The Cost of Misclassified Employees

This week the press had tons of stories about how hiring was up and the economy was on the rebound. I stumbled on a story that talked about how few people had filed for unemployment over the last month and discussed how temporary employees were increasing. Reflecting on those articles I realized that contract employment was on the rise as well.

It made sense. An employer could save some money by utilizing temporary and contract employees due to the employee cost being reduced making getting ramped in staffing more affordable. After all contract employees don’t require employee taxes (unemployment and work comp premiums) be paid.

BEWARE!!! Both state and federal governments are cracking down HARD on employers who incorrectly classify an employee as a contractor. The back unpaid income taxes, unemployment compensation and work comp premiums owed for misclassified employees will eat up any savings the practice may have provided the employer. Add to the fact that there are fines, and potential back wages, and the impact of misclassification of employees could cost a small business …everything!

President Obama has sought additional funding to target businesses who misclassify employees and the state governments are not far behind. There are more that 300 new investigators targeting businesses just looking to find misclassified employees. The fines and back wages often run into six figures.

Unlike so many other employment related issues, obtaining protection from the expensive risk of being caught with misclassified employees, is very easy and cost effective. If your business is in the area of Trucking/Transportation, Construction, Manufacturing, IT or Home Health Care, your industry is being looked at very closely. If your business is not one of these industries, you are not immune. Investigators are looking everywhere. When government budgets are so tight, any chance to recoup unpaid funds is high on the government’s priority list.

When was the last time you evaluated how all your employees were classified? When was the last time you reviewed the differences between and employee and independent contractor? When was the last time you thought about your employee hiring practices. 2011 is the year to get it done. Delay and the government just might do it for you at a very high cost, maybe the cost of your business. The cost of a professional independent review of your hiring practices is a fraction of the impact of fines and potentially the loss of your business.

Happy New Year!

Glenn Brown is the Co-Founder and Chairman of the Board of G & J Consultants, LLC. In addition to having directed the HR Department of a health care services company, Glenn is an attorney with 15 years experience assisting businesses of all sizes and industries in complying with employment and labor legal issues. G & J Consultants specializes in providing small and medium sized businesses with traditional HR services as well as compliance with employment laws and regulations.

Will it be a happy new year for your business?

I recently heard that the federal government was hiring more investigators. In addition to those employers who have mis-classified their employees and failed to pay overtime due, the government is looking for employers, who have been lax in their handling of I-9s documenting their employee’s legal right to work in the U.S, who prevent employees from exercising their employment rights, or ignore their employees’ well being.

Just last month the National Labor Relations Board weighed in and is watching how employers handle employees who use social networks to complain about their work, co-worker, bosses and working conditions.

It appears to me, also a small business owner, that unless you are paying close attention to managing your employee relations, the chances of running afoul of any number of regulations, laws or practices is growing easier by the minute. The really frustrating thing is that I seem to spend more time managing my HR than growing my business. HR and employment issues impact every aspect of my business and if you think about for more than a minute, I bet that you can (and do) say the same thing. Thank goodness that I know exactly what I need to do to solve my HR issues. It is my job to keep fully abreast of legislation, court decisions and regulatory adjustments, so I am pretty sure that no “surprise” inspection will cost my business any part of my hard earned income.

Our company employee handbook is up to date and fully compliant with all federal, state and local laws that apply to me and my business. We have in place standard policies and procedures for handling all types of employment issues that may come up. Our paperwork and employee files are current and accurate, our leave policies are consistent and comply with all the leave policies required by the FMLA, ADA and Work comp.

Of all the things that can impact my business I am in control of my employee relations and fully compliant with every law and duty I have to obey as a business. I am ready for 2011. I hope you can say the same thing. Happy New Year!!!

Glenn Brown is the CEO of G & J Consultants, LLC. In addition to having directed the HR Department of a health care services company, Glenn is an attorney with 15 years experience assisting businesses of all sizes and industries in complying with employment and labor legal issues. G & J Consultants specializes in providing small and medium sized businesses with traditional HR services as well as compliance with employment laws and regulations.

