Category Archives: Compensation

Final Paychecks in Texas

Compensation, Forms and Policies

I get lots of questions about final paychecks in Texas, so I thought I would give you a quick review of the Texas Payday Law.

Your employees must receive their final paychecks on the sixth calendar day after they are laid off, discharged, fired or otherwise terminated involuntarily, or on the next regular payday if they voluntarily quit. So if you mail the final paychecks, you must mail them early enough that they are available to your former employees by the deadline.

Do you have to include pay for accrued but unused vacation and/or sick leave in the employee’s final paycheck? Not in Texas. The employer can have a written policy or a standard practice of not paying unused vacation, sick leave or paid time off, or paying them only for employees who leave in good standing (two weeks notice and no disciplinary problems), or paying them to everyone who leaves. Just be consistent and put your policy in writing with distribution to every employee and the Texas Workforce Commission will back you up if a complaint is made.

Can you “hold” an employee’s final paycheck past the sixth day or the next regular payday because he still hasn’t turned in his uniforms, his keys or other company property? In a word, “NO”. Texas law does not allow any holding of paychecks. As an employer, you have an obligation to pay every time, on time.

So what do you as an employer do to make sure that equipment, uniforms, or store inventory don’t disappear when the employee leaves your company? And what if the employee still owes you money for a salary advance?

Long before the employee is terminated, you must get his written permission to make deductions from his final paycheck for items that can be lawfully withheld, such as uniforms, salary advance repayment, personal charges on company accounts, damaged or lost equipment, etc. If you have a wage deduction authorization agreement signed by the employee ahead of time, you may withhold the items enumerated in the agreement from that final paycheck. The Texas Workforce Commission has even drafted a form for you to use, which you can access by clicking here.

If you don’t have a written authorization or if the final paycheck won’t cover all of the amounts owed to you by the employee, you cannot hold his paycheck hostage until you receive repayment. You must send him his final paycheck on time and then turn around and sue him in small claims court to get the amounts owed to you repaid.

If you pay an employee bonuses or commissions, you must have a written agreement with the employee outlining how those bonuses or commissions will be paid if they are collected and due after the employee leaves your employment. A simple written agreement regarding commissions can help you avoid fighting a Payday Law claim with the Texas Workforce Commission which will ensue if your terminated salesperson disagrees with your interpretation of how much he is owed in commissions after he leaves your company.

Bush’s Employment Law Legacy

Compensation, Discrimination, Documentation

Since this is the last day of President George W. Bush’s presidency, I thought it appropriate to look back and see what employment laws have been passed while he has been in office. While generally considered lax on enforcement of employment laws (except with regard to employing illegal immigrants), there have been several sweeping changes that affected the employee/employer relationship in the last eight years.

The Americans with Disabilities Act was amended drastically in 2008. I have written extensively about the amendments on this blog, which you can read by clicking here. Surprisingly for an administration that was considered pro-business, these amendments that Bush signed were very favorable to employees and could mean a substantial increase in the number of lawsuits against companies for alleged disability discrimination.

The Family and Medical Leave Act was also amended to expand the act to cover military families, not only when a servicemember is wounded and needs care, but also to allow family members to take 12 weeks off whenever a servicemember is called up. In addition to this law, signed by Pres. Bush in January 2008, his Department of Labor finalized substantial changes to the regulations affecting the FMLA. Most of the changes were applauded by businesses for making the complicated FMLA easier to administer.

Pres. Bush signed legislation requiring Incremental increases to the minimum wage, which increased to $5.85 in the summer of 2007, $6.55 in July 2008, and will be finalized at $7.25 on July 24, 2009. Traditionally, businesses have protested minimum wage increases, saying that the economic impact on small businesses is too great to be passed on and negatively drags down profits. I have seen no study linking the current economic crisis to the minimum wage increases that began in the summer of 2007, but the timing of the increases and the economy going into the toilet is worth considering. Continue reading Bush’s Employment Law Legacy →

Brief Updates

Attendence, Compensation, Discrimination, Hiring,

The Department of Labor has released new notification forms to be used with Family and Medical Leave. If you have more than 50 employees (names on the payroll, whether full or part time), you should have an FMLA policy in your handbook and the FMLA poster on your employee bulletin board. Once an employee has requested any absence from work that might qualify as family or medical leave, then it is up to the employer to notify the employee of the employee’s eligibility for federally mandated family and medical leave, to ask for medical certification of the condition necessitating the leave and to make a final determination of eligibility. Also the employer must provide leave to military families under certain circumstances. The necessary forms to use for all of these determinations are available on the Department of Labor’s website, which you can access by clicking here.

* * *

The wage discrimination laws that I discussed in my January 6 blog post were unsurprisingly passed by the U. S. House of Representatives last week. If they clear the Senate, you can be assured that President Obama will promptly sign them. As I stated in that post, you can get ready for this law by deleting any policy still in your employee manual that prohibits employees from discussing their salaries. You can also review the salaries of any employees performing the same jobs and make sure that you have a rock-solid (meaning something in writing from the time the salary was determined) explanation relating to tenure or extra educational or licensing qualifications to explain why a male employee is making more than a female employee.

