One of the things I admire most about many of my clients in the Texas Panhandle is their entrepreneurial spirit. Many of them have created and nurtured several businesses to success. But there is a downside to owning many businesses: your employment headaches increase.
For example, if you have one employee who works for two of your businesses, such as a receptionist at your main office, you might be paying that employee out of two business accounts and not realizing that you have overtime obligations to that employee. Your two businesses may be “joint employers” of this receptionist if there are common officers or directors of the companies and/or there are common insurance, pension or payroll systems. If so, you must take the hours that receptionist works at all of your businesses into account when determining whether that employee should be paid overtime for working more than 40 hours in any one workweek.
Another consequence of owning more than one business is that the number of employees working at all of your businesses may need to be combined when deciding whether you have to comply with various federal employment laws, such as Title VII (which goes into effect when you employ 15 employees), the Americans with Disabilities Act (which requires 15 employees), the Age Discrimination in Employment Act (which requires 20 employees), the Family and Medical Leave Act, which requires that you provide up to 12 weeks of unpaid leave to your employees if you have 50 names on the payroll, or the Affordable Care Act, which mandates that employers with 50 or more full-time equivalent employees provide health insurance to their employees beginning in 2015 or face substantial penalties.
The Department of Labor and the EEOC will apply an “integrated employer” test to determine whether separate but related businesses are deemed to be a single entity for counting the number of employees (names on the payroll) to determine whether you are liable for discrimination under Title VII, the ADA, the ADEA or the FMLA. This test looks at four factors: common management of the two companies, interrelation between the operations of the companies, central operation of labor relations and some degree of common ownership or financial control. If your companies are integrated, you need to count names on all of your payrolls to determine if you need to be complying with these federal laws.
The Affordable Care Act counts employees a little differently and combines related companies differently also. The ACA requires that related entities count employees as if they were employed by one business to determine if you employ at least 50 full-time equivalent employees (and remember that the definition of “full-time” under the ACA is 30 hours per week). If your related companies all together employ 50 FTEs or more, you will have to provide your employees with health insurance beginning in 2015 or be ready to pay the penalties imposed on employers who do not comply. The ACA combines into one employer related entities such as parents and their subsidiaries, brother/sister companies where the same five people or entities own the equity in two or more companies, and affiliated service groups such as law firms, accounting firms, civic organizations and temporary staffing companies that are linked by at least some ownership (the statute refers to a 10% threshold) and closely collaborate in the services they provide.
Accurately counting the number of employees you employ when you own more than one business can be much more complicated than it initially appears. But getting that accurate count is essential to operating your businesses legally.
If your business employs at least 50 full-time equivalent employees, you know that the Affordable Care Act will penalize you in 2015 if your business does not provide your full-time employees with affordable health insurance. But did you know that the determination of who is a full-time employee may need to start as early as November 1, 2013?
When deciding if an employee works full-time (30 hours per week), the ACA allows employers to set measurement periods during which you keep careful track of an employee’s hours of service (hours actually worked and hours of pay for vacation, sick leave, etc.) and then decide if that particular employee has actually averaged 30 hours per week over that measurement period.
For current employees whose hours fluctuate over and under the 30 per week criterion or whose hours fluctuate over the course of the measurement period (such as construction employees who may work 60 hours per week during the height of a building project and 10 or 20 hours per week when the project slows down), this standard measurement period can be between 3 and 12 months.
The standard measurement period is followed by an administrative period of no more than 3 months, during which the employer can make the calculation and offer the employee insurance if he/she is averaging 30 hours or more per week.
That administrative period is followed by a stability period of at least as long as the standard measurement period, during which the employee must be allowed to stay on health insurance even if he/she drops below the 30-hour per week standard.