I-9 Audit gets cooperative company a million dollar fine

Recently a $1,047,110 fine settlement was reached against a large clothing retailer for violations of the Immigration and Nationality Act. In 2009, the U.S. Immigration and Custom’s Enforcement Office of Homeland Security Investigations put together a plan to reduce the demand for illegal employment opportunities. This has created the greatest number of penalties, both civil and criminal, imposed by ICE in the past year.

The case involved how the clothing company verified the employment eligibility of its employees. The retail store in Michigan had been using an electronic system to verify I-9 information. The investigation found many deficiencies, mostly technology-related. The company was cooperative and have since changed their compliance program. Fortunately, no instances of knowingly hiring someone unauthorized were found, however the company still received over a million dollar fine.

PTO and the upcoming holidays

Time Off and Pay Requirements on National Holidays

As the holidays approach, ten national holidays are authorized by federal law. A private company is not required by law to observe national holidays by providing the day off to employees. There are several matters of law to keep in mind, however:

• The Fair Labor Standards Act (FLSA) does not require companies to pay non-exempt (hourly) employees for time off on national holidays, but companies may do so. Exempt (salaried) employees who are given the day off, however, must be paid their full weekly salary (assuming they worked or took paid leave during the week in which the holiday falls).
• One of the national holidays — Christmas Day — is a religious holiday, but there are many other religious holidays and observances during the year that are not nationally recognized. Employers are obligated to provide reasonable accommodation for the religious practices of employees. A reasonable accommodation might be allowing an employee to take unpaid leave, personal leave, or paid vacation time for a religious observance that falls on a regular workday. Another option is to offer a “paid floating holiday” so that employees can choose a religious holiday to observe by taking paid time off.
• Paid or unpaid time off may be specified in government contracts covered by the McNamara-O’Hara Service Contract Act or the Davis-Bacon and Related Acts, or by union contracts.
• For federal government workers, the national holidays are called “federal holidays” and all ten holidays are paid days off.

For reference regarding the FLSA, click the link below.

http://www.dol.gov/dol/topic/wages/holiday.htm#doltopics

OSHA News Release

Statement of Labor Secretary Hilda L. Solis on reported decline in workplace injuries and illnesses

WASHINGTON — The U.S. Department of Labor's Bureau of Labor Statistics today announced that nonfatal workplace injuries and illnesses among private industry employers declined in 2009 to a rate of 3.6 cases per 100 equivalent full-time workers, down from a total case rate of 3.9 in 2008. BLS also reported a decline in the total number of cases from 3.7 million in 2008 to 3.3 million in 2009. Secretary of Labor Hilda L. Solis issued the following statement:

"While the reported decline in workplace injuries and illnesses is encouraging, 3.3 million workplace injuries and illnesses are 3.3 million too many. No worker should fear being injured or made sick for a paycheck.

"Complete and accurate workplace injury records can serve as the basis for employer programs to investigate injuries and prevent future occurrences. Most employers understand this and do their best to prevent worker injuries, but some do not. That is why my department's Occupational Safety and Health Administration is aggressively working to ensure the completeness and accuracy of injury data compiled by the nation's employers. We are concerned about the widespread existence of programs that discourage workers from reporting injuries, and we will continue to issue citations and penalties to employers that intentionally under-report workplace injuries.

"Too many Americans suffer each year from preventable injuries or illnesses they received while on the job. Even in these difficult economic times, we must keep in mind that no job is a good job unless it's a safe job."

Diversity??? What Diversity??

In 1964 with much fanfare and congratulations, the Civil Rights Act was passed and signed into law. Some expected discrimination to be banished, particularly from the workplace, and experience, talent and knowledge would determine who was hired and promoted not race, sex, national origin, age, religion or disability.

