How to Calculate Overtime Pay Correctly

by Jim Spencer

As Lady Gaga found out the hard way, the Fair Labor Standards Act (FLSA) is cracking down on employers who fail to pay their employees overtime in accordance with state and/or federal law. Her personal assistant sued the Poker Face singer for $400,000 under the New York state law and the FLSA alleging the pop superstar failed to pay her for several hours of overtime. This is certainly not an isolated incident as several celebrities have come under fire for alleged overtime hours that were not paid. But it’s not just celebrities being taken to court. As we all know, businesses have also been severely penalized for not calculating the correct overtime.

Let’s examine the proper way to calculate overtime pay and when it’s required by law. By using these tips, you should be able to avoid a potential lawsuit like Ms. Gaga’s. But then again, unlike Ms. Gaga, I’m sure you don’t request your personal assistant to sleep in bed with you. If so, that’s another serious issue.

Let’s start with the issue of properly classifying your employees as exempt or non-exempt, because that’s very important. The significant difference between exempt and non-exempt is that non-exempt employees are entitled to overtime compensation of 1.5X their regular rate. Their job duties will primarily determine if the employee is exempt from overtime. Please note that even if you pay a non-exempt employee a salary, that does not make them exempt from overtime pay. If a non-exempt employee is paid a salary, the employer will have to convert their salary to a regular hourly rate to determine what their overtime rate is.

It is very important to also understand what exactly goes into that regular rate of pay calculation. First, it’s based on hours actually worked. So it does not include holiday, PTO/vacation time, or other fringe benefit payments such as gifts, discretionary bonuses, benefit plan contributions, certain premium payments, certain stock related income, or reimbursement for work-related expenses. However, it does include wages, commissions, non-discretionary bonuses, shift differentials, and some on-call payments.

There is one piece of this that I know causes a lot of questions — or as I like to say, heartburn — and that’s the difference between a discretionary and non-discretionary bonus. Let’s clarify this before moving on. To qualify as a discretionary bonus (and therefore not be included in the regular rate of pay), the amount of the payment must be determined within the sole discretion of management. A key to maintaining the discretionary status of a bonus is to vary the bonus amounts to coincide with company performance. In other words, it is similar to a profit-sharing bonus. I would also advise against paying a discretionary bonus that is regularly paid each year (for example, a Christmas bonus) as it may lose its discretionary status after some period of time if the employees come to expect the payments.

Conversely, a non-discretionary bonus would include: production bonuses (encourage the employee to work steadily, rapidly, or efficiently), retention bonus, attendance bonus, quality assurance bonuses, cost of living bonus (usually given in lieu of a cost of living adjustment), or finally a bonus that is intended to attract employees to an isolated or less desirable job or job site. The easiest way to spot a non-discretionary bonus is if it is tied to some type of metric. If it is, it must be included within the regular rate of pay and will then increase the amount of overtime pay that will be owed.

Another important concept to explain when discussing overtime pay is compensable time or hours worked before we discuss how to calculate overtime pay. The FLSA has a continuous workday principle where all hours between the beginning and the end of the workday must be paid. Sure that makes sense and that’s only logical . . . right? Well, defining when the workday starts and ends is not as easy as just clocking in and out. It includes ANY hours the employer has required work or the employee has been allowed to work. This includes, donning and doffing (the putting on and taking off protective gear, clothing, uniforms), preliminary and postliminary activities, travel time, waiting or on call time, training and testing.

Non-exempt employees must record all hours worked on a daily basis. Employers should ensure accuracy of these records by having the employee sign their time records. It would also be a prudent idea to have a time and attendance policy that requires them to record all hours worked. In the policy, require that the employees and supervisors sign off on any changes made to time records. Also, train your managers and employees on the policy and the practice of recording their time and train them to understand “off the clock” and to recognize what are recordable working hours. By having your pay practices in writing and having them signed off by the employee, you will be able to show that the employee understands the policy and will report any errors immediately for resolution.

Ok, so now, let’s get into the teeth of this blog and that’s how to pay overtime. First, overtime must be calculated on a workweek basis which is defined by a fixed, regularly occurring, 7-day period (or 168 hours). Please note that you cannot average hours over a period of two weeks or more. So even if your company pays on a bi-weekly or semi-monthly basis, you must calculate overtime by the 7-day workweek. Employees can be paid on a piece rate, commission, or some other basis, but all the earnings must be converted to an hourly rate (a.k.a. the regular rate). The regular rate is typically calculated by dividing the total pay in a given workweek by the total number of hours actually worked in that workweek.

Let’s look a “quick” example. Let’s say John makes $12/hour. He works 56 hours in a workweek and earns $50 in commission (or bonus). Let’s look at the math for that:

  • Straight time (ST) compensation is 56 hours x $12 an hour + $50 bonus = $722 (total ST compensation)
  • $722 (ST)/ 56 hours worked = $12.89 (regular rate)
  • $12.89 (regular rate) x ½ = $6.45 (half time premium)
  • $12.89 (regular rate) + $6.45 (half time premium) = $19.34 (overtime rate)
  • 40 hours straight time x $12.89 (regular rate) = $515.60 (ST earnings)
  • 16 overtime hours x $19.34 (OT rate) = $309.44 (OT earnings)
  • $515.60 (ST earnings) + $309.44 (OT earnings) = $825.04 (total weekly earnings)

Let’s look at another example, this time using a bonus. Everyone knows the difficulty in attracting nursing staff. There are job postings all over the place. So, let’s say in order to attract nursing candidates you decide to give hourly LPN’s and RN’s a $2,000 bonus after being employed for 6 months. This would be considered a non-discretionary bonus (i.e., it’s tied to a metric) so it must also get factored into the regular hourly rate of pay. Let’s also say that this is a deferred bonus that will be paid out over a series of pay periods.

