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Tag Archives: DOL

Does Your Company Classify Workers As Independent Contractors?

Does your company classify workers as independent contractors? In 2017, companies need to realize that such classifications are becoming fraught with financial peril. Given stricter IRS enforcement of independent contractor standards in regards to employment taxes combined with the ongoing requirements of the Affordable Care Act, misclassification has become hazardous to your company’s bottom line. As a professional employer organization, Total HR Management has a proven track record of making sure our client companies avoid the financial and regulatory hazards of worker misclassification.

Do You Classify Workers as Independent Contractors?

classify workers as independent contractors

Classify Workers As Independent Contractors?

Beyond IRS enforcement and Affordable Care Act requirements, there are many other reasons not to classify workers as independent contractors. For example, avoiding potential problems with the Department of Homeland Security is a major motivating factor. The Department of Homeland Security has become much more vigilant when it comes to the completion of I-9 Employment Eligibility Verification forms. Every employer is required to complete and retain a Form I-9 for every employee hired for employment in the United States.

The only major exception for Form I-9 verification is for individuals hired on or before November 6, 1986. Employees hired on or before November 6, 1986 are exempt if they have been in continuous employment with an employer. Given the huge time gap, the certified Professionals in Human Resources (PHRs) at Total HR Management would imagine that few, if any, of your employees qualify for such an exception. More importantly, this exception would never apply when making the decision to classify workers as independent contractors. In other words, there are no loopholes.

Increased Workplace Rights for Independent Contractors

Do you know about additional federal provisions that call for increased workplace rights for employees who once were classified as independent contractors? Such provisions are coming at employers from all directions. These added requirements will have a lasting impact both on employers and employees moving forward. If you sign up for an HR audit with Total HR, we can examine your employment and staffing strategies, figuring out how these provisions affect your company.

 

For example, expanded requirements for employers to pay unemployment compensation insurance and workers’ compensation insurance now covers many workers once classified as independent contractors. In addition, the Family and Medical Leave Act now covers many of these workers once classified as independent contractors. The Department of Labor is focused on remedying independent contractors’ ineligibility to take time off under the Family and Medical Leave Act. They consider this an unfair loophole that needs to be closed.

Beyond Federal Problems, Beware the States

 

Although this article focuses on the federal hazards of deciding to classify workers as independent contractors, the state hazards are increasing as well. In a future article, we will detail the dangers of independent contractor misclassification in California and other states. For now, your company needs to realize that the threat is real. In the past, it wasn’t a big deal to classify a potential employee as an independent contractor. Today and beyond, the decision to classify workers as independent contractors has become a much riskier decision for your company

Overall, the benefits of deciding to classify workers as independent contractors have been greatly reduced in the past couple of years. Instead of being positive for your company, the decision to classify workers as independent contractors has become a real liability. Misclassification is a literal minefield of financial dangers for your company. However, the HR managers at Total HR Management can help minimize this danger for your company, allowing you to hurdle the federal regulatory and bureaucratic minefields. Our goal is to help you focus on the business of your business.

Total HR Management Can Help

To learn more about how we can help your company avoid the dangers of worker misclassification, contact Total HR Management today. Please call (800) 975-5128 today to speak with an HR professional and access the help your small to mid-sized company needs.

 

No Legal Advice Intended: This blog includes information about legal issues and legal questions.  Such materials are for informational purposes only and may not reflect the most current legal developments.  These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. You must not rely on the information on this website as an alternative to legal advice from your attorney or other professional legal services provider.

 

 

 

 

HR Payroll Alert As FLSA Overtime Expansion Halted Nationwide By Texas Lawsuit

On the 22nd of November 2016, a federal court in Texas issued a temporary nationwide injunction on the FLSA overtime expansion. This injunction has had a national effect on the recent salary changes instituted by the revision to the DOL’s Wages and the Fair Labor Standards Act (FLSA). Prior to U.S. District Judge Amos Mazzant’s ruling, an estimated 4.2 million additional American workers would have become eligible for overtime pay on December 1st, 2016.

Major FLSA Overtime Expansion Impact

flsa overtime expansion

Managing FLSA Overtime Expansion Expectations

Issued by the Labor Department, the new FLSA Overtime expansion would have doubled to $47,500 the maximum salary a worker can earn and still be eligible for mandatory overtime pay. The first significant change in four decades, the FLSA overtime expansion was expected to touch nearly every sector of the U.S. economy, greatly affecting many management workers whose salaries are below the new threshold. Total HR Management has been focused on helping our client companies make this transition by determining eligibility and modifying their payroll systems.

Given this legal update, the status quo surprisingly will remain unchanged for now, and there was no overtime expansion on December 1st. Instead, employers will still only have to pay overtime to exempt workers who make less than $23,660 annually as opposed to the new salary threshold that had been defined by the final update to the FLSA overtime expansion package. Such a late injunction literally throws payroll processing and HR departments into hurry-up mode nationwide, and Total HR managers are prepared and ready.

