If Adopted, Overtime Pay Rules May Expand to More Employees

Posted on March 22, 2019July 23, 2024 by Debra Barcuch

Today (and since 2004) salaried employees who earn at least $455 per week aren’t eligible for overtime pay under the Fair Labor Standards Act, if their job duties are executive, administrative or professional (EAP) in nature. That’s true no matter how many hours these employees work in a week.

Under proposed regulations, the limit would rise to $679 in 2020. So, salaried employees earning up to around $35,308 annually would be overtime-eligible even if they fall into those EAP job roles as defined by the Department of Labor (DOL).

Although the jump in the threshold is substantial, it’s not nearly as high as the $913 weekly pay threshold set in an earlier version of the proposed regulations. If that version — which was blocked by a federal judge — had passed, it would’ve been much more costly to employers.

Highly Compensated Employees

The other significant change in the newly re-proposed regulations would raise the threshold for “highly compensated employee” (HCE) status from a $100,000 annual salary to $147,414. HCEs aren’t eligible for overtime, even if they don’t fall under the EAP job categories. In other words, if that new higher HCE threshold takes effect next year, a non-management employee earning, for example, $146,000, could still be eligible for overtime pay after logging more than 40 hours of work in a week.

Chances are, you don’t have many (or any) employees earning that kind of money who don’t meet the EAP test. Even so, you may need to take a close look at your higher paid employees’ job duties to be sure you don’t inadvertently neglect to meet the regulations’ requirements next year.

An employer who wishes to avoid paying overtime needs to pay at least the $35,308 threshold. However, a wrinkle in existing regulations that was preserved in the new proposal allows you to pay only 90% of the salary threshold ($31,778) to employees who are also eligible for a “non-discretionary” bonus. Assuming the bonus is earned, it must be sufficient to carry them over the $35,308 annual income level. A non-discretionary bonus (or commission) is one awarded based on an employee’s objective performance against concrete goals, such as profitability or productivity levels.

That works out to eligibility for a bonus of at least $3,531. If it turns out that, by the end of the year, the employee doesn’t earn the full bonus and misses the $35,308 threshold, the employer can make up the difference in the following pay period.

No Automatic Raises

Under the 2016 version of the proposed regulations, the compensation thresholds would have risen regularly based on a cost of living index. That provision isn’t included in the latest version, which indicates only that the DOL would periodically update thresholds using an amendment process (including public input).

Also unchanged in the current version: Overtime protections for police officers, fire fighters, paramedics, nurses and laborers. The “laborers” category includes:

Non-management production-line employees, and
Non-management employees in maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers and longshoremen.

What This Means for You

So, what’s the bottom line for employers, assuming the regulations are finalized as proposed? The DOL estimates that “average annualized [additional] employer costs” over the next decade will be $120.5 million. Your share of that estimated cost will depend on what steps, if any, you take to mitigate the impact.

For example, if you have employees who are now earning close to $35,308 annually and who would become newly eligible for overtime pay, you might come out by raising their compensation above the $35,308 threshold. Doing so would eliminate eligibility for overtime pay (assuming their jobs qualify for overtime based on the EAP test). Alternatively, you can take steps to minimize overtime work by previously exempt employees who suddenly become eligible for overtime pay.

Something to Think About

Be aware, this topic is one where it’s easy to be “penny wise and pound foolish.” Unemployment is low and the labor market is tight. If employees believe you’re changing your policies to do an end-run around the intent of the updated regulations, you may save a little money but the result could be a spike in your employee turnover rate.

Nearly 15 years have elapsed since the last change in the minimum pay overtime eligibility threshold level, so change is most likely coming. Even so, the DOL will probably receive some complaints from employers who don’t believe the threshold should be raised as much as proposed. The agency will accept comments on the revised proposal until early May.

The Perfect Manufacturing Storm: 7 Ways to Weather It

Posted on March 19, 2019 by Debra Barcuch

In the current political climate, just about the only thing manufacturers can be certain about is continuing uncertainty. Everything from changes to foreign trade policies, to new tariffs, to military actions threaten to disrupt smooth operations in the manufacturing sector.

To complicate matters, there’s no clear timeframe for when (or if) events will transpire. Already, manufacturers are coping with the rising costs of raw materials and subsequent pushback from customers with long-term contracts. For example, your firm may have been forced to find cost-effective alternatives or make certain concessions.

So what’s the forecast? For most manufacturers, it’s “wait and see.” However, you can take several steps now to weather the storm and minimize potential economic damage. These steps can also help position your company to benefit from any favorable conditions that may arise.

