timekeeping systemsaving you money by not having to pay employees for coming in late, leaving early or taking extended breaks, it will also save an administrator the time. The administrator will not have to compile timsheets and enter data. It also cuts down on the number of errors due to copying data onto payroll data sheets or entering it into a payroll system.
An electronic timekeeping system makes it extremely easy to retrieve the information and run reports by date, employees, departments or locations. This will allow you to match up payroll records with electronic timesheets and provide an easy verification that you are in compliance and have properly compensated employees for hours worked.
Having the proper written policies , procedures and systems in place, will go a long way in preventing or minimizing your exposure to an employee lawsuit and srutiny by the Department of Labor.