Perspectives

With the recent closure of Silicon Valley Bank, employers may feel the pressure of liquidity issues, which in turn could impact their ability to pay employees on time or operate their compensation/benefits programs.

Three key considerations to focus on when evaluating your company’s internal finances are payroll, furlough, and benefits. These will effect your employees’ day-to-day lives, and eat up most of your HR staff’s time.

Payroll/Employee Communications:

Communicate immediately with employees regarding potential delays in payroll timing and provide prompt updates on changes. If you’re switching payroll to another financial institution, ensure compliance with existing wage rules that are designed to prevent changes to employee’s elected methods of payment without their consent. To the extent the employer cannot timely make payroll, consider furloughing or terminating employees.

Benefit Plans:

Review health and welfare benefit plans, contracts and arrangements to determine whether missed or late payments by the employer to third-party providers may cause a lapse in benefits/insurance coverage for employees (or otherwise impact coverage).

Fair Labor Standards Act:

Many employers impacted by the SVB closure are faced with difficulties in making payroll. Most employers are covered by the Fair Labor Standards Act (“FLSA”), which governs federal wage and hour standards. Covered employers have several obligations under the FLSA, including ensuring nonexempt employees are paid (a) minimum wage for all hours worked and (b) overtime for all hours worked in excess of 40 hours in any workweek. There is no explicit deadline in the FLSA itself with respect to the payment of wages. Nevertheless, the U.S. Department of Labor’s (the “DOL”) position is that FLSA-mandated sums earned for a workweek generally must be paid on the regular payday for the pay period in which the workweek ends. Currently there is no available waiver, or exemption, for noncompliance resulting from bank closures.

An employer that repeatedly or willfully violates the minimum wage or overtime pay requirements of FLSA is subject to a civil penalty of up to $1,100 for each violation. For any violation (including isolated or inadvertent violations), the employer is liable to the employee for the amount of unpaid wages and overtime pay, if any, plus an equal additional amount paid as liquidated damages. There is no requirement that the affected employee show harm beyond the late payment.

In addition to potential penalties for compliance failures under FLSA, employers may also face penalties in connection with failure to timely remit the employer portion of taxes, which includes federal income tax, Social Security and Medicare taxes and Federal Unemployment Tax. There are penalties for untimely, inaccurate, or improperly paid employment taxes, imposed based on the number of days the taxes are overdue.

State Wage Laws:

In addition to complying with wage payment obligations under FLSA, employers must also comply with applicable state wage laws or risk additional fines and penalties. Unlike FLSA, many states impose specific intervals for paying employees (e.g., weekly, bi-weekly, etc.), which may vary depending on an employee’s role or function or the industry in which they work. Penalties for failing to comply with state wage laws vary by state and can include liquidated damages and attorney’s fees.

Furloughing Employees:

In connection with similar liquidity crises, employers have considered employee furloughs as an alternative to layoffs until they can resolve their liquidity issues. Furloughs generally refer to a mandatory, but temporary, cessation from work without pay, with the expectation that the impacted workforce would return to work with the employer in the future.

Health Benefits and COBRA:

Employers that sponsor group health plans should consider whether a furlough would allow employees to continue to participate in employer-provided health benefit plans as “active” participants without requiring participants to elect benefits under COBRA. The determination will depend on the terms of the applicable plan and the underlying insurance policies maintained by their plan carrier.

Qualified Defined Contribution Retirement Plans:

A furloughed employee will generally be considered an active participant in the retirement plan and will not be considered to have experienced a “severance of employment.” Therefore, the employee would not qualify to take a termination distribution from the retirement plan. Further, furloughed employees would not qualify to take a termination distribution from the retirement plan termination assessment. Furloughed employees who are considered active participants may, subject to applicable plan terms, receive plan loans (or have existing loans remain outstanding) or in-service distributions.

Other Benefits:

Employers should also carefully review and assess the impact of furloughs on company participation in, and elections made under other benefit plans, including flexible spending accounts. A furlough may be considered a qualifying event triggering an employee’s ability to make mid-year election changes under a flexible spending account.