Business Benefits

Review the following to determine whether they may benefit your business.

1. Negotiate and renegotiate.

Even if the goods your company produces aren’t directly affected by tariffs, you may be hurt indirectly by extra costs associated with materials like steel and aluminum. Take this into account when hashing out contracts. For instance, build higher supplier costs into new customer agreements.

For agreements already in place, see if the other party is willing to renegotiate Then consider a long-term arrangement that provides pricing you think you can live with. Incorporate clauses into the contract that provide protection if additional tariffs are imposed.

2. Analyze profit margins.

Thorough analysis is necessary to help prepare your company for possible tariffs and rising materials cost. This involves deciding which costs your firm can absorb and which ones you can pass along to customers. Of course, you might also be able to find a satisfactory middle ground.

To help offset unexpected expenses, locate opportunities for efficiencies or cost rationalizations that customers will be able to tolerate. If a customer has an existing contract that provides price escalation clauses or limits, further renegotiation may be required.

3. Explore alternate sources.

You might be able to avoid disruptions by tariffs if you can find alternative sources for supplies and materials. And be prepared to move quickly when warranted. This may include modifications to existing systems and processes to accommodate new business relationships. Have your professional advisors guide you concerning the logistics and legalities.

4. Get into “the zone.”

One way to cut costs may be right under your nose: Take advantage of free-trade zones (FTZs). These are areas where goods can be landed, stored, handled, manufactured or reconfigured, and re-exported under specific customs regulation. Generally, these goods aren’t subject to customs duty.

FTZs usually are organized around major seaports, international airports and national frontiers.

There, your business can produce products and export them to a U.S. customs territory or foreign destination, thus bypassing potential tariffs.

5. Join the club.

Be aware that you’re not facing these complex issues alone. To share thoughts and possible solutions, participate in trade compliance groups that focus on issues such as inventory and supply chain strategies, resource alternatives, and multiple data sources. Consider how your association can present a united front.

And if you can’t find a group? Start one yourself.

6. Find an exclusion.

Your company may be eligible for an exclusion retroactive to the date a tariff becomes effective. Contact the U.S. Commerce Department to request exclusions for aluminum and steel tariffs and the U.S. Trade Representative for China tariffs. The Commerce Department has been willing to provide exemptions from the 25% tariff on steel and the 10% tariff on aluminum imposed in 2018.

7. Assess imports.

Whether a product will be affected by a tariff depends on its classification. Therefore, misclassifications in borderline cases can result in unnecessarily higher costs. In addition, if imports of materials are currently subject to a low tariff or have no tariff, you might be able to stockpile those materials now. A CPA can review your company’s books and may be able to help you avoid unpleasant surprises.

Don’t Wait

In any event, it doesn’t make much sense to just sit back and wait for the other shoe to drop. Be proactive about protecting your manufacturing company’s interests.

Why Construction Companies Need Suicide Prevention Programs

Posted on March 14, 2019July 22, 2024 by Debra Barcuch

The construction industry is well known for having a high physical injury rate. Perhaps less well known is its elevated risk for mental illness — specifically, high suicide rates. Recently, the Centers for Disease Control and Prevention (CDC) studied more than 22,000 individuals working in different market sectors. The CDC found that construction workers had the highest suicide rate, at roughly four times the national average. Clearly, this is an issue that construction company owners and managers need to know about so they can take steps to prevent loss of life on their own crews.

Small Company Blues

Construction businesses face several challenges when it comes to their employees’ well-being. First off, most are small companies. More than 90% employ fewer than 20 workers, and only about 1% employ more than 100 employees. These smaller operations typically don’t have the HR staff to, for example, mediate disputes, direct disciplinary actions or provide crisis management resources. What’s more, owners and managers of smaller companies usually don’t have the training — not to mention the time — to handle HR functions.

What’s the owner of a smaller business to do? Implement an effective suicide prevention program, which may be relatively easier and less expensive than you might think. The key to success depends on fostering a friendly and supportive environment.

Here’s where small construction companies may have an advantage over their larger peers. With a compact team, your leaders are more likely to interact frequently with workers and get to know their personalities and work habits. An owner who regularly visits jobsites and participates in safety training with crew members opens the door to conversation. Even if an employee doesn’t feel comfortable approaching the boss about his or her problem, other workers may be more willing to discuss coworkers who seem to be in trouble.