A retention bonus was earned over 6 months of 26 weeks for a weekly equivalent of $76.92 ($2000/26 weeks). If the employee worked OT during the 26-week period, the increase in the regular rate is calculated by dividing $76.92 by the total hours worked during the overtime week.  If the employee worked 10 hours of overtime in their 9th week, the employee would be due an additional $7.70 of overtime earnings as follows:

  • $76.92 / 50 hours -$1.54 (increase in regular rate)
  • $1.54 x ½ = $.77 (increase in half time premium)
  • $.77 x 10 hours of OT worked = $7.70 (increase in OT earnings due to bonus)

Believe it or not, wage and hour violations are the number one litigated employment law topic right now in the country. In addition, the DOL was given extra money as an initiative to crack down on wage and hour violations. They are targeting five (5) industries as part of this initiative. That means if you are in one of them, you are at a higher risk of getting an audit and having to pay all those fines if you are not compliant.

The top five (5) industries at risk for wage and hour violations and an audit by the DOL are:

  1. Hospitality & Food Services
  2. Healthcare & Social Assistance
  3. Retail
  4. Construction
  5. Manufacturing

Failure to follow these rules can result in large fines and damages including back pay for up to three years for unpaid wages and overtime owed but not paid, liquidated damages (up to two times the original amount owed), attorney’s fees and court costs. In addition, wage and hour violations are one of the few employment laws that can result in personal liability to the owners and decision makers who violated the law. Lastly, most insurance policies do not pay for any of the damages associated with violating wage and hour law.

If you’re unsure about how to remain compliant with overtime laws, ECRM’s Human Resources professionals are ready to help!  Employers can reach us by calling (724) 864-8745.

Disclaimer: The information provided on this website is for informational purposes only and not for the purpose of providing legal advice. Use of and access to this website do not create an attorney-client relationship between East Coast Risk Management or our employment law attorney and the user or browser.

Posted in Human Resources | Tagged , ,

FMLA: What to Know BEFORE it Happens

by Nancy Owen, PHR

The Family Medical Leave Act (FMLA) is a federal law that provides eligible employees of covered employers with unpaid, job-protected leave for specified family and medical reasons. Eligible employees may take up to 12 or 26 workweeks of leave in a 12-month period for eligible reasons.

In addition to providing eligible employees an entitlement to leave, the FMLA requires that employers maintain employees’ health benefits during leave and restore employees to their same or an equivalent job after they return from the leave.

What is the big risk?  Over time organizations have been challenged in ensuring that their employees are treated fairly when it comes to the FMLA. The task can be daunting for employers because they have to comply with the law which has many moving pieces. Employers with leave processes that are not compliant expose the company to enormous risks and potential expense. Employees have two years to file a claim against an employer for a FMLA violation. If they win their case, the employee may be entitled to lost back pay, lost front pay, liquidated damages, punitive damages, and attorneys’ fees and costs. As you can imagine, this can quickly add up to hundreds of thousands of dollars.

Understanding what the FMLA requirements are and determining the risks to your organization are necessary when deciding who will be your administrator. Do you outsource the administration of your FMLA or do you process it in-house? This decision can be a critical one to lower your risk of a claim. You need to guarantee your workforce the ability to safeguard their jobs and give them the peace of mind that they can care for their family issues. It will benefit all of the employees in your organization.

Let’s look at the requirements:

On August 29, 2016, the Equal Employment Opportunity Commission (EEOC) issued what is referred to as the Enforcement Guidance on Retaliation and Related Issues document. This Enforcement Guidance replaces the EEOC’s Compliance Manual Section 8: Retaliation, issued in 1998. Since that time, the Supreme Court and the lower courts have issued numerous significant rulings regarding employment-related retaliation. The percentage of EEOC private sector and state and local government charges alleging retaliation has essentially doubled since 1998. That means that retaliation is now the most frequently alleged basis of discrimination in all sectors, including the federal government workforce.

Each of the Equal Employment Opportunity laws clearly prohibit retaliation and related conduct when it comes to FMLA, Title VII of the Civil Rights Act of 1964, Age Discrimination in Employment Act (ADEA), Title V of the Americans with Disability Act (ADA), Section 501 of the Rehabilitation Act, The Equal Pay Act (EPA) and finally Title ii of the Genetic Information Nondiscrimination Act (GINA).

According to the Department of Labor’s (DOL) Wage and Hour Division, “Since its existence in 1993, FMLA has served as the cornerstone of the Department of Labor’s efforts to promote work-life balance and we have worked in support of the principle that no worker should have to choose between the jobs they need and the family they love. With the FMLA, our country made it a priority to give workers the ability to balance the demands of work and family. It made the healthy development of babies, healthy families, and healthy workplaces a priority. It was a remarkable accomplishment at the time and, since its enactment, the FMLA has been used more than 100 million times to help workers balance the demands of the workplace with the needs of their families and their own health.”

The law protects employees from interference and retaliation for exercising or attempting to exercise their FMLA rights. The law also includes certain employer recordkeeping requirements.

Here are some examples of what would constitute interference or denying rights:

  • Refusing to authorize FMLA leave, or discouraging an employee from using such leave.
  • Transferring employees from one work site to another to keep a work site below the 50-employee head count.
  • Changing the essential functions of a job before an employee takes leave, or
  • Manipulating an employee’s work hours or schedule to avoid the employee’s eligibility under the FMLA.
  • Counting FMLA leave under a regular attendance policy, or
  • Failing to provide benefits to an employee on unpaid FMLA leave if the employer provides those benefits to employees who use other types of unpaid leave.
  • Not counting temporary or part-time employees in the 50 or more headcount calculation.

Who is a covered employer? Covered employers include private employers with 50 or more employees in 20 or more workweeks in the current or preceding calendar year. For the purposes of FMLA, that count must include staffed or shared employees (more on integrated and joint employers in a bit). FMLA also covers public agencies and public or private elementary or secondary schools, regardless of the number of employees.

Let’s take a minute to look a little more closely at the requirements for private employers. Once a private employer meets the requirement for FMLA coverage, the employer is a covered employer and will remain covered as long as it employs 50 or more employees in 20 or more workweeks in either the current calendar year or in the previous calendar year.

For example, last year during its busy season from June 1st to October 31st, a restaurant had more than 50 employees on their payroll. In the current year, the same restaurant employs fewer than 50 employees and an employee has requested FMLA leave. Because the restaurant employed more than 50 employees for more than 20 workweeks in the previous year, the restaurant is considered to be covered at the time of the request and must offer the FMLA benefits and protections to its eligible employees. This count included full-time, part-time, and temporary employees.