* * *

The Texas Legislature started its biennial circus last week in Austin. Once the drama of the Texas Speaker’s race subsided, it was time to look at the proposed legislation that could affect employers. Some of the ones I will be watching include a bill to require all employers to pay an employee her regular wages while she serves on jury duty, lots of bills penalizing employers who don’t carry worker’s compensation insurance, and family leave bills to allow parents time off to attend school activities involving their children. If any of these or other employment-related bills pass during this legislative session, I’ll keep you posted.

* * *

Somehow, the last tidbit on giving time off to parents for school activities reminded me of this joke about an employer’s reply to an employee’s request for time off:

“So you want a day off? Let’s take a look at what you are asking for!

There are 365 days this year.

There are 52 weeks per year in which you already have 2 days off per week, leaving 261 days available for work.

Since you spend 16 hours each day away from work, you have used up 170 days, leaving only 91 days available.

You spend 30 minutes each day on coffee break. That accounts for 23 days each year, leaving only 68 days available.

With a one hour lunch period each day, you have used up another 46 days, leaving only 22 days available for work.

You normally spend 2 days per year on sick leave. This leaves you only 20 days available for work.

We are off for 5 holidays per year, so your available working time is down to 15 days.

We generously give you 14 days vacation per year which leaves only one day available for work and I’ll be damned if you’re going to take that day off!”

Wal-Mart’s Costly Wage and Hour Mistakes

Compensation

The big news recently in the employment law arena is that Wal-Mart Stores, Inc. has agreed to settle 63 wage and hour lawsuits in 43 states. The settlement of these class actions will cost Wal-Mart somewhere between $352 million and $640 million!

What the heck did Wal-Mart do wrong that could cost them a half billion dollars? The thousands of class action plaintiffs allege that Wal-Mart managers pressured employees not to record all their time actually worked or to work through hours that were recorded as unpaid meal and rest breaks. Employees who actually recorded the overtime hours they worked were allegedly disciplined and humiliated. For example, one store manager allegedly posted the names of employees recording overtime next to the time clock to remind others that overtime was against company policy.

For its part, Wal-Mart says that these are old allegations and not indicative of how Wal-Mart does business today. Unfortunately, it is the way many employers in the Panhandle still do business. Here are a few points to remember to avoid wage and hour liability in your business: Continue reading Wal-Mart’s Costly Wage and Hour Mistakes →

Congress Set to Consider Employment Laws

Compensation

It’s January after an election year, and things are going to start moving fast in the world of employment law. The 111th Congress of the United States convened this morning and by the end of this week two laws may have passed that drastically affect employers.

An entry on this blog dated December 1, 2008, predicted that a new Democratic administration and Congress would try to pass the Ledbetter Fair Pay Act and amendments to the Equal Pay Act. As expected, the U.S. House of Representatives is scheduled to vote on these laws in this first week. If you don’t like the proposed changes, you better contact your congressman quickly.

The Ledbetter Fair Pay Act, if passed, will override the U.S. Supreme Court’s decision in 2007 in Ledbetter v. Goodyear Tire & Rubber Co. The change will affect the statute of limitations on pay discrimination claims to allow employees to sue over discriminatory pay based on each successive paycheck in which the discriminatory pay is received. So if you decided to pay a woman less than a man for the same job in 1983, and that inequity still exists despite 25 years of raises and bonuses, you could still be liable as an employer for discrimination based on each new paycheck that she receives.

If the Paycheck Fairness Act, which amends the Equal Pay Act of 1963, is passed, it will require you to pay the same amount to any employee in your company if the job requires comparable functions, skills, effort and responsibility in the same working conditions. The problem that I foresee is that you may pay workers in other areas of the country differently because of different costs of living and different market factors. This would become illegal. This law could also bring into question whether your payment of different employees for the same job is really based on tenure and experience or discrimination.

The law also would make it illegal for employers to discipline or fire workers who publicly reveal their salaries. The National Labor Relations Act already frowns on employer policies that prohibit employees from discussing their salaries because such a policy is perceived to have a chilling effect on the formation of unions. The Paycheck Fairness Act will provide the final nail in the coffin for these types of salary discussion prohibitions.

Finally the Paycheck Fairness Act would lift the caps currently in place on compensatory and punitive damages under pay discrimination laws. This could create a powerful incentive for plaintiff’s employment lawyers to accept and file more employment discrimination cases.

The end result is that as an employer, your company will be more vulnerable than ever to discrimination lawsuits. That makes your preventative efforts all the more important. Delete any policy that prohibits your employees from discussing their salaries. Then get the rest of your employment policies and procedures, especially your pay practices, reviewed now if you want to avoid costly litigation against your company.