Proactive Actions

Of course, being personally supportive of your workers isn’t enough. You also need to provide benefits. Make sure your employee health insurance plan provides adequate mental health benefits. With many plans, mental health coverage (including copays and deductibles) is less generous than coverage for physical maladies. Some plans also require more stringent referral requirements and place limits on the number of office visits and lengths of hospital stays. Try to ensure that, if one of your workers needs mental health services, he or she can afford the cost. Otherwise, a suicidal worker may go without.

Research mental health services in your geographic area. Contact providers about whether they accept your employee medical insurance and whether they’re taking new patients. Then create a directory of these qualified providers and give employees a copy. They’ll be more likely to take advantage of such services if they have a list of vetted providers handy.

Also post community counseling and local crisis services information (provided, for example, by your city or county) in a public area, such as a break room or in the job trailer. National suicide prevention hotlines, such as the National Suicide Prevention Lifeline (800-273-7255) and Crisis Text Line (text 741741), give employees someone to talk to any time, day or night.

Know the Warning Signs

Would you recognize the warning signs of a potential suicide? These types of employees could be at risk:

A star employee who’s suddenly underperforming. A usually reliable worker who starts making mistakes. A careful crew member who experiences several near accidents. An individual with perfect attendance who begins missing work. A former “team player” who’s suddenly uncooperative or disgruntled. Any worker who has recently experienced a disruptive life event such as a divorce, death in the family or big financial setback. Any employee who appears to have an alcohol or substance abuse problem.

Do Good and Do Well

An effective suicide prevention program doesn’t have to be elaborate or expensive. Cultivating a supportive “family” atmosphere and making yourself available to workers can go a long way to preventing tragedy.

Of course, establishing your program isn’t just the right thing to do, it’s also good business. When workers feel respected and cared for, they’re more willing to work hard and remain loyal over the long haul. And investing in good health care — both physical and mental — can reduce absenteeism and disability claims.

Is an HSA Right for You?

Posted on March 12, 2019 by Debra Barcuch

Health care costs have skyrocketed over the last few decades. Fortunately, health savings accounts (HSAs) allow qualifying individuals to pay for certain medical expenses with pretax dollars. Here is what you need to know to put an HSA to work for you.

Healthy Growth

Over the last decade, many people have jumped on the HSA bandwagon. HSA assets exceeded $51 billion as of June 30, 2018, according to a recent survey conducted by HSA investment provider Devenir. That’s an increase of 20.4% compared to the previous year.

In addition, the total number of HSAs grew to 23.4 million as of June 30, 2018, up 11.2% compared to a year earlier. Devenir projects the number of HSA accounts to increase to 29 million by the end of 2020 with assets approaching $75 billion.

The Basics

With HSAs, individuals must take more responsibility for their health care costs, instead of relying on an employer or the government. The upside is that HSAs offer some tax benefits.

Under the Affordable Care Act (ACA), health insurance plans are categorized as Bronze, Silver, Gold or Platinum. Bronze plans — which have the highest deductibles and least generous coverage — are the most affordable. Platinum plans have no deductibles and cover much more, but they’re also significantly more expensive.

In many cases, the ACA has led to premium increases, even for those with less generous plans. However, these less generous plans also might make you eligible to open and contribute to a tax-advantaged HSA.

For the 2018 tax year, you could make a tax-deductible HSA contribution of up to $3,450 if you have qualifying self-only coverage or up to $6,900 if you have qualifying family coverage (anything other than self-only coverage). For 2019, the maximum contributions are $3,500 and $7,000, respectively. If you’re age 55 or older as of year end, the maximum contribution increases by $1,000.

To be eligible to contribute to an HSA, you must have a qualifying high deductible health insurance policy and no other general health coverage. For 2018, a high deductible health plan was defined as one with a deductible of at least $1,350 for self-only coverage or $2,700 for family coverage. For 2019, the minimum deductibles are the same.

For 2018, qualifying policies must have had out-of-pocket maximums of no more than $6,650 for self-only coverage or $13,300 for family coverage. For 2019, the out-of-pocket maximums are $6,750 and $13,500, respectively.

Important note: For HSA eligibility purposes, high deductible health insurance premiums don’t count as out-of-pocket medical costs.

Deductible Contributions

If you’re eligible to make an HSA contribution for the tax year in question, the deadline is April 15 of the following year (adjusted for weekends and holidays) to open an account and make a tax-deductible contribution for the previous year.

So, there’s still time for an eligible individual to open an account and make a deductible contribution for 2018. The deadline for making 2018 contributions is April 15, 2019.

The write-off for HSA contributions is an “above-the-line” deduction. That means you can claim it even if you don’t itemize.