46 years later, we are “surprised” that far from eliminating discrimination in the workplace it is apparently on the rise. It seems that businesses are getting more mired in the cycle of discrimination than ever before. In the last 20 years as corporations and businesses developed and “mandated” diversity programs and training in their companies, rampant racial discrimination in hiring, promotions and wages is continuing without abatement. Racial harassment claims reported to the federal EEOC have doubled during the same 20 year period and data produced by the U.S. Bureau of Labor Statistics continues to support the contrary impact of corporate diversity programs.

If the Fortune 500 companies can’t get it right, with all the staff and budgets that they have invested in diversity initiatives, does the small business have any chance of escaping increased federal and state enforcement programs?

I believe the answer is a resounding YES, YOU CAN!!!

The problem is that corporate diversity programs seem to have lost the target…the reason for their existence. Corporations are using “diversity” as a marketing tool and looking to see how it impresses and attracts more clients which in turn affects their bottom line. Small business has a more immediate need. Hiring and maintaining an outstanding and productive workforce.

The second motivation for diversity in small businesses is eliminating expensive EEOC complaints and lawsuit. Small businesses can’t support issues with diversity like larger corporations: a $2.5 million settlement for racial harassment (Lockheed Martin); $1.26 million class action lawsuit settlement (Bahama Breeze) or even a $400,000 settlement of a racial harassment charge (Big Lots), but If done correctly, and properly reinforced by owners and managers, diversity in your workplace reaps significant and huge benefits.

Having a workforce that works as a team, operates at a high level of productivity and is cohesive and supportive of each other takes less time to manage, generates better products and services, and improves customer service and creates higher profits.

If you need help reevaluating your diversity plans and programs, or if you don’t have any diversity programs in place, contact someone trained and able to give you a helping hand. Every business regardless of size benefits when they take diversity and equality in the workforce seriously.

Diversity does not need to cost, diversity can save you money and strengthen your business!

Glenn Brown is the CEO of G & J Consultants, LLC. In addition to having directed the HR Department of a health care services company, Glenn is an attorney with 15 years experience assisting businesses of all sizes and industries in complying with employment and labor legal issues. G & J Consultants specializes in providing small and medium sized businesses with traditional HR services as well as compliance with employment laws and regulations.

Get a Watch Dog!

Let me start by stating that I am a huge University of Kansas fan. I am an alumnus of the Kansas School of Law, and I bleed crimson and blue! So, I watched the local and national news coverage on the events of the last few weeks regarding the situation with KU athletic tickets with concern and surprise. This morning I read about the statements made by the Athletic Director, Lew Perkins and thought …what a lesson for all employers and managers of employees.

Do you know what your employees are doing on your time? Do you delegate responsibility then never follow up? Are you so busy that you don’t have time to oversee what your staff is doing? If you are not minding the store, then who is?

Human Resources is more than recruiting, hiring, disciplining, terminating employees. HR is more than creating employee motivation. HR is more than writing policies because it is a good idea legally. HR is more than administrators pushing paper and watch files. HR should be your watch dog making sure that your employees model your values, achieve your objectives and send the right message to your customers, clients and vendors.

Do you have a watch dog? Lew Perkins and KU Athletics sure needed one!

A competent HR professional who is integrated into your business, understands your business model, and embraces your goals and objectives, will allow you to focus on what only you can do…guide the business, generate customers, and built the market for your product or service.

If you need a watch dog, someone to train your current watch dog, or just an outside set of eyes to assist your watch dog occasionally, give us a call!

No business owner should ever have to sit in front of the nation and take the “responsibility” for the actions of his/her employees that cost your business it’s image and millions of dollars.

You have so much more to do with your valuable time.

Glenn Brown is the CEO of G & J Consultants, LLC. In addition to having directed the HR Department of a health care services company, Glenn is an attorney with 15 years experience assisting businesses of all sizes and industries in complying with employment and labor legal issues. G & J Consultants specializes in providing small and medium sized businesses with traditional HR services as well as compliance with employment laws and regulations.