Another thing that you want to consider is if you are an Integrated or Joint employer. For the purposes of FMLA coverage, determining if you are an integrated employer is not a simple test. Basically, an integrated employer is a single employer that has separate entities or divisions. Factors to be considered in determining if separate businesses are an integrated employer include:

  • Common management,
  • Interrelation between operations,
  • Centralized control of labor relations, and/or
  • Degree of common ownership or financial control.

For purposes of determining employer coverage under the FMLA, the employees of all entities making up the integrated employer must be counted.

Employers may also qualify as a Joint Employer if two or more businesses exercise some control over the work or working conditions of an employee, such as with a temporary employment agency. For purposes of determining employer coverage under the FMLA, employees jointly employed by two employers must be counted by both employers, even if the employees are maintained on only one of the employer’s payrolls. Two (or more) businesses may simultaneously employ an employee, making them joint employers of the employee. For example, joint employment ordinarily will exist when a temporary employment agency supplies employees to a second employer. In that case, the employee must be counted by both employers when determining FMLA coverage.

Here are some facts you may find helpful:

Did you know that . . .
Employers who willfully violate FMLA’s posting requirement may be assessed a civil money penalty for each separate offense. Employers may download the DOL’s FMLA Poster for no charge by visiting the DOL’s website.

Did you know that . . .
An employee is eligible for FMLA if they have worked for a covered employer for at least 12 months (these do not have to be consecutive) and have worked 1250 hours in the 12 months leading up to the FMLA leave. In addition, they must work at a work site that employs 50 or more employees within a 75-mile radius.

Did you know that . . .
Covered employers who employ FMLA-eligible employees must maintain records that include the following:

  • Payroll employee data that includes the employee’s name, address, and occupation
  • Your employee’s rate of pay and terms of compensation,
  • The hours your employees work on a daily and weekly basis for each pay period
  • Additions to and deductions from wages, and total compensation paid.
  • The dates that the FMLA leave is taken
  • The hours of FMLA leave that is taken by your employee including hours taken in increments of less than a day,
  • All copies of FMLA notices that are provided by an employee to the employer and by the employer to its employees regarding FMLA (including any written request for leave from the employee)
  • Documents that include electronic records, describing your employees benefits or employer policies and practices regarding the taking of paid or unpaid leave as well as premiums paid

In addition, keep all documents regarding any disputes between the employer and an employee regarding the designation of leave as FMLA leave, such as emails or other written statements.

Did you know that . . .
As soon as an employer has enough information that indicates an employee may have a qualifying reason to take FMLA leave, the employer should initiate the FMLA leave process.  It is extremely important that the leadership team as well as the administrators play a vital role in ensuring FMLA compliance is met. This team must be able to recognize FMLA-qualifying reasons for leave as well proper initiation of the required notifications and eligibility requirements to satisfy the law. Providing FMLA training regularly helps to make sure those responsible for implementing the FMLA are up-to-date on the requirements of the law and the employer’s policy, procedures and practices. Making sure your leaders are in the know will help you stay in compliance and lower your organization’s risk.

Did you know that . . .
An employer could be exposing itself to risk and liability by failing to make a timely determination of eligibility or failing to provide notice to employees within the required time frame. Failure to timely notify employees of their eligibility status may constitute interference with, restraint, or denial of the exercise of an employee’s FMLA rights.

Did you know that . . .
The right to take FMLA leave applies equally to all employees regardless of their gender. For example: fathers are equally entitled to take up to 12 workweeks of FMLA leave for the birth or placement for adoption or foster care of a child and to bond with the child within 12-months from the date of birth or placement.

Did you know that . . .
Employers may not request a certification for leave to bond with a healthy newborn child or a child placed for adoption or foster care. However, employers may request documentation to confirm the family relationship such as a written confirmation or the birth certificate of the child.

Did you know that . . .
After receiving sufficient certification, an employer is not permitted to ask for more information, such as requiring a doctor’s note for each absence associated with that already-approved leave. Such a requirement may be considered interference with the employee’s use of FMLA leave.

Did you know that . . .
FMLA leave and workers’ compensation or short-term or long-term disability can run concurrently, provided the reason for the absence is due to an FMLA-qualifying serious health condition and the employer properly notified the employee that the leave would be counted as FMLA leave. Also worth noting, even though most state’s laws do not require an employer to continue an employee’s benefits while receiving workers’ compensation benefits, as long as workers’ compensation is running concurrently with FMLA, the employer is required to continue to provide benefits at the same level prior to leave.

Did you know that . . .
Separate from the employer’s ability to request that the employee provide a fitness-for-duty certification, employers may also require an employee to submit to an examination at the employer’s expense by the employer’s medical staff provided the examination by the employer’s medical staff is job-related and consistent with business necessity. An employer may not deny or delay reinstating an employee who has been absent on FMLA leave pending an examination by the employer’s medical staff. The employer may require the employee to submit to examination after reinstatement, including the first day of the employee’s reinstatement.

With so many moving parts, FMLA compliance is no simple task. Be sure you have a clear understanding of what is involved. Does your FMLA administrator have the knowledge, resources and time needed to properly administer, track and follow-up with FMLA leaves? If not, outsourcing this task may be the best way to lower your risk of a FMLA claim.

If you have any questions about East Coast Risk Management and the services we offer, please explore our website (www.eastcoastriskmanagement.com) or call (724) 864-8745.

Disclaimer: The information provided on this website is for informational purposes only and not for the purpose of providing legal advice. Use of and access to this website do not create an attorney-client relationship between East Coast Risk Management or our employment law attorney and the user or browser.

Posted in Human Resources | Tagged , , , ,

PTO: Is it Best to Combine Vacation and Sick Time?

by Nancy Owen, PHR

How does your company pay for employee time off? Vacation time? Sick leave? Or does it combine both into Paid Time Off (PTO) days?

Many employers simply do what they’ve always done and have never thought about other options. But it is worth considering the advantages and disadvantages of using the combined method before deciding what works best for your organization.