In addition, the HSA contribution privilege isn’t tied to your income level. Even billionaires can make deductible HSA contributions if they have qualifying high deductible health insurance coverage and meet the other eligibility requirements.

Important note: Sole proprietors, partners, LLC members, and S corporation shareholder-employees are generally allowed to claim separate above-the-line deductions for their health insurance premiums, including premiums for high deductible health plans that make you eligible for HSA contributions.

HSAs in the Real World

To show the tax perks of HSAs, consider the following example: Albert and Angie are a married couple in their 30s. They’re both self-employed, and both have separate HSA-compatible individual health insurance policies for all of 2019. Both policies have $2,000 deductibles.

For 2019, Albert and Angie can each contribute $3,500 to their respective HSAs and claim a total of $7,000 of write-offs on their 2019 joint return. If they’re in the 32% federal income tax bracket, this strategy cuts their 2019 tax bill by $2,240 (32% × $7,000). Over 10 years, they’ll save $22,400 in taxes, assuming they contribute $7,000 each year and remain in the 32% bracket.

Tax Treatment of Distributions

HSA distributions used to pay qualified medical expenses of the HSA owner, spouse and dependents are federal-income-tax-free. However, you can build up a balance in the account if contributions plus earnings exceed withdrawals for medical expenses. Any earnings are free from federal income tax unless you withdraw them for something other than qualified medical expenses.

So, if you’re in very good health and take minimal or no distributions, you can use an HSA to build up a substantial medical expense reserve over the years, while earning tax-free income along the way. Unlike flexible spending accounts (FSAs), undistributed balances in HSAs are not forfeited at year end. They can accumulate in value, year after year. Thus, an HSA can function like an IRA if you stay healthy.

Even if you empty the account every year to pay medical expenses, the HSA arrangement allows you to pay those expenses with pretax dollars. But there are some important caveats to bear in mind:

HSA funds can’t be used for tax-free reimbursements of medical expenses that were incurred before you opened the account.
If money is taken out of an HSA for any reason other than to cover qualified medical expenses, it will trigger a 20% penalty tax, unless you’re eligible for Medicare.

If you still have an HSA balance after reaching Medicare eligibility age (generally age 65), you can drain the account for any reason without a tax penalty. If you don’t use the withdrawal to cover qualified medical expenses, you’ll owe federal income tax and possibly state income tax. But the 20% tax penalty that generally applies to withdrawals not used for medical expenses won’t apply. There’s no tax penalty on withdrawals after disability or death.

Alternatively, you can use your HSA balance to pay uninsured medical expenses incurred after reaching Medicare eligibility age. If your HSA still has a balance when you die, your surviving spouse can take over the account tax-free and treat it as his or her own HSA, if he or she is named as the account beneficiary. In other cases, the date-of-death HSA balance must generally be included in taxable income on that date by the person who inherits the account.

For More Information

HSAs can provide a smart tax-saving opportunity for individuals with qualifying high deductible health plans. Contact us to help you set up an HSA or decide how much to contribute for 2019. And, remember, there’s still time to make a deductible contribution for your 2018 tax year, if you’re eligible.

6 Common Mistakes When Taxpayers Prepare Their Own Tax Returns

Posted on March 9, 2019 by Debra Barcuch

Tax filing season kicked off as scheduled on January 28. But tax returns for 2018 may require extra time to file and process due to confusion over the sweeping tax law changes under the Tax Cuts and Jobs Act (TCJA). Most the TCJA provisions that affect individuals are effective for 2018 through 2025, unless Congress extends them.

In addition, people who prepare their own returns may experience further delays and possibily incur unexpected tax liabilities (including penalties and interest) if they make one of the six common do-it-yourself tax filing errors listed below. These are some of the ways an experienced tax preparer can help at filing time and ensure you claim all the tax breaks to which you are entitled.

1. Inserting Incorrect Names and SSNs

It’s surprising how often taxpayers misspell their own names and transcribe incorrect Social Security numbers (SSNs). Getting a digit wrong on your SSN throws your entire return into jeopardy. You also can’t use a nickname or shorthand version of your name, such as Nick for Nicholas or Liz for Elizabeth.

IRS computers match up information, so it’s likely that this type of mistake will be flagged right away. Then, a return may be rejected, causing refund delays and sometimes costing extra tax dollars.

2. Providing Inaccurate Financial Account Information

Another potential trouble spot involves reporting information from banks, brokerage firms and other financial institutions. Generally, taxpayers are required to report capital gains and losses, dividends and interest on their returns. Again, if just one digit is wrong or missing, it can create problems.