Labor Law and Contract Considerations:

When determining which employees to furlough, it is important for employers to use objectively defined and non-discriminatory categories of employees, to mitigate arguments of disparate impact and retaliation.

Further, employers with 100 or more employees need to be aware that under the federal Worker Adjustment and Retraining Notification Act of 1988 (“WARN Act”), employers are required to provide 60 days advance written notice to terminated employees in the event of a “plant closing” or “mass layoff.”

Under the federal WARN act, notice obligations are not triggered if employees will be furloughed for fewer than six months. However, a furlough that exceeds six months or a reduction of hours by 50% for six months or more will constitute an “employment loss” and trigger WARN’s notice obligations.

Several states that have adopted “mini-WARN” laws have similar exceptions for unforeseeable business circumstances to the WARN Act, such as New York. Employers should review the applicable local, state, and federal notice requirements before furloughing any employees.

The expense of missing payroll, or letting your employee’s benefits lapse could be detrimental to your business, especially during times of economic distress. The attorneys at Wagner, Falconer and Judd have decades worth of experience navigating the ever-changing legal obligations employers face, and are only a phone call away to help you ensure your employees, and your bottom line, are protected. Visit our Support Services page to schedule a consultation with one of our attorneys.

Perhaps not our most intriguing information share to date, but still equally important. Come the New Year, do you know which of your business states will be due for a minimum wage increase? If you answered no, then you’re in luck—below is a compiled list of all the US states with planned minimum wage increases to have on your radar. If your state is not listed, then this year you have one less policy to update.

• Alaska
  • Minimum wage increases to $10.85
• Arizona
  • Flagstaff minimum wage increases to $16.80
  • Tucson minimum wage increases to $13.50
• California
  • Statewide minimum wage increases to $15.50
• Colorado
  • Statewide minimum wage increases to $13.65
  • Denver minimum wage increases to $17.29
• Connecticut
  • Statewide minimum wage increases to $15.00
• Delaware
  • Statewide minimum wage increases to $11.75
• Illinois
  • Statewide minimum wage increases to $13.00
  • Chicago minimum wage increases to $15.00 for employers of 4 to 20 employees
• Maine
  • Statewide minimum wage expected to increase to $13.80 based on the anticipated Consumer Price Index adjustment
  • Portland minimum wage increases to $14.00
  • Rockland minimum wage increases to $14.00
• Maryland
  • Statewide minimum wage increases to $13.25 for employers of 15 or more employees and $12.80 for employers of 14 or fewer employees
  • Howard County minimum wage increases to $15.00 for large employers (15 or more) and $13.25 for small employers (14 or fewer)
• Massachusetts
  • Statewide minimum wage increases to $15.00
• Minnesota
  • Statewide minimum wage increases to $10.59 for large employers (annual gross sales of $500,000 or more) and $8.63 for small employers (annual gross sales of less than $500,000)
  • Minneapolis minimum wage increases to $15.19 for employers with 100 or more employees
  • St Paul minimum wage increases to $15.19 for macro employers (those with more than 10,000 employees)
• Missouri
  • Statewide minimum wage increases to $12.00
• Montana
  • Statewide minimum wage increases to $9.95
• Nebraska
  • Statewide minimum wage increases to $10.50
• New Jersey
  • Statewide minimum wage increases to $14.13 for most employers (those with 7 or more employees) and $12.93 for small (those with 6 or fewer employees) and seasonal employers
• New Mexico
  • Statewide minimum wage increases to $12.00
  • Albuquerque minimum wage increases to $12.50
  • Las Cruces adopts the statewide minimum wage as of January 1, 2023
• Ohio
  • Statewide minimum wage increases to $10.10 for employers generally and remains at the federal minimum wage ($7.25) for businesses grossing less than $372,000 annually.
• Rhode Island
  • Statewide minimum wage increases to $13.00
• South Dakota
  • Statewide minimum wage increases to $10.80
• Virginia
  • Statewide minimum wage increases to $12.00
• Washington
  • Statewide minimum wage increases to $15.74
  • City of SeaTac minimum wage increases to $19.06
  • Seattle:
    • $18.69, for employers of 501 or more employees.
    • $16.50, for employers of 500 or fewer employees that contribute at least $2.19 an hour to the individual employee’s medical benefits and/or the employee earns at least $2.19 an hour in tips.
    • $18.69, for non-qualifying small employers.