The advantages of the combined method:

  • When employees were asked how they felt about PTO, many reported feeling more empowered because they have more control over their own days off. They do not feel micromanaged. Instead, they appreciate the freedom to take whatever days they have accrued, for whatever reason, without the need to explain it to anyone. If they have accrued the time, they can simply request it without telling their supervisor about personal business or medical issues.
  • Your employees most likely think of PTO as a benefit. If they don’t they should. Combining vacation and sick time allows employees to take more time off for rest and relaxation if they do not need as much sick time during a year.
  • PTO leaves employees feeling less obligated to make excuses when they simply need a day off but are not sick enough to see a doctor and get a note. When vacation and sick time are combined, they won’t have to distinguish between a day to simply rest and relax and a day in which they are actually too sick to work.
  • PTO can be easier to administer. Since all days off fall under the same category, there is no need to establish or track the reason for the time off. You simply track the number of hours used.

The disadvantages of the combined method:

  • If your company is located where the law dictates that all accrued vacation is treated as wages upon termination, then the whole accrued PTO balance may need to be paid if an employee is separated. This expense may cause some companies to think twice about terminating an employee whose performance or conduct would otherwise warrant termination.
  • Employees who want to save all their PTO for vacation time, or who have already used up all of their PTO, may come to work when they are ill and may infect other employees.

What if sick leave is required by law? According to the Department of Labor, most private employers are not required by any federal law to offer paid sick leave to their employees. However, federal law does require public and private employers covered by the Family Medical Leave Act (FMLA) to give unpaid sick leave to their eligible employees, according to the provisions of the act. FMLA provides up to 12 weeks of unpaid leave for certain medical situations for either the eligible employee or a member of the eligible employee’s immediate family. Covered employers may choose to require employees to use any paid time off they have available while on an FMLA leave, as long as they require the same for a non-FMLA medical leave.

Federal law does require some employers to offer paid sick leave. Employers affected by Executive Order 13706, signed by President Barack Obama on September 7, 2015, includes companies that enter into covered contracts with the Federal Government. Covered employers must provide covered employees with up to seven days of paid sick leave annually, including paid leave allowing for family care.

Paid sick leave also may be required under state or local law. An increasing number of states, counties and municipalities are implementing paid sick leave laws. Below is a list of states who currently have statewide paid sick day laws:

  • Arizona – Earned Paid Sick Time (2016 approved ballot measure; takes effect July 1, 2017)
  • California – Healthy Workplaces, Healthy Families Act of 2014 (AB 1522)
  • Connecticut – Paid Sick Leave Act
  • Massachusetts – Earned Sick Time for Employees (2014 approved ballot measure)
  • Oregon – Mandatory Provision of Sick Time (SB 454)
  • Vermont – Act 69 (H 187)
  • Washington – Paid Sick Leave (2016 approved ballot measure; takes effect Jan. 1, 2018)
  • Washington D.C.- Employee Sick Leave

Each state or local law has unique provisions and your organization must stay on top of any new laws and any amendments. Be sure to check the requirements for all the areas in which your company operates. Even in these areas, a separate sick leave policy may not be needed as long you have a PTO policy that offers adequate allowances.

Legislators at the federal, state and local levels continue to consider various new laws pertaining to paid sick leave and paid family leave. Be sure to watch our blog for updates as news develops. In the meantime, if you have any questions about East Coast Risk Management and the services we offer, please explore our website (www.eastcoastriskmanagement.com) or call (724) 864-8745.

Disclaimer: The information provided on this web site is for informational purposes only and not for the purpose of providing legal advice. Use of and access to this Web site do not create an attorney-client relationship between East Coast Risk Management or our employment law attorney and the user or browser.

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Travel Time: When to Pay and What to Pay?

by Nancy Owen, PHR
and Laura Pokrzywa

Do you always have to pay your employees for time spent traveling? The answer, of course, is “it depends.”

The first consideration is the Fair Labor Standards Act (FLSA) which is the federal law that establishes minimum wage, overtime pay eligibility, recordkeeping, and child labor standards. The FLSA also gives the Department of Labor the authority to recover back wages and liquidated damages (owed to the employee), and to assess civil money penalties (owed to the government), in instances of minimum wage and overtime violations. So it is worth ensuring that you are paying your traveling employees correctly. The FLSA has a lot to say about travel time. One of the most basic provisions is this: time spent traveling during normal work hours is considered compensable work time.

In addition to federal law, employers must look at state laws. Many states have labor laws that give employees greater rights than federal labor laws – rights that go beyond just the time spent traveling. For example, although federal law does not require reimbursement for employee travel expenses, California law does have such a requirement. California mandates that employers indemnify employees for all necessary expenditures and losses that are work related. When it comes to travel pay, like all other employment issues, employers must know and follow the labor laws for each state in which they operate.

As we look into more details, remember that we are only considering travel pay for non-exempt employees. We are not referring to exempt employees because they are paid the same salary each week regardless of how many hours they work. When an exempt employee travels after hours or travels on days off, including weekends or holidays, their salary is unaffected. So, for the rest of this article, “employee” refers to non-exempt employees, including those that are paid by salary.

You’ll be glad to know that commute time is generally not considered compensable time. When your employee travels to work before their regular workday begins, and from work after the regular work day ends, that time is not considered work time and therefore it is not payable time.

Let’s look at when your employees should be paid:

  • One exception to the general rule regarding to and from work is if an employee is called back to work for an emergency. In that case travel time from his home to the work site and back is compensable and he must be paid for that time.
  • If an employee is asked to report to a location other than the normal work location, you would have to pay for any travel time that exceeds the employee’s usual travel to and from their normal reporting location.
  • When your employee travels during the workday as part of their job, such as travel from one job site to another, or from one client location to another, that time is counted as hours worked and therefore must be paid.
  • If your employee is traveling away from home for an overnight, he/she is paid for any travel time that occurs during the employee’s regularly scheduled work hours — even if the travel falls on a day they are not normally scheduled, such as a weekend or holiday. For example, let’s say Mary is regularly scheduled to work from 7:30 AM to 4:00 PM, Monday through Friday. She is given a special assignment that requires her to travel by train on Sunday, from 2:00 PM to 6:00 PM. Mary is owed travel pay for the time she spent traveling between 2:00 PM and 4:00 PM on Sunday, because that is the portion of her travel that cut across her regular work hours, even though it is not a regular work day.
  • Time traveling away from home for an overnight assignment, travel outside of regular working hours as the driver of a vehicle must be paid. NOTE: As we saw in the example above, the time the employee spends traveling away from home outside of regular working hours as a passenger in a car, van, airplane, train or bus does not have to be paid. If Mary was driving a vehicle to get to her new assignment, she would be owed travel time pay for all four hours of her trip, not just the time that cut across her regular work hours.
  • Time spent traveling to training must be paid if any one of the following circumstances apply:  (1) the training is within the employee’s normal work hours; (2) the training is NOT voluntary, but is required; (3) the training is job-related; or (4) the employee is performing work during the training time.