Many employers are choosing a standard measurement period that lasts the maximum of 12 months. Then they will need at least a couple of months for their administrative period to make their calculation and get their employees enrolled. For employers who are on an insurance plan that renews with the calendar year, or for those who want to make sure they are completely in compliance with the Affordable Care Act before the employer penalties start in 2015, they would be well-advised to start their standard measurement period on November 1, 2013 and conclude it on October 31, 2014. The administrative period would then take all of November and December 2014. The result would be that all employees who are full-time would be measured and offered health insurance in time for a January 1, 2015 enrollment. The stability period would then run from November 1, 2014 to October 31, 2015, concurrently with the next standard measurement period.
The employer who faces this issue will need a written policy setting out the dates that the employer has chosen for its measurement periods with an explanation of how it works for the employees.
In 25 years of practicing employment law, I have unfortunately had to advise many clients who have been robbed by their own employees. They have lost thousands of dollars to theft of cash and inventory. In most instances, when my client has called me with questions about employee theft, the business has already been ripped off by its employee and is now just trying to figure out whether to prosecute and if there is any way to put in an insurance claim. I would rather see my clients take some preventative measures to stop employee theft before it happens.
Prevention starts by screening applicants with thorough reference and criminal background checks. Any employee with access to the financial records, bank accounts, credit cards, cash or inventory should have a clean record both with past employers and with law enforcement.
You should also assign overlapping job duties. Many of my employers who suffered losses to employee theft trusted just one person to handle the finances, the checkbook, cash receipts, reimbursement of business expenses or the bank deposits and didn’t require a second set of eyes on these records. Even if you don’t constantly have two people double-checking these records, learn a lesson from banks. Most banks require employees in sensitive financial jobs to take their vacation time in at least one week segments so that another employee can get a good long look at the vacationing employee’s records.
Every employer should also identify those areas of the business that are at high risk for theft and conduct audits every quarter or every six months on expense reporting, cash reconciliation, firm credit cards, etc. If you stock inventory, then performing a regular count of your inventory is also important. You should protect your inventory by watching for cars parked close to loading zones, unlocked exits that should remain locked, and bulging bags.
Finally, you should know your employees. The U. S. Chamber of Commerce recommends that you watch your employee’s behavior for unusual working hours, poor work performance, defensiveness when reporting on work, an unexplained close relationship or favoritism with a supplier or customer and/or a personal lifestyle that doesn’t match the employee’s salary.
One word of caution. If you suspect an employee of theft, don’t make the mistake of falsely imprisoning that employee or defaming that employee. If you detain an employee in the workplace by restricting his movement in some way, you could be guilty of false imprisonment. Let him leave if he wants to, and then let the police track him down and arrest him later if you have proof of theft. Defamation involves publicizing to others (such as your other employees) that an employee stole from you before that fact has been clearly established. In most instances, there is no reason for anyone else to be notified that you are accusing your employee of a crime. Only when the employee has been convicted of theft can you safely report to others, such as prospective employers who call for a reference, that your former employee stole from you.
As an employer, you have a deadline quickly approaching. You are required to send a notice to all of your employees about the marketplace exchanges created under the Affordable Care Act. You can find the model notices at http://dol.gov/ebsa/healthreform. There is a model notice for those employers who provide group health insurance and a separate model notice for those employers who do not provide group health insurance. There are Spanish versions of both of those notices available on that same DOL website page.
This notice is required of all employers who are subject to the Fair Labor Standards Act (overtime and minimum wage law), regardless of how many employees you have and regardless of whether you offer health insurance or not.
You must provide this notice to all of your employees, even those who are not eligible for your group health insurance and those who are not enrolled in your plan.
The deadline for providing this notice to your current employees is October 1, 2013. Anyone you hire after that time must receive the notice within 14 days of employment. You may provide the notices by mail, or you can use e-mail to notify those employees who regularly have access to a work e-mail address.
For those employers who offer health insurance, the Model Notice has a page three that asks about the specifics of your health insurance plan. It is optional as to whether you as an employer answer the questions asked on page three. Because of the uncertainties of the health insurance market right now and the probability that many of you will be offered a renewal in December 2013 that will change this information, I suggest that those of you who offer a group health plan do not answer any of the questions on page three of this notice at this time.