If a taxpayer files electronically, data usually can be imported from most major institutions into the tax software program. However, some taxpayers have difficulty using this function or make mistakes when they input numbers manually.

In the same vein, if a taxpayer arranges for a direct deposit of a tax refund, he or she must enter the bank’s routing numbers accurately. If not, he or she may have to wait months until the error is discovered and corrected to receive a refund.

3. Using the Wrong Filing Status

One of the first items to enter on Form 1040 is your filing status. Depending on a taxpayer’s situation, an unmarried individual may be eligible to file a return as a single person or as a head of household. Married people can file a joint return or opt for separate returns. The tax rates and thresholds vary based on filing status, so this choice can make a big difference in the amount of taxes a taxpayer incurs for the year.

Usually, a married couple fares best by filing a joint return, but that’s not always the case. For instance, under the TCJA a taxpayer may be able to preserve a deduction for “qualified business income” (QBI) received from a pass-through entity by filing separately. There may be significant tax savings to be won or lost with the filing status election. Plus, it’s a hassle to fix things if a taxpayer doesn’t qualify for the status chosen.

4. Missing or Omitting Income

Sometimes taxpayers forget to report sources of income, such as Form W-2 from a side job or Form 1099-G from the previous year’s state tax refund. Taxpayers are required to report all sources of income, even if an employer doesn’t send a W-2 or a 1099. This can be especially challenging for self-employed people who receive multiple 1099s for services rendered.

It’s easy for a 1099 form to be unintentionally discarded or fall into the wrong pile of papers. So, it’s important to assemble all the forms in an organized fashion.

5. Filing Paper Returns

Technically, filing a tax return on paper isn’t a “mistake.” But doing things the old-fashioned way can lead to errors and delays. With a paper return, it’s more likely that taxpayers will enter information incorrectly, such as a name or SSN or make math errors. To help prevent common errors, a tax preparer is aware of items from the previous year and will ask questions to help eliminate discrepancies.

Furthermore, if you file electronically, you generally will receive a refund faster than you would if you mail your return to the IRS. Typically, in a normal tax filing season, the IRS processes e-filed returns within 48 hours. Plus, you’ll receive confirmation of receipt when you e-file. Keep in mind that DIY software isn’t a substitute for the expertise of an experienced tax professional. Using software without an in-depth understanding of tax law can lead to inadvertent mistakes and missed tax-saving opportunities.

6. Filing in Haste

Even if taxpayers file electronically, instead of by paper, they can make mistakes if they’re in a rush. This usually happens when the filing deadline is approaching. April 15 is the deadline for most taxpayers to file (or extend) a return for the 2018 tax year. For taxpayers in Massachusetts and Maine, the deadline is April 17 due to holidays. (April 15 is Patriots’ Day in Maine and Massachusetts; April 16 is Emancipation Day in Washington, D.C., where the IRS is located.)

Some early filers also may complete their returns at breakneck speed or try to “wing it” before they receive supporting figures from their employers, banks and other third parties.

If you’re not ready to sign off, you can request an automatic six-month filing extension. This gives you and your tax preparer until October 15, 2019, to complete your return. But filing an extension doesn’t extend the deadline for paying taxes. You still must make a good faith estimate of your tax liability by either withholding from your paycheck or making quarterly tax estimates.

Help Your Tax Professional Help You

There are several benefits of using an experienced CPA to prepare your tax return, including convenience and potential tax savings. But you still need to do your part to ensure accurate and timely filing.

First off, you’ll need to provide your tax return preparer with accurate information. Include all forms and documents that will be needed to file your return. If you omit a 1099 or fail to disclose information about foreign investments, for example, you only have yourself to blame.

Those documents should be organized in a logical fashion. If you present your preparer with a shoe box of receipts or dump a pile of records on his or her desk, it will take a while to sort things out and your return may be delayed.

Lessons Learned

Using an experienced tax preparer is the best way to avoid mistakes and achieve peace of mind when you file your tax return. Most CPA firms have implemented quality control measures — such as checklists and review procedures — to prevent common mistakes. Moreover, a trained tax professional understands the ins and outs of current tax laws and can inform you about tax-saving opportunities to lower your tax bill for 2018 and beyond.

I-9 Audits Are On the Rise: Be Prepared

Posted on March 6, 2019 by Debra Barcuch

Audits of I-9 records quadrupled in 2018 over the prior year (the federal fiscal year). That means nearly 6,000 employers were audited, which led to several dozen civil and criminal convictions. The agency involved — Homeland Security Investigations (HSI) — “is carrying out its commitment to increase the number of I-9 audits in an effort to create a culture of compliance among employers,” it stated upon releasing audit statistics. To accommodate the increase, HSI is beefing up its army of auditors.