Just a few more considerations as you decide who must be compensated for travel time:

  1. Is your employee engaged in work before they commute or during their commute (taking phone calls or running errands for work, for example)? If so, it’s compensable work time.
  2. Is your employee required to stop by the shop to pick up necessary tools, equipment or instructions before traveling to the worksite? If so, travel to the worksite is compensable work time.
  3. Is your employee traveling on a special assignment that does not require an overnight stay? If so, the time spent in traveling to and returning from the other city is work time, but you may deduct the time the employee would normally spend commuting to the regular worksite.

Now that you have determined what time is compensable, did you know that you can pay for travel time at a different rate?

Compensable travel time can be paid at a different rate of pay than the employee’s regular straight pay rate, as long as that travel pay rate is not lower than minimum wage. Please note such an arrangement should be clearly spelled out in a written wage agreement that the employee has signed. Care also should be taken to accurately record all compensable travel time as distinct from regular work time.

Of course, all compensable time must be included in overtime calculations, including compensable travel time. So how do you calculate overtime due when an employee is being paid two different rates of pay in one workweek?

According to the U.S. Department of Labor Wage and Hour Division’s publication, Regulations Part 778: Overtime Compensation, “Where an employee in a single workweek works at two or more different types of work for which different non-overtime rates of pay (of not less than the applicable minimum wage) have been established, his regular rate for that week is the weighted average of such rates. That is, his total earnings (except statutory exclusions) are computed to include his compensation during the workweek from all such rates, and are then divided by the total number of hours worked at all jobs.”  Let’s consider an example to clarify.

EXAMPLE: Bob worked 50 hours in one week. He spent 40 hours at worksites @ $15/hr and 10 hours driving between worksites @ $8/hr.

Overtime is always one and one half the “regular rate.” The regular rate in this case is the “weighted” rate calculated by dividing the total money earned ($680) by the total hours worked (50).

Bob earned a total of $680 (40 hours at jobsites @ $15 PLUS 10 hours traveling @ $8 = $680), before overtime is added. Bob’s “weighted” rate for this workweek will be $680 divided by 50 hours total, for a rate of $13.60. This is the straight time for all 50 hours. Bob is now due the additional “one half” for the 10 hours of overtime he worked. So we need to multiply $13.60 by .05 to get the overtime rate of $6.80. That rate times the 10 hours of overtime means Bob is owed an additional $60.80 for overtime. Add that to his regular pay of $680 and we owe Bob a total of $740.80 for the workweek.

Don’t forget that all compensable travel time must be considered when calculating overtime for the workweek.

If you have any questions about East Coast Risk Management and the services we offer, please visit our website (www.eastcoastriskmanagement.com) or call (724) 864-8745.

Disclaimer: The information provided on this web site is for informational purposes only and not for the purpose of providing legal advice. Use of and access to this web site does not create an attorney-client relationship between East Coast Risk Management or our employment attorney and the user or browser.

Posted in Human Resources | Tagged , , , ,

Outsourcing your HR Department: Why it could be a win, win strategy.

by Derek Ross

Maybe you have outsourced a portion of your business (i.e., contracted with a third party to have them administer a program or department that was formerly internally administered). Have you ever considered doing the same with your Human Resources administration?

It may not have made sense in the past considering the Human Resources Department (or Personnel Department as it used to be called) mostly concerned itself with employee record keeping, recruitment, training and wage administration. For many companies, the HR department hardly ever had any say in the company’s strategies or objectives. Nor did the HR leaders sit at the table with other leaders. It was purely an administrative and staff function. But times have changed.

Human Resources is no longer referred to as an administrative function but has grown into a strategic partner with responsibilities for:

  • Recruitment – HR has a direct impact on your organization’s profitability by increasing staff engagement and ensuring compliance in all recruiting and hiring procedures.
  • Safety – HR has a responsibility to employees, managers and the organization’s leadership to ensure that everyone in the workplace is aware of all health and safety programs. Your HR department should organize policies and procedures that ensure the safety of everyone in the workplace.
  • Compliance – Many complicated and detailed regulations govern the employment relationship such as the Fair Labor Standards Act (FLSA), the Civil Rights Act (Title VII), the Family and Medical Leave Act (FMLA), the Americans with Disabilities Act (ADA), workers’ compensation laws, immigration laws, anti-retaliation laws, etc., etc. Your HR department is responsible for administering their functions in such a way as to ensure that the organization is compliant with all federal, state and local laws that apply. Your HR department is key to managing risks and making sure the company avoids costly fines and lawsuits that result from non-compliance.
  • Compensation and Benefits – Whether it’s determining who is exempt and who is non-exempt, addressing travel pay, commission plans, or sorting out benefits questions, your HR  professional must understand this highly regulated area. From the Employee Retirement Income Security Act (ERISA), which has to do with reporting, disclosure, and fiduciary requirements, to the Affordable Care Act (PPACA), this arena must be carefully navigated by someone who knows the regulations and can help company leaders as they consider compensation and benefits options for employees.
  • Employee Relations – HR consults and facilitates employee relations issues and resolution strategies for workplace issues. In this role, HR should assist in the communication between employees and supervisors, corrective action and planning, disciplinary actions, and explanation and clarification of policies and procedures. They play a key role in bringing the employees together, engaging them, and educating them on an efficient work flow. HR works with employees to strengthen their bond as co-employees and teammates. As we have mentioned in previous blogs, research proves that if the employees are satisfied with their jobs, they tend to remain happy and avoid conflicts with each other. When employee relations are a priority, individuals develop a feeling of trust and loyalty towards their organization and don’t waste their time and energy in unproductive tasks.

So why do companies outsource their HR Department?