In June, the AMA recognized obesity as a disease, instead of just an issue of poor judgment. As an employer, you now have to think about obesity in terms of the Americans with Disabilities Act (“ADA”). To be protected under the ADA, an employer must have a physical or mental impairment that affects a major life activity, such as walking or bending, or affects a major bodily function, such as the cardiovascular system. In addition, the ADA protects people who are “regarded as” having a disability, even if they don’t.
With the AMA’s decision as ammunition, you as an employer are now in the crosshairs of many more disability claims because the Centers for Disease Control says 35.9% of American adults over 20 are obese. We don’t know all the ramifications yet, but it is reasonable to assume that the AMA’s label will eventually change your legal obligations.
As an employer, you are going to need address the obesity of your employees in three ways:
- You must not discriminate against obese applicants or employees by treating them adversely in hiring, promotions, discharge, compensation, job training, or other terms and conditions of employment. Appearance discrimination hasn’t found much support in the courts before the AMA’s decision, but this could give that kind of claim new life. This means that the overweight applicant who you fear will have absenteeism problems because of health issues cannot be excluded on that basis from hiring consideration. Also, that obese employee who you have consistently passed over for a promotion because you think he is lazy, or the fat assistant who wants to go into sales but you don’t believe she presents a professional image, may have a discrimination claim against you either because he/she is disabled by obesity or is regarded as such. Finally, when you are firing an employee, you’ll need to have well-documented reasons if obesity could be a claim.
- You will have to accommodate an obese employee’s reasonable requests for bigger, more comfortable furniture, more doctor’s visits or additional time to perform certain physical functions at work. As with any disability, you will have to handle these requests with discretion and sensitivity. I imagine that public theaters, airplanes and stadiums will also have to address this issue of whether they will have to provide larger seats.
- You must prevent harassment based on a person’s disability. That means that fat jokes will have to be tamped down just as you would racial or religious slurs to prevent a hostile work environment.
At a time when some parts of the federal government (HHS, DOL and IRS) are promoting wellness programs under Obamacare and encouraging employers to adopt programs that reward employees who stop smoking, lower their cholesterol or their BMI, the federal discrimination enforcement agency, the EEOC, is going to be scrutinizing wellness programs that may stigmatize obese employees. As an employer, you are going to need to walk a fine line with your wellness incentives. Heck, just having a motivation poster glorifying skinny people climbing to the top of a mountain may imply a negative stereotype of disabled obese employees.
There are no easy answers to this new issue. The AMA’s decision, by itself, doesn’t carry any legal weight. But it could influence the courts and accelerate the EEOC’s efforts to make appearance a protected class. My advice is to avoid becoming the test case on this issue and just use some care and common sense when dealing with obese employees.
You have probably heard the news by now that the Obama administration announced that it is delaying enforcement of one piece of the Patient Protection and Affordable Care Act (PPACA) for one year. The starting date for the mandate that employers with 50 or more full-time equivalent employees have to offer affordable health insurance to their employees beginning January 1, 2014 or face penalties of $2000-$3000 per employee has been delayed until January 1, 2015. This is a huge relief to many businesses, particularly restaurants, hotels, retail establishments and construction companies, who have not traditionally provided health insurance to all of their employees and were scrambling to try to figure out their strategy for complying with the law without the cost of the benefits putting them out of business. Employers still have to make those tough decisions, but will not do so in as big a rush as they were facing and hopefully will have more guidance in making those decisions.
However, every employer needs to understand that this delay in the pay or play penalties for employers and the reporting by employers of the details of the health coverage that they offer does not mean that many other parts of the PPACA aren’t going to be effective on January 1, 2014. For example, the individual mandate, requiring that every American have health insurance, has not been delayed. This means that every citizen has to have coverage in 2014, but many will not have any insurance offered through their employers on that date. Fortunately, the IRS penalty for a person who doesn’t have health insurance is only $95 for 2014 and won’t increase until after that.