Most employers don’t intentionally falsify I-9 forms or knowingly accept falsified ones from employees. They simply make honest mistakes. And that’s what lets them get by with only a civil conviction instead of a criminal one. But, as the saying goes, ignorance of the law is no excuse. A civil offense conviction and its associated penalties still costs money and generates bad publicity. How can you avoid slipping up? With a quick review of basic I-9 employment eligibility verification requirements and common errors.

Timing Is Everything

First, be sure you’re using an up-to-date Form I-9. They’re easy to pull off of the U.S. Citizenship and Immigration Services (USCIS) website. The most current version expires on Aug. 31. New employees must complete their part of the form (Sec. 1) when hired. You need to complete the rest of it within three days of the employee’s start date.

Note the word “employee”: You don’t need to worry about independent contractors — unless you happen to know of any that aren’t authorized to work in the United States. Knowingly engaging such a person could expose you to serious legal sanctions.

That three-day deadline coincides with the deadline for employees to give you the documentation you need to complete Part 2. You must “physically examine each original document the employee presents to determine if the document reasonably appears to be genuine and relates to the person presenting it,” according to USCIS. And the employee you’re hiring needs to give you his or her documents personally, not anyone else.

The USCIS “E-Verify” system has been around a long time, but its use is voluntary for most employers. Federal rules, however, do require it for certain employers, and a handful of southern states require its use for all employers. Other states require it only for employers doing business with the state in question.

Reverification Requirement

If anyone you hire isn’t a U.S. citizen and is here on a visa that expires, it’s up to you to reverify that the employee’s work authorization has been renewed before the original visa expires.

You might be tempted to avoid hiring someone whose legal employment eligibility, such as having only temporary resident status, appears more complicated than you want to deal with. But employment antidiscrimination rules come into play here. Specifically, “citizenship status discrimination” is illegal. So too are “unfair documentary practices” (selectively asking people for more documents than are required) and “national origin discrimination.”

You need to hang on to those I-9s as long as employees are with you, and a bit longer. Specifically, you need to retain them for three years from the date of hire, or one year after the employee leaves you, whichever is longer. In other words, if an employee only stayed with you one year, you’d need to retain that I-9 for two additional years. You can retain the forms electronically using USCIS-approved formats.

Details Matter

The USCIS is quite particular when auditing I-9s. The agency has posted a list of “common mistakes” on its website. Most often, the errors involve omissions of basic information, such as the employee’s middle initial, job title and date of hire.

Also posted on the website is a list of general tips for filling out the form, including the following:

Ensure that the date of hire on the form matches payroll records.
Write legibly.
Use only commonly known abbreviations.
Complete all applicable sections.

If you fall short of compliance and are audited, you could face penalties for each mistake on each form. Penalties per mistake range from around $200 to around $2,000. That means that, if you consistently made the same mistake on each form, a penalty can grow exponentially.

Play It Safe

Don’t gamble with the important task of properly completing, submitting and retaining Forms I-9 for your employees. Work with your CPA and attorney to answer any questions that come up. Getting it right is too important to roll the dice.

Federal Investigators Find Labor Law Violations in Several Cases

Posted on March 3, 2019 by Debra Barcuch

The U.S. Department of Labor’s Wage and Hour Division (WHD) recently finished several investigations aimed at employers. The agency announced that seven different employers had violated federal laws involving minimum wages, overtime calculations, family and medical leave, the tip credit and work visas.

Court: Off-Duty Officers Were Entitled to Overtime

A federal appeals court recently ruled that a group of off-duty police officers who held side jobs with a private security company were employees of the company. Therefore, they were entitled to overtime pay under the Fair Labor Standards Act (FLSA).

What the Law Requires. The FLSA requires employers to pay overtime to employees who work more than 40 hours a week. Courts commonly use a “six factor” test to determine whether a worker is a contractor or an employee:

The degree of control exercised by the employer over the business operations;
The relative investments of the employer and worker;
The degree to which the worker’s opportunity for profit and loss is determined by the employer;
The skill and initiative required to perform the job;
The permanency of the relationship; and
The degree to which the worker’s tasks are integral to the employer’s business.

Facts of the Case. The company provided private security and traffic control services to customers. It generally employed sworn law enforcement officers, although some had no police training. The company paid sworn officers more per hour than it paid nonsworn workers, but the duties performed by both groups were the same. A scheduler kept track of customer work requests and offered assignments to the security workers.