The main reason is to cut costs. It can be quite expensive to have a team of specialized Human Resources Professionals managing and administering all those HR functions in house. The cost for an HR Manager or HR Director alone typically starts in the $70,000-$90,000 range — and that does not count benefits or the salaries for the rest of the staff needed to manage all aspects of HR. Companies are finding that when they outsource at least some part of the HR functions, they drastically lower annual overhead and, in many cases, have avoided expensive payouts that could have resulted from high risk situations.

Convenience is another key benefit. When you outsource HR, you should have access to a whole staff of professionals with great resources, all readily available when you need them. Their quick action and extensive resources will help you control legal risks and streamline the HR function. In many cases, outsourcing HR also allows companies to offer employees services that could otherwise not be provided due to limits on the in-house staff’s time and resources.

Some organizations are understandably reluctant to outsource all of the human resources functions. Giving up that control can be scary. Many of our clients prefer to have our HR team partner with their in-house HR teams. We are able to reduce their overall workload and to provide specific expertise which increases employee productivity, allows our client’s leaders to focus on other core business needs, and ultimately improves the client’s bottom line.

When choosing to outsource any part of your business, you will want to ensure that your vendor can be trusted, has a solid track record, and that they will partner with you, customizing their services to meet your needs. Your HR consulting company needs to be accessible, allowing you to have real-time assistance so that you can limit your liability in the midst of a critical situation, and prevent urgent issues from becoming crises.

So, whether you’re examining the direction of your human resources department or not, consider outsourcing all or part of your HR tasks and responsibilities to reduce costs, limit risks, and improve productivity.

If you have any questions about East Coast Risk Management and the services we offer, please visit our website (www.eastcoastriskmanagement.com) or call (724) 864-8745.

Disclaimer: The information provided on this web site is for informational purposes only and not for the purpose of providing legal advice. Use of and access to this web site does not create an attorney-client relationship between East Coast Risk Management or our employment attorney and the user or browser.

Posted in Human Resources | Tagged , ,

Can You Discipline an Employee for Violating a Safety Rule?

by Renee Mielnicki, Esquire

For many of you, workplace safety is a huge part of your organization. A lot of our clients operate very labor intensive companies such as construction, manufacturing and oil and gas. The physical requirements involved in these types of industries are demanding which makes a workplace safety program very important. Safety is regulated by a lot of different laws, but one of the most important ones is the Occupational Safety and Health Act (the “OSH” Act”). Please note that the OSH Act doesn’t apply to all employers. For example, it doesn’t apply to government employers, but it does apply to most private employers. For more information about the OSH Act, and to see who is covered, click here.

The OSH Act does a lot of things including setting forth safety standards for employers covered by the Act. It allows employees to make complaints about unsafe working conditions to OSHA, the federal agency responsible for enforcement of the OSH Act. For that reason, it prohibits employers from disciplining or discharging employees in retaliation for exercising their rights under the OSH Act. Examples of some employee rights under the OSH Act are the right to make a complaint to the Occupational Safety and Health Administration (OSHA), testifying against an employer regarding an unsafe workplace and the right to report workplace injuries. Lastly, the OSH Act prohibits employers from discriminating against employees for exercising their rights under the OSH Act.

A lot of our clients are faced with unique challenges as far as how and when to discipline an employee who has broken a safety rule. Consider these examples:

  • A welder fails to wear required protective eye wear and as result sustains and reports to his employer an eye injury.
  • A construction worker fails to wear a required helmet and is injured by an object that falls from above. His injury could have been prevented had he been wearing the required helmet. The construction worker reports this injury to his employer.

So what can these two employers do about the violation of the safety rules involved? OSHA has published memos and guidance relating to these types of situations. In a nutshell, OSHA seems to recognize the need of employers to have and enforce legitimate workplace safety policies to protect its workers from getting injured on the job. However, discipline relating to breaking those rules has to be delicately balanced with the rights that employees have to report injuries to their employer. Any form of discipline for violating a safety rule that follows an employee reporting an injury could be seen as retaliation or discrimination under the OSH Act. Before imposing discipline on an employee for violating a safety rule following a workplace injury, here are some things to consider.

  • Does the employer have a clear, unambiguous safety policy that is written and provided to the employees concerning the rule that was violated?
  • Was the employee provided with training relating to the safety rule that was broken?
  • Is the discipline the employer wishes to impose proportional to the infraction committed by the employee? In other words, does the punishment fit the crime?
  • Has the safety rule that was violated been consistently applied and enforced by the employer in the past, particularly with regard to employees that violated the rule and were not injured as result?

The goal here is for the employer to be able to show that the discipline it wishes to impose is solely related to breaking the safety rule and has nothing to do with reporting the injury. If the employer is able to do this, it will be in a decent position to defend a claim that it has violated the OSH Act by punishing the employee after reporting a workplace injury. Of course, like any other form of discipline, the employer will need good documentation of the discipline and must place that documentation in the employee’s personnel file.

Another issue for consideration in such a situation is as follows. Most employees who sustain workplace injuries make a claim for workers’ compensation. Employees disciplined or terminated after making a workers’ compensation claim can also make a legal argument that is similar to the ones that they can make under the OSH Act. In a nutshell, employees have the right to file a workers’ compensation claim for a workplace injury. Discipline or termination following such a claim can give rise to what is known as a violation of public policy claim (meaning that it is a violation of public policy to punish an employee for exercising their right to make a workers’ compensation claim after a workplace injury). Similar precautions and considerations as highlighted under the OSH Act discussion need to be considered relating to this type of claim.

Seems like a lot to take in, I know. But, guess what?

East Coast Risk Management is going to be hosting a FREE WEBINAR on this very topic on May 8th at 11:00 a.m. EST.

ECRM’s William Paletski, an experienced safety professional, and James Spencer, a senior HR professional with ECRM, will present the webinar together. Mr. Paletski will discuss the basics of the OSH Act and a safety program. Mr. Spencer will then discuss, in more detail, the implications of disciplining an employee who has broken a safety rule and been injured. Watch your email for registration details which will be coming out soon. We hope you can join us.

Disclaimer: The information provided on this web site is for informational purposes only and not for the purpose of providing legal advice. Use of and access to this web site does not create an attorney-client relationship between East Coast Risk Management or our employment attorney and the user or browser.