FLSA Overtime Expansion Halted

Although Total HR Management understands the confusion experienced by client companies in light of this legal shift, we are here to help. HR and payroll plans under our umbrella were preparing to implement the new rules by the old deadline. This implementation will be put on hold until the Texas legal situation plays itself out. Employers need to proceed with caution and continue planning for the eventual implementation of the FLSA overtime expansion.

Total HR realizes that many of the payroll changes made to prepare for the FLSA overtime expansion will be difficult to undo, but we will fully support our client companies. Right now, we recommend a wait-and-see approach that avoids damaging company morale with a kneejerk reaction to the legal challenge. Although the twenty-one state attorney generals, combined with a powerful coalition of business groups, that sued and filed the case in Texas have a strong argument and might be able to stop the overtime expansion, this outcome would be the exception to the normal precedent. It is rare for a judge to rule against the U.S. Department of Labor and overturn federal policies. Still, companies need to be prepared for any outcome.

Lawsuit Against FLSA Overtime Expansion

Filed in the U.S. District Court for the Eastern District of Texas, the detailed lawsuit argues that the Fair Labor Standards Act does not allow the DOL to rely solely on the salary threshold to decide who is eligible for overtime pay. The suit points out any overtime pay revision must also address the duties test. Judge Mazzant wrote in his injunction that the new FLSA Overtime Expansion rules, “creates essentially a de facto salary-only test.” The duties test contention is based on the belief that the duties test should be the base definition for which employees qualify for the FLSA’s executive, administrative, and professional exemptions.

The Department of Labor will likely appeal the ruling to the Fifth Circuit Court of Appeals. For now, a federal court has enjoined the increase in minimum salary to $913 per week effective immediately. The appeal of the Texas federal district court’s decision could result in the injunction being lifted and the Final Rule going into effect immediately. Given the election of Donald J. Trump as President, however, great uncertainty now exists. Even if the current Department of Labor appeals the injunction and wins, the new Republican administration could withdraw the challenge, thus permitting the injunction to stay in place. As a result, companies are facing one big question mark.

What To Tell Your Employees

Without question, employees who were in line to become eligible for overtime pay will be disappointed when presented with this news. It’s essential for companies to manage such disappointment. Total HR Management agrees with the Seyfarth Shaw employment law firm’s recommendation that all employers communicate honestly and openly with their employees. The law firm’s website offers the following explanation for employers to potentially use with expectant employees:

“A federal court in Texas has issued an order that makes it uncertain how the FLSA’s overtime pay exemptions apply to employees who would be impacted by the new rules that were to go into effect on December 1. Because of the court’s order, those rules will not go into effect as expected. To ensure that it is able to follow the laws that govern how employees are paid under the FLSA, the company has revised its plans and will be reporting back to you soon about how this will impact you.”

Total HR Management Can Help

Regardless of what happens moving forward, Total HR Management is here to help. Out goal is to support our client companies so the interruption by the Texas court injunction of the FLSA overtime expansion does not hurt their business or do any internal damage. If you have questions about what to do at your company, please call Total HR Management at (800) 975-5128 today to set-up an HR audit.

 

 

No Legal Advice Intended: This blog includes information about legal issues and legal questions. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. You must not rely on the information on this website as an alternative to legal advice from your attorney or other professional legal services provider.

Federal Overtime Pay Expansion Detailed As DOL Reveals Final Exemption Threshold Regulations And Effective Dates

Is your company ready for the major overtime pay expansion announced by the United States Department of Labor (DOL)? On May 18th, the DOL revealed the details behind the final exemption threshold regulations. The new regulations will greatly expand the number of employees eligible for overtime pay. In addition, the DOL officially announced that the effective date of the Final Rule is December 1, 2016. The nationwide increase to the standard salary level (from $455 to $913 per week) and highly compensated employee total annual compensation requirement (from $100,000 to $134,004 per year) will be effective on that date. Given the significant changes, Total HR Management is helping our client companies navigate through the new federal overtime requirements.

In 2014, President Obama directed the Department of Labor to update and modernize the regulations governing the exemption of executive, administrative, and professional employees (EAP) from the minimum wage and overtime pay protections of the Fair Labor Standards Act (FLSA). On May 18, 2016, the Department published a Final Rule to update the regulations.

Final EAP Overtime Pay Expansion Rules

overtime pay expansionIs your company ready for the major overtime pay expansion announced by the United States Department of Labor?

New DOL Rules About Employee Overtime Pay Expansion

Since 1940, the Department of Labor’s regulations have generally required each of three tests to be met for the FLSA’s EAP exemption to apply: (1) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed; (2) the amount of salary paid must meet a minimum specified amount (“salary level test”); and (3) the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by the regulations.