The company told workers when and where to report, and whom to report to upon arriving at a job. Occasionally, depending on the job, the workers were provided with equipment such as reflective jackets, stop/go signs and badge-shaped patches.

Workers who weren’t sworn police officers were required to buy police model vehicles. They followed customers’ instructions, complied with the security company’s standard policies, and sometimes were supervised by other workers from the company. Sworn police officers wore their official police uniforms. Nonsworn workers wore police-style uniforms that bore branded patches from the company. At the end of assignments, workers submitted invoices detailing the hours spent on the job. The workers, both sworn and nonsworn, were treated as independent contractors and were never paid overtime.

Appeals Court Ruling. The U.S. Court of Appeals for the Sixth Circuit found that all the workers were employees and should have been paid overtime. (Acosta v. Off Duty Police Services, Inc., Dkt. No. 17-5595/6071, 2/12/19)

Here are brief descriptions of the cases.

1. Minimum wage violations.

A Tennessee motel company owes $58,894 in back wages to four employees for minimum wage and overtime violations. The employers provided homeless individuals with rooms in exchange for front desk work without pay.

The maximum lodging credit allowed for the rooms totaled less than the required federal minimum wage of $7.25 per hour. Overtime hours weren’t accounted for because compensation consisted of housing only. The employer also didn’t maintain accurate records of hours worked.

2. Overtime calculation errors case #1.

A lighting manufacturer failed to include employees’ shift differentials when computing their overtime pay by basing the time-and-a-half calculation only on the workers’ hourly base rates. Failure to use shift differentials resulted in lower overtime than required by law.

In addition, the employer failed to maintain complete and accurate records of the hours that employees worked. The employer must pay $138,753 in back wages and liquidated damages to 829 employees.

3. Overtime calculation errors case #2.

A continuing care retirement community failed to include workers’ shift bonuses when calculating their overtime rates. The employer also failed to maintain accurate records of employee bonuses and hourly rates.

4. Tip credit violations.

WHD investigators uncovered willful violations of the Fair Labor Standards Act (FLSA) at a Pennsylvania restaurant chain. The employers shorted employees and pocketed 15% of customer tips charged on credit cards — well in excess of the 4% charged by credit card processors.

Additionally, the employers failed to notify tipped workers that they were using the tip credit against the minimum wage, a violation of the FLSA. The employers also paid some workers flat daily rates for all hours worked, even when their time records clearly showed them working upwards of 50 to 60 hours per week.

The employers agreed to pay $935,000 in back wages and liquidated damages and $65,000 in civil penalties to 201 employees for the willful violations.

5. Infringement of family and medical leave law.

An Alabama medical services company will pay lost wages to an employee for violating the Family and Medical Leave Act (FMLA).

The FMLA allows qualifying employees to take up to 12 weeks of unpaid leave for a serious health condition. WHD investigators determined that an employee who had taken time off to seek medical care for an FMLA-covered condition was unlawfully terminated. The company must pay lost wages of $1,859 and reimburse the employee $4,729 in medical expenses incurred due to losing her health insurance coverage when the employee was terminated.

6. Work visa violations case #1.

An owner and operator of two horse training facilities must pay $1,270,683 in back wages and damages to 30 employees for work visa and wage violations. WHD investigators discovered the employers had failed to pay prevailing wages required under the H-2B visa program and the promised rates under the Migrant and Seasonal Agricultural Worker Protection Act (MSPA).

Violations also included:

Collecting kickbacks from H-2B visa fees;
Impermissible deductions for transportation costs to and from the workers’ home countries;
Unsafe and unhealthy housing conditions; and
Failure to record overtime worked and deductions from wages.

A consent judgment filed in a federal district court requires the business to pay back wages and damages, plus an additional $100,000 in civil penalties. The company and its owner are enjoined from applying for any labor certification applications, including under the H-2B temporary visa program, for one year.

7. Work visa violations case #2.

In another work visa violation case, an administrative judge ordered an employer to pay an engineer employed through the H-1B visa program $43,366 in back wages and interest for failing to pay required wages as stated on the H-1B visa application. Additionally, the employer was found to have failed to maintain required records.

The judge denied the employer credit for $14,150 in cash payments to the worker because it had failed to report the payments on its payroll records and to report the wages to the IRS as required for the credit.

Cautionary Tales

These recent cases serve as a warning to employers about the implications of failing to comply with employment laws. When it comes to labor and payroll laws, there are many ways that your organization can get into trouble. Contact your HR, payroll and tax advisors for assistance staying in compliance.