Posted in Human Resources | Tagged , , , ,

Avoiding Claims of Workplace Harassment

by Jennifer Roman

Sterling Jewelers, better known as Kay Jewelers or Jared Galleria of Jewelers, has recently been in the news because of a class action claim against the retailer. Various statements from the arbitration of the lawsuit filed by some 69,000 women employed or formerly employed by the company have been released. In addition to the claims filed for promotion and pay discrimination, widespread allegations of sexual harassment have been snowballing.

The claim was originally filed in 2008 by around a dozen females who worked for or formerly worked for the companies. As mentioned above, the number quickly grew to around 69,000 women alleging gender discrimination and sexual harassment. Claims include allegations of unequal pay and promotions, sexual groping, sex in exchange for promotions, and company-wide events in which all of this behavior was widespread and included upper echelon management. In addition to these claims, many women allege after reporting such behavior to the corporate hotline that they were subsequently terminated.

These allegations will result in substantial cost to the company, not only in legal fees and potential damages, but also in customer and employee retention. In the last year alone, the cost of shares dropped over 45%. In addition, the company will naturally experience immeasurable difficulty attracting and retaining talent. All of this damage has occurred prior to any judgment being entered in the class action claim.

Can a company avoid such liability?

The answer is maybe. The fact is, in legal claims, an individual or individuals outside of an organization will make the decision as to whether the company broke the law or not, and there are many factors that will play into the decision. Some of the things that might be examined are training programs, review practices, compensation comparisons, management of complaints and investigations and subsequent disciplinary actions. From a legal standpoint, such things should be put into place to reduce the company’s risk of liability for such claims.

The first thing a company can do to avoid claims of harassment and unprofessional behavior is to implement a policy against harassment. This policy should include all types of harassment and a procedure to follow in order to report any allegations to the company as well as an outline of the investigation process. Following the implementation of a harassment policy, organizations should implement a formal training process for new hires as well as annual refreshers for employees.

Once a policy and training process is in place, a company must take steps to ensure that their human resources professionals and management team are adhering to the process that is outlined in the policy. This is probably even more important than having the policy or training process in place. The strength of a policy is only as strong as the consistent, practical application of it. Each claim, no matter who makes the claim or who the allegations involve, must be investigated thoroughly, fully implementing the process outlined in the policy. This can become extremely time-consuming for those conducting the investigation and sometimes even uncomfortable if it involves a high level manager, but proper investigation, documentation and implementation of the disciplinary process can assist a company when defending claims. It is important to take EVERY claim seriously and those who have had experience with such claims know that initial impressions of the validity of claims should not affect the investigation process.

Further, once a claim is made, it is important to protect the alleged victim, witnesses and others participating in the investigation from potential retaliation. Retaliation is tricky, because whether the claim is valid or not, if an employee reports the allegations in good faith, they are protected from retaliation. Retaliation can include any negative or adverse job action from increased scrutiny in performance evaluation, all the way up to termination. It is important for those investigating a claim to advise all those involved about retaliation and what action to take if they feel they are being retaliated against.

In general, performance evaluations should be uniform in an organization and use measurable results. It is a good practice to conduct regular compensation comparisons examining rates of pay by position, performance ratings, and years of service, to ensure that there are no disparities in pay. Developing ranges of pay for positions is usually a good way to ensure that no employee is too far below or above the average.

Putting such practices into place will not fully protect any company from liability, however it will increase the chances that the company will be successful in defending claims of discrimination and harassment.

If you are an employer with questions about compliance issues, you can contact our HR professionals at hrhelpline@eastcoastrm.com. Please note, the HR helpline is for employers only. Employees with HR-related questions should consult their company’s HR department or an attorney.

Disclaimer: The information provided on this web site is for informational purposes only and not for the purpose of providing legal advice. Use of and access to this web site does not create an attorney-client relationship between East Coast Risk Management or our employment attorney and the user or browser.

Posted in Human Resources | Tagged , , , ,

Four Common Mistakes That Could Put Your Business at Risk

by Jennifer Roman

The internet is a great resource for finding information related to employment law. Many employers use various internet resources to assist them with education regarding wage and hour laws, terminations and various other issues that they encounter while managing day-to-day issues at their business. While there are many credible sources online to find information, the interpretation of the materials and the knowledge of the laws are key to putting in place proper practice when it comes to legal compliance. There are several common mistakes employers make when interpreting the law that can lead to potential legal action, penalties and damage the reputation of a business.

1. At-Will Employment
The first common misconception is frequently encountered in states where employment is “at-will”. Most employers understand the concept of at-will employment, which means that an employer can terminate any employee at any time for any reason or conversely, the employee can terminate the employment relationship for any reason at any time. The misconception with at-will employment is that even though an employer has the right to terminate an employment relationship, a reason should always be identified and documented. In cases where any type of discrimination is alleged by the former employee, the employer must be able to prove that the reason for termination was not discriminatory. Properly documenting events leading up to a termination is critical when defending a business against a discrimination claim. It is important to have a process in place, whether the issue is regarding poor performance, a policy violation and even company downsizing.

2. Management Discretion
Policies that are applied at the discretion of the manager or business can become a huge legal liability to businesses. Many employers believe that if a policy is written and specifically says that the policy will be subject to the discretion of the business or the manager, this will protect their practice. Discretion can be a precarious practice if it is not applied consistently throughout the business over time. When a complaint is being investigated with the Equal Employment Opportunity Commission or the Human Relations Commission, it is common for an agency not only to ask for information regarding the complainant, but also any employees who were in a similar situation. When a policy is practiced at the discretion of one or more people, over time, it can inadvertently be applied in a different manner. The result of this could be the appearance that the business treated two employees differently in the same situation. This could cause the perception of discrimination rather than simply losing track of past practice.

3. Classification
The classification of certain employees also tends to be problematic for employers when they are making the decision as to whether an employee should be exempt or non-exempt. Many employers are familiar with some of the federal guidelines and tend to generally classify employees based on job title rather than the actual responsibilities involved in the position. Information technology professionals and administrative employees are those that are most frequently misclassified. This is especially problematic when an employee who is actually non-exempt is misclassified as exempt. This mistake can result in the requirement to pay back-wages to your non-exempt employee. In addition to this, it is important to know and apply the criteria used to distinguish the difference between a W-2 employee and an independent contractor. The Department of Labor, Internal Revenue Service and other state agencies have combined efforts in recent years to provide a more aggressive approach to addressing misclassifications.