PPACA provisions that are not going to be affected by the delay and will therefore need to be addressed in 2014 by employers who already provide health insurance include the 90-day limit on waiting period for benefits eligibility, the maximum deductibles of $2000 single/$4000 family on new plans and renewals, the “community ratings” guidelines, which require premiums not to be based on health status, but on age, geography and tobacco use (which will benefit older, sicker groups and hurt younger, healthier groups), the elimination of pre-existing conditions exclusions, the requirement to provide at no additional cost certain preventive care (including contraception), the summary of benefits and coverage disclosure rules that dictate how health plan benefits information has to be presented to participants, and the taxes on employers, including the $63/person fee for every participant in a health plan, the $2/person PCORI fee to fund research, and the premium tax of 2.54% for participants of fully-insured medical plans.
For those employers who do not provide health insurance yet to the majority of your workforce, you can take this time to shop around for better rates, to better structure your workforce as full-time or part-time, to set up better time-keeping systems to know how many hours each employee works each week, and to better train your human resources and benefits staff. However, you must understand that this delay should in no way stop your efforts to get ready for compliance with PPACA. It is breathing room, a break, but the work still needs to be done.
Regardless of your political beliefs about gay marriage, you are going to need to start dealing with the legal implications in your business. The U.S. Supreme Court’s two decisions regarding gay marriage, issued June 26, will leave you as an employer with more questions than answers right now. Even though Texas doesn’t recognize same-sex marriages, there are going to be issues raised by your employees about the application of benefits and employment laws to same sex couples even within the 37 states that don’t yet allow gay marriages. As Justice Antonin Scalia wrote in his dissent:
Imagine a pair of women who marry in Albany and then move to Alabama, which does not “recognize as valid any marriage of parties of the same sex.” Ala. Code §30–1–19(e) (2011). When the couple files their next federal tax return, may it be a joint one? Which State’s law controls, for federal-law purposes: their State of celebration (which recognizes the marriage) or their State of domicile (which does not)? (Does the answer depend on whether they were just visiting in Albany?) Are these questions to be answered as a matter of federal common law, or perhaps by borrowing a State’s choice-of-law rules? If so, which State’s?
Justice Scalia could have continued with questions such as: Must an employer offer COBRA continuation coverage of health insurance to a same-sex spouse, since COBRA is federally regulated, not a state issue? Does an employer in Texas have to provide Family and Medical Leave for an employee to provide his same-sex spouse (who legally married elsewhere) with care for a serious medical condition? Again, FMLA is a federal law, not a state one. There is some speculation among lawyers that President Obama will direct federal agencies such as the Department of Labor, when interpreting federal statutes such as FMLA or COBRA, to treat the “State of celebration”, as Scalia called it, as the state that matters, not the state of residence. This could mean that you as a Texas employer could be liable under FMLA, for example, even though gay marriage isn’t allowed in Texas.
In addition, many employee handbooks define “immediate family” for purposes of bereavement leave, personal leave, nepotism and health insurance benefits and include just the word “spouse” without a definition. Are you going to make a distinction in your business that the “spouse” must be an opposite-sex spouse? And if you do, will you at some point face a federal lawsuit for discrimination?
Is your head spinning yet from these questions?
The courts and the administrative branch will eventually give us the answers to these questions, but as an employer, you have to deal with many of them now as best you can. My suggestion is that if any question involving same-sex marriage arises with your employees, you call an employment lawyer immediately to find out the very latest regulations on this issues.
The Texas Legislature in its most recent session adopted the Uniform Trade Secrets Act by passing Senate Bill 953. The new law, which will go into effect September 1, 2014, will help you keep your departing employees from competing against you using your own trade secrets, which are defined as “a formula, pattern, compilation, program, device, method technique, process, financial data, or list of actual or potential customers or suppliers.” Most employers ask me to protect their customer and/or supplier lists after the employee has left the company, which is about as effective as that old saying about closing the barn door after the horse has already bolted for greener pastures.