Women in Business: Who’s the Boss?

Posted on March 1, 2019July 23, 2024 by Debra Barcuch

Barriers for women in leadership positions are slowly being broken down in the United States. Women currently hold 102 seats in the House of Representatives (23.7% of the voting members) and 25 seats in the Senate (25% of the total). Four women also serve as non-voting delegates from American Samoa, Puerto Rico, the Virgin Islands and Washington, D.C.

Two decades ago, women held only 13% of the seats in the House and 9% of the seats in the Senate. However, the “glass ceiling” has yet to be shattered in some business boardrooms. When it comes to business leadership, women in the U.S. have come a long way, but there’s still a long way to go at many organizations.

California Mandates More Female Directors

Under a new law, California has become the first state to require public companies to have at least one woman on its board of directors. This mandate was signed into law on September 30, 2018.

It requires public companies whose principal executive offices are located in California to comply by the end of 2019. By the end of 2021, the minimum is two females on the board if the company has five directors, and three females if it has at least seven directors.

Venus or Mars: Does It Matter

Approximately 70% of women and 50% of men think too few females hold leadership positions in U.S. business and politics. This finding was reported in Women and Leadership 2018, a recent survey and report published by Pew Research.

Women are also far more likely than men to see females facing organizational impediments. Mentoring, which sounds like a positive thing, may sometimes become an obstacle in a business setting. That’s because men may be more likely to mentor other men than women, and women are more likely to mentor other women than men. Thus, it’s hard to break the cycle of male dominance. As inroads are made, women leaders may want to focus on mentoring the next generation of women leaders.

Despite such obstacles, most Americans generally see men and women as being equally capable when it comes to leadership, according to the Pew survey.

In addition, the majority acknowledges that the different genders tend to exhibit different leadership styles. Female business leaders are often perceived to have certain advantages. For instance, 43% of the people polled by Pew Research responded that women are better at creating a safe and respectful workplace while only 5% say men are better at this. The majority (52%) was neutral on this issue.

In addition, women often excel at compromising, which, in turn, helps promote collaboration and avoid stalemates. It’s widely believed that a woman’s give-and-take approach can help close deals and result in more effective brainstorming sessions.

Other perceived advantages cited in favor of women include:

Valuing people from different backgrounds,
Considering the societal impact of business decisions,
Mentoring young employees, and
Offering reasonable pay and fringe benefits.

However, men are perceived to be better than women at negotiating profitable deals, according to those surveyed. Overall, the public recognizes the value of female leadership in both political and business arenas. More than two-thirds say having more women in leadership positions would improve the quality of life for everyone.

Opportunity Knocks

Despite decades of progress, the disparity in pay based on gender has persisted. Currently, a woman earns about 78 cents for every dollar that a man makes, according to The State of the Gender Pay Gap in 2018 published by Pay Scale (a provider of payroll software)..

But it’s not just a “pay gap” that’s holding women back; there is also an “opportunity gap.” According to PayScale, women and men start their careers making roughly the same amount of money for the same sort of work. However, men are offered more opportunities to advance into higher-paying positions.

At middle age, men are 70% more likely to be in executive positions than women. By retirement, this disparity almost doubles.

How Women Add Value

Another study, sponsored by the Peterson Institute for International Economics, focused on diversity in the workplace. The not-for-profit organization’s study found a positive relationship between female corporate leadership and financial performance. It concludes that fair and unbiased representation throughout an organization improves operations.

According to the study, minority women owned fewer than a million U.S. businesses (approximately 17% of all U.S. businesses) in 1997. By 2014, that figure had nearly doubled to 33% of all businesses. African-Americans represented the largest women’s business ownership group at 14%, followed closely by Hispanic women at 11% and Asian-American women at 7%.

During this time of growth in female and minority leadership, there were no legal mandates for gender inclusion and diversity in the C-Suite. Thus far, the progress has evolved with minimal government intervention. However, that could change in certain parts of the country. (See “California Mandates More Female Directors” at right.)

To help bridge the gender gap, industry leaders — both male and female — must become agents of change. This may include mentoring qualified women candidates and helping them develop career strategies. In addition, mentors can help future women leaders set and attain specific goals within a definitive time frame.

How Does Your Business Measure Up?

Businesses without women in leadership positions may be missing the boat. A diverse management team is more likely to see problems (and solutions) from a variety of perspectives — allowing it to identify potential threats and opportunities that might otherwise be missed. We can help you evaluate your current policies and procedures to identify and correct possible gender disparity in your workplace.

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