Without intervening action by their employers, the new regulations extend the right of overtime pay to an estimated 4.2 million workers who are currently exempt. It also strengthens existing overtime protections for 5.7 million additional white collar salaried workers and 3.2 million salaried blue collar workers whose entitlement to overtime pay will no longer rely on the application of the duties test.

Overtime Pay Expansion Details

The most significant change involves the salary basis test for white-collar employees. In order to meet the salary basis test for the EAP exemptions, employees must be paid a minimum of $47,476 per year or $913 per week. The threshold was set based on the 40th percentile of full-time salaried workers in the lowest income Census Region, currently the Southern states. While this increase is lower than the originally proposed $50,440 per year, it still will result in a significant number of previously exempt employees being now eligible for overtime pay.

For the first time, however, employers will be able to use nondiscretionary bonuses and incentive payments, including commissions, to satisfy up to 10 percent of the standard salary level threshold of $47,476. As a result, an employee with a base salary of $42,729 per year may actually be exempt. In order to attain exemption status, the employee must also receive a minimum of $4,747 in non-discretionary bonus, commission or incentive compensation. Moreover, such compensation needs to be distributed on at least a quarterly basis.

Traditional Exemptions Still Apply

Although the $47,476 minimum salary level will affect millions of white-collar employees nationwide, it does not apply to employees who qualify for an exemption that is not tied to a salary requirement. For example, outside sales employees, teachers, attorneys and physicians all fall under these traditional exemption categories for a variety of reasons under the law. The final rule also does not impact the so-called “duties tests” for white-collar exemptions.

The new salary exemption threshold that has led to this major overtime pay expansion will not be fixed. Instead, an automatic mechanism has been instituted so the salary thresholds for exempt employees will increase every three years, beginning January 1, 2020. The goal of this ongoing increase is the DOL’s focused desire to continue to reflect the 40th percentile for salaried workers in the lowest income Census Region. Opening the door to another major overtime pay expansion, the exemption threshold is anticipated to reach $51,000 in 2020.

Changes For Highly Compensated Employees

Finally, the total compensation requirement for “highly compensated employees” has increased from $100,000 to $134,004 annually, equal to the 90th percentile of full-time salaried workers nationally. The threshold level for these employees is based on total annual compensation, not just those amounts paid on a salary basis. These levels also will adjust every three years. Such employees require “only a minimum showing” that they are otherwise exempt under one of the duties tests.

To learn more about how the overtime pay expansion and the exemption threshold regulations will affect your company, contact Total HR Management to set-up an HR audit. Please call (800) 975-5128 today to speak with an HR professional and access the help your company needs.

 

No Legal Advice Intended: This blog includes information about legal issues and legal questions.  Such materials are for informational purposes only and may not reflect the most current legal developments.  These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. You must not rely on the information on this website as an alternative to legal advice from your

Updated FLSA Rules Regarding The New Wage Threshold For Overtime Exemption

Do you know the new FLSA rules concerning employee overtime exemption? Administered by the United States Department of Labor (DOL), the Fair Labor Standards Act (FLSA) governs most jobs in the American workforce. While some jobs are excluded from FLSA coverage by statute, other jobs, while governed by the FLSA, are considered “exempt” from FLSA overtime rules. In this context, exempt means exempt from overtime pay and the traditional definition of the 40 hour work week. In 2015, the DOL issued a proposal to substantially increase the minimum salary level needed to classify an employee as an exempt executive, administrative or professional employee. Ever since the proposal became law, employers have been requesting to know both the details of the new overtime exemption rules and when they will take effect.

New Wage Threshold For Overtime Exemption

overtime exemption

Wage Threshold for Overtime Exemption

In this article, Total HR Management provides a detailed examination of the updated FLSA rules regarding the new wage threshold for overtime exemption. According to the Wall Street Journal, the final rules should come into effect by the end of 2016. These rules include the proposal to raise the salary limit for who is eligible for overtime pay from $23,660 per year to $50,440. Such a change will put millions more employees in the United States in line for overtime pay. By raising the threshold, employers will need to pay employees making less than $50,440 overtime when they work more than 40 hours in a week with practically no exceptions.

Total HR Management wants to emphasize that employers may not have much time to comply once the final rules are issued. When the Department of Labor last made significant changes to the white collar exemption regulations in 2004, the final rules were published on April 23 and took effect only four months later. The schedule for the implementation this time around could be even tighter.

Implementation Of New Wage Threshold

Employers should be prepared to act with as little as 60 or even 30 days’ lead time. With presidential elections in November of 2016, it is a fair bet that the Department of Labor will want any final regulations to take effect before a new president takes office. As a result, if the final rules are issued in “late 2016” as promised, employers may have only a month or two to comply.