So the recently adopted statute is good news, but you as an employer have some responsibilities too. The trade secret will only be protected if it is (1) valuable; (2) not generally known to, and not readily ascertainable by proper means from others; and (3) subject to “efforts that are reasonable under the circumstances to maintain its secrecy”. In other words, you can’t blame a former employee for using your trade secrets if you made no efforts to keep them, you know, SECRET!
To prevail under this statute, which provides for an injunction and damages, you are going to have to show that you took proactive steps to protect your confidential property, such as:
- Limiting employee access to the trade secret so that only those with a strong “need to know” gain access;
- Labeling files or stamping the trade secret documents with “Confidential” or “Secret” stamps;
- Password protecting the trade secrets if located on database;
- Installing monitoring software to record who had access to the computerized trade secret;
- Keeping the secret under lock and key;
- Requiring numbering and shredding of all copies of the trade secret documents;
- Requiring employees to sign non-disclosure and confidentiality agreements in addition to a written confidentiality policy in your employee handbook;
- Conducting periodic inspections and reviews to beef up security of trade secrets; and/or
- Having your employees sign a non-competition agreement that meets all of the quirky requirements for valid and enforceable non-competes in Texas.
If you can demonstrate that a former employee misappropriated valuable confidential information and you took some or all of these reasonable steps to protect your data before the employee left, this statute will allow your lawyers to more easily stop your employee and his new employer from profiting from your hard work and secrets.
When an employee leaves your company (if you employ 20 or more people), he or she is entitled for at least 18 months to continue any group health insurance coverage that you provide to your employees. This continuation coverage requires that the employee pay the insurance premiums to remain on your group health plan. Therefore the employee must be notified when he leaves your employ of the rights he has to elect to continue that coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA). The same election notice must be provided to the employee or his/her dependents if the employee dies, the employee divorces, the employee becomes entitled to Medicare, or a dependent child ceases to be considered a dependent under the health plan.
On May 8, 2013, the Department of Labor updated the election notice you must provide to your employees under COBRA when these events happen. The notice has to be provided to the employee within 14 days of when the plan administrator (you as the employer or an administrator you pay to take care of this function) receives notice that one of the these events has occurred. The new election notice and a redlined version showing what has been changed from the notice you are now using is available on the DOL’s website at: http://www.dol.gov/ebsa/COBRA.html. COBRA carries a stiff daily monetary penalty for employers or administrators who do not timely and properly provide these election notices, so you should start using the new notice immediately.
The DOL also publishes a guide to help you understand and administer COBRA: http://www.dol.gov/ebsa/pdf/cobraemployer.pdf. However, because COBRA can be tricky, I prefer that my employer clients pay the little extra fee per month to have your insurance company act as your COBRA administrator and take responsibility to assure that the deadline and notice requirements are met.
As it routinely does, the United States Department of Labor recently released to the media a report of another Texas employer who had to pay back wages to current and former employees for overtime violations. This time the company was Porter Ready Mix Inc., in Porter, Texas and the amount was $173,863. But it could have been almost any employer because the overtime laws are very difficult to understand and follow. The DOL gets more than 26,000 complaints a year and collected $224 million in back wages in fiscal year 2011. Some of its favorite targets are restaurants, construction companies, agriculture, hotels, healthcare providers, landscapers, preschools and other industries that pay lower wages, but no employer is immune. Porter Ready Mix’s mistake? It paid gravel truck drivers by the trip instead of by the hour.
If you as an employer are paying any employee in any manner other than by the hour and paying time and one-half for all hours over 40 worked in one week, you too could be facing a Department of Labor investigation soon. Paying employees by the day, by the trip, by travel time, by commission, by tips, by bonus, by incentive, even by weekly salary can put you in the hot seat. Salaried employees must fall into one of four or five narrow categories to be exempt from overtime. Many employers put employees on salary or another pay scheme without doing any analysis of whether failing to pay overtime is legal based on that particular employee’s job duties.
Don’t rely on your instinct, your competitors, your experience, your employee’s desires or any other resource other than the Fair Labor Standards Act when you set compensation for a new employee or when you are reviewing your current staff compensation. Do your research before you pay any employee on any basis other than hourly plus overtime.