4. Family Medical Leave Act (FMLA) Administration
One of the more complex human resources issues that some companies must deal with is the administration of FMLA. It is not enough to know that an employee is entitled to certain benefits or how much time they are entitled to when it comes to FMLA. There is a multi-faceted process involved from paperwork to tracking to recertification. Knowing how to administer FMLA and when to look at ADA and ADAAA compliance in connection with FMLA is critical to avoiding legal liability. Intermittent FMLA presents a host of areas that a business may need to pull in to the process, which includes how the business’ paid time off, attendance and light duty policies interact with their FMLA administration. Beyond all of this, a point person must properly monitor each leave without improperly disclosing information which could violate FMLA regulations.

Due to the complexity and overlap of regulations that govern employment law, it is paramount for a business to use professionals who are properly trained and educated in such areas to avoid potential liability. Regardless of an organization’s intent, if there is a violation in any of these areas, it is likely the cost will be high to remedy the situation. It is best to take a proactive approach to legal compliance rather than waiting for an issue to arise.

If you are an employer with questions about compliance issues, you can contact our HR professionals at hrhelpline@eastcoastrm.com. Please note, the HR helpline is for employers only. Employees with HR-related questions should consult their company’s HR department or an attorney.

Disclaimer: The information provided on this web site is for informational purposes only and not for the purpose of providing legal advice. Use of and access to this web site does not create an attorney-client relationship between East Coast Risk Management or our employment attorney and the user or browser.

Posted in Human Resources | Tagged , , , , ,

Don’t Wait to Evaluate: Performance Improvement Plans for Poor Performers

by Jennifer Roman

Many of us have been there. We are frustrated, the employee is frustrated or upset, and both of us are losing the motivation to move forward in a productive way. From repetitive directives to repetitive errors, the tension is continuing to grow. As supervisors, we begin to lose patience and dread interactions with the employee, because all seem to focus on negativity and difficult conversations. The friendly exchanges between you and your employee have long since become a memory and every day you are overwhelmed with the additional work you are doing because you have a poor performer on your team.

One of the most difficult aspects of personnel management is dealing with poor performance. It is a burden on management as well as peers when an employee is not willing or able to pull their weight. There are two common mistakes that supervisors make when dealing with performance issues. The first is that they continue to address each issue separately. The second is that they wait until the annual performance evaluation is due to communicate their overall dissatisfaction with performance.

When a supervisor begins to recall multiple instances of the same mistake or clusters of errors over periods of time, it is likely time to address it from this perspective with the employee. Continuing to address each issue independently does not always give the employee the big picture perspective. Before you ever get to a performance improvement plan, your meetings should be addressing a primary error as well as the ones that you have observed over time. This allows the employee to understand the compounding impact each error is having on your assessment of their overall performance. This will give the employee an opportunity to amend the performance issues before it becomes critical to their continued employment with the company.

Communication is key when you begin to notice performance issues. Many managers have a tendency to avoid addressing problems while frustrations build, only to react over-emotionally when reaching the breaking point. This is not fair to the supervisor, the team or the employee. Keeping an open line of communication and setting a serious tone with purpose is critical to creating a platform for which improvement can be achieved by the employee. Address every problem, every time. Keep your emotions in check when communicating your observations to the employee.

When all else fails, PIP! Performance Improvement Plans are very similar to performance evaluations, but one should not be substituted for another. A performance evaluation is a regular review of performance to document progress, or lack of progress, for employees during a designated period of time. Many companies who provide merit increases or bonuses directly tie their evaluation process to compensation. A performance improvement plan is used when improvement is needed within a certain period of time to maintain employment with an organization.

Performance Improvement plans outline performance issues and necessary goals which need to be met over a period of time, typically ranging from 30-90 days. Performance improvement plans not only require effort on the part of the employee, they also require additional effort on the part of the supervisor. Prior to putting together a performance improvement plan, the supervisor must be documenting specific instances of poor performance. This will allow the supervisor to communicate specific examples to the employee where their performance is not meeting expectations.

A solid performance improvement plan should have four primary components: a statement of problem areas in performance, requirements for improvement, measures for improvement, and the method you will use to track progress. Once your performance improvement plan is finalized, you should schedule a meeting with the employee. During the meeting, you will have to properly communicate that the employee’s performance is not meeting expectations and that if it does not improve, they will be subject to termination.

It is important during the performance improvement period to meet with the employee regularly to give them feedback on your observations and communicate how they are progressing through the improvement period. Those meetings should be documented and retained by the company.

In the end, the performance improvement plan will serve one of two purposes: the employee will be able to meet expectations and maintain their position with the organization or you will have a well-documented record of the reason that the employee was terminated. That documentation will reduce liability for the company if the employee chooses to take legal action as a result of the termination.

Disclaimer: The information provided on this web site is for informational purposes only and not for the purpose of providing legal advice. Use of and access to this web site does not create an attorney-client relationship between East Coast Risk Management or our employment attorney and the user or browser.

Posted in Uncategorized |

President Trump’s Impact on Business

by Mark Beck, COO, ECRM

Now that it is official and Donald J. Trump has been sworn in as the 45th President of the Unites States, he has promised to promote sweeping, potentially dramatic changes to our government that could have a big impact on all Americans.

In particular, President Trump has vowed to slash government regulations that could reduce the regulatory cost to businesses by at least 10%. More specifically, he is likely to nominate more conservative members to the National Labor Relations Boards which may lead to more business-friendly decisions.  He may rescind changes to the EEO-1 reporting requirements that were to go into effect next year. He is expected to appoint more conservative judges to federal courts, including the Supreme Court.  Many are speculating that he may also require more employers to use the E-Verify system. He can also change the labor law landscape by rolling back many of former President Obama’s executive orders and dismantling Obamacare.

Our Human Resources team at East Coast Risk Management will be monitoring any changes that impact our clients and we will, of course, keep you informed through notices and this blog.   On behalf of the entire team, thank you for your continued interest and support of ECRM.

Posted in Human Resources | Tagged , , , ,