Test Your Employment Law Knowledge

Compensation, Discrimination, Personnel Policies,

Just for fun today (if you are like me and have no life!), test your knowledge of federal and Texas employment law. If you manage people in the workplace in Texas, this is the kind of information you should know off the top of your head. Give yourself about 10 minutes to answer these questions, then click on the answer page and see how you did.

  1. What is “employment at will” and why is it important?
  2. True or false: A “contract employee” is someone who works full-time for you but for whom you do not have to pay payroll taxes nor report as an employee.
  3. True of false: To prevent violence in the workplace, you should check your applicant’s criminal arrest record.
  4. Age discrimination claims can be filed by an employee who is ____ years of age or older.
  5. True or false: if an applicant is mentally ill, you don’t have to hire that applicant.
  6. At what age can you make an employee retire?
  7. True or false: The company can be liable if a customer sexually harasses its employee.
  8. How many people does a company have to employ before the Family and Medical Leave Act applies to that company? ______ employees.
  9. What is required to legally deduct anything other than payroll taxes from an employee’s paycheck?
  10. You can hold an employee’s final paycheck until he turns in : (check all that apply)   ____ uniforms; _____ company credit cards; _____ tools and other company equipment; ____ keys to company facilities; _____ all money owed to the company for salary advances, benefits, etc.
  11. How many days do you have to get an employee’s final paycheck to him in Texas if he has been fired?  ____ days.
  12. What is the current minimum wage? $_____ per hour. What will the minimum wage be on July 24, 2009? $ _____ per hour.
  13. True or false: An employer must prove that the employee committed “misconduct” if the employer wants to avoid an award of unemployment benefits to a fired employee.
  14. True or false: An employee who was fired for poor performance (just couldn’t do the job correctly) has committed “misconduct” so that she won’t receive unemployment benefits.
  15. How many employees do you have to have before you are liable under the federal and state discrimination laws, such as the laws prohibiting sexual harassment or disability discrimination? Continue reading Test Your Employment Law Knowledge →

Common Overtime Mistakes

Compensation

Note: This article appeared first in the Amarillo Sunday Globe-News on August 24, 2008.

One of the trickiest areas of employment law that every employer has to learn to handle well is the overtime law.

The Fair Labor Standards Act is not at all intuitive, so if you don’t know the specifics of it, you need to educate yourself quickly.

Why bother learning the overtime law? Because overtime violations are one of the most common bases for employee lawsuits against companies right here in the Panhandle.

These cases are never limited to just one employee seeking a little back pay. They are routinely turned in class actions seeking two times the alleged overtime compensation due to each employee for up to three years past and, of course, the employees’ attorney’s exorbitant fees.

To explain all of the Fair Labor Standards Act requirements, I would have to write a book, not a newspaper column. But here a few danger areas that you should know about: Continue reading Common Overtime Mistakes →

The Myth of Contract Labor

Compensation,

My clients sometimes fall for the myth of “contract labor”, which is about as real as Bigfoot and the Loch Ness monster. The Texas Workforce Commission’s mythbusters explain it this way:

“Contract labor” may be the most widely used misnomer in business today. The issue is really whether a given worker is an employee or an independent contractor. In basic terms, an employee is someone over whose work an employer exercises direction or control and for whom there is extensive wage reporting and tax responsibility. An independent contractor is self-employed, bears responsibility for his or her own taxes and expenses, and is not subject to an employer’s direction and control. The distinction depends upon much more than what the parties call themselves. . . . It is important to note that it does not matter that one or both parties may call their arrangement “contract labor”.

I can’t tell you how many employers I know who still try to claim that an employee is “contract labor”, a “subcontractor” or an “independent contractor”. The IRS and the TWC will very likely see your situation differently . . . even if the employee has signed a contract labor agreement . . . even if your employee agrees to this arrangement . . . even if you’ve always done it this way . . . even if your employee doesn’t work full-time . . . etc.

While there is no easy test, let’s just put it this way: The person performing work for you is your employee. Unless the worker advertises his services in the phone book, works by the job and has lots of other clients besides you, the government is probably going make a finding that he is your employee.

If you really, strongly, firmly believe that your situation is unique and you really do use independent contractors instead of employees, talk to your employment lawyer before deciding that you can get away with not following the tax and employment laws as to any particular worker. Otherwise, get ready for a TWC payroll tax audit, a Department of Labor overtime investigation or an IRS audit. Or maybe all three.

Minimum Wage Increase Reminder

Compensation

Remember that the minimum wage increases by $.70 per hour again on July 24, 2008.

If you are paying less than $6.55 to almost any worker (except waitstaff that receives part of their income from tips), you will need to raise his/her hourly rate to $6.55 per hour for every hour beginning with those worked after 12:01 a.m. on Thursday, July 24.

If you want to find out more about whether you are responsible as an employer for paying your workers the minimum wage, check out the Department of Labor’s explanatory information at https://www.dol.gov/dol/topic/wages/minimumwage.htm.

The minimum wage will go up again on July 24, 2009, to $7.25 per hour. There are no increases scheduled after that date.