In addition, employers need to assume that the minimum salary level will be increased to approximately $970 per week for 2016, with annual increases thereafter. The DOL’s proposed rules increase the minimum weekly salary for exempt employees from $455 per week to a weekly salary at the 40th percentile of weekly earnings for full-time salaried workers. The percentages are based on Bureau of Labor Statistics data. For 2016, the DOL has projected that this number will be $970 per week, which works out to about $50,440 per year.

Although the payroll specialists at Total HR Management consider it to be unlikely that the final implementation will increase the minimum salary level above the 40th percentile, such a last minute change is not an impossibility. This is exactly why your company needs the support of a professional employer organization (PEO). Right now, it is safe to assume that $970 will be the applicable minimum salary. If the totals come in higher or lower, Total HR Management will immediately alert our client companies and help them make any necessary adjustments.

The Job Duties Test Is Important

While the DOL’s proposed rules do not change much in the current regulations other than the minimum salary level, the final rules may contain more surprises. For example, the final rules might contain changes to the job duties tests for executive, administrative and professional employees. Since the DOL asked for comments on some aspects of the current duties tests, when coming up with the latest updates, it presumably would not have done so unless some changes were still in consideration.

When it comes to the updated FLSA rules, the time to start your company’s compliance planning is now. In many cases, this may mean re-classifying employees as non-exempt. While it will offer the promise of additional overtime pay for some, this change may not be popular with all employees. Many exempt employees like being treated as exempt, both because of the status they believe it conveys and because it offers a level of flexibility in their hours that non-exempt employees may not enjoy. As a PEO, Total HR can help your company determine how your workforce is likely to react to these changes. The goal is to make the transition as smooth as possible.

Total HR Management Can Help

A new wage threshold for overtime exemption combined with the job duties test presents a lot of challenges to any company. To learn more about how Total HR Management can support your company’s compliance with the updated FLSA overtime exemption rules, please contact us today. Call (800) 975-5128 to schedule an HR audit and access the payroll support your company needs.

 

No Legal Advice Intended: This blog includes information about legal issues and legal questions.  Such materials are for informational purposes only and may not reflect the most current legal developments.  These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. You must not rely on the information on this website as an alternative to legal advice from your attorney or other professional legal services provider.

The Department of Labor’s Plan/Prevent/Protect Program — How The New Approach To Federal Contractors Will Affect Your Business

When you work for a Federal Contractor, you take on a bundle of Federal regulations and labyrinthine affirmative action plans. In the past, it was a relief when you discovered that a potential client was not a Federal Contractor. Unfortunately, due to the U.S. Department of Labor’s new “Plan/Prevent/Protect” program, those days now appear to be over. Under the new policy, companies will be subject to regulatory citations even when substantive violations do not exist. What Total HR Management wants our PEO clients and potential human resources outsourcing clients to understand is that your company will be ready for this big shift in Federal policy as we prepare to help you implement and enforce the new regulations.

 

United States Department of Labor's New Regulations

Since DOL resources are limited (reflecting the overall state of the country in difficult times), Secretary of Labor Hilda Solis decided that the current “catch me if you can” system was far from effective. On April 26, 2010, the DOL released a description of the new approach to enforcement entitled, Plan/Prevent/Protect: The Beginning of a Broader Regulatory and Enforcement Strategy. The new agenda of regulatory procedures will be used by the Occupational health and Safety Administration (OHSA), the Mine Safety and Health Administration, the Office of Federal Contract Compliance Programs (OFCCP), and, arguably most importantly, the Wage and Hour Division (WHD).

Although the details have yet to be fully released, the overall approach as described by Secretary Solis focuses on the implementation of “compliance action plans” that are broken down into three objectives that reflect the name of the program. Based on research done, Total HR outlines the three objectives as follows:

 

The DOL's New Plan, Prevent, and Protect Program

1.   PLAN — Employers would be required to create a plan for identifying and fixing risks of legal violations.

2.   PREVENT — Both employers and employees in unison would implement the plan. Employers would be responsible for monitoring the compliance of their company in regards to such implementation procedures.

3.   PROTECT — Employers will become responsible for ensuring that the workplace rights of their employees are safeguarded from violations by being placed under the umbrella of the new compliance program.

Total HR Management recognizes the potential impact of these new DOL regulations on our client companies. As a result, specific procedures and implementation strategies are being designed to help our clients make this new program into a concrete reality. By shifting the basic compliance model from a passive approach to a proactive responsibility, employers suddenly have the new role of ensuring that the laws are not violated within their companies. When the change comes, Total HR will be ready to ensure that our PEO clients are prepared to make the shift into the new proactive stance on employee regulations as outlined by the United States Department of Labor.


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