There is a dedicated team at Wagner, Falconer & Judd that can help you simplify your HR needs. Check out our Support Services options to see if we are a fit for you! 

What’s going on with the EEOC? On October 19th 2022, the U.S. Equal Employment Opportunity Commission (EEOC) released their new ‘Know Your Rights’ poster, which replaces and clarifies the historically required “EEO is the Law” poster. As with the original poster, covered employers are still required by federal law to prominently display the poster at their work locations. If unsure what spot could classify as “prominently displayed”, the EEOC states that posters should be placed in a conspicuous location in the workplace where notices to applicants and employees are normally posted. In addition to physically posting, employers are encouraged to post a digital notice on their employee websites in an obvious location. These two steps can help employers avoid any applicable fines for non-compliance.

Most employers are familiar with the EEOC poster and the laws it summarizes. Contained within we find summaries of federal laws prohibiting job discrimination, and the steps for filing a charge if an employee believes they have experienced discrimination. The poster shares information about discrimination based on:

• Race, color, sex, national origin, religion,
• age (40 and older),
• Equal pay,
• Disability,
• Genetic information (including family medical history or genetic tests or services), and includes
• Retaliation for filing a charge, reasonably opposing discrimination, or participating in a discrimination lawsuit, investigation, or proceeding.

So at this point you’re probably saying, “I knew all of that, what’s changed?” Most prominently added to the new ‘Know Your Rights’ poster is a familiar square that’s becoming more common in our fast-moving lives today. The square is a QR code, and it allows for applicants or employees to scan the QR code and be directed to instructions for how to file a charge of workplace discrimination with the EEOC. There is speculation that the increasing ease of filing a charge will correspondingly increase the number of employee EEOC charges.

Additional changes to the poster are intentional clarifications which could also lead to an increase in EEOC charges against employers. The clarifications include:

• Use of straightforward language and formatting, such as bullet points;
• Explanation that harassment is a prohibited form of discrimination;
• Clarification that sex discrimination includes discrimination based on pregnancy and related conditions;
• Addition of language regarding sexual orientation and gender identity discriminations;
• Inclusion of information about equal pay discrimination for federal contractors.

Why do we think this is important enough to share with you? Our thoughts echo those of EEOC Chair Charlotte Burrows who said in a statement that “The new ‘Know Your Rights’ poster is a win-win for employers and workers alike. By using plain language and bullet points, the new poster makes it easier for employers to understand their legal responsibilities and for workers to understand their legal rights and how to contact EEOC for assistance.”

This is a good time for employers to ensure all required posters are being properly displayed and that employee handbooks and workplace policies are up to date an in compliance with recent changes to federal EEOC law. Also, employers should remember that in addition to using the QR code to file a charge with the EEOC, all of the original methods for filing a charge remain, including online via the EEOC Public Portal, in person at an EEOC Office, by telephone, at a State or local Fair Employment Practice Agency or by mail.

Follow Wagner, Falconer & Judd on LinkedIn to stay up-to-date on news like this from our experienced Employment Law group. 

If you have been struggling to find workers lately, you aren’t alone. High inflation and low unemployment have given prospective employees more bargaining power and desire for higher wages. Some of the industries hit hardest are hospitality (including restaurants and hotels), care facilities, and construction and trade jobs.

With background checks and drug tests disqualifying some otherwise qualified candidates, old patterns of thinking may have to change (although if DOT or other federal law governs your industry, this not the advice for you!)

Here are four strategies that may increase your applicants and fill roles sooner:

All in all, companies that take the time to create a good work environment for current and prospective employees will likely have an easier time finding (and retaining) good workers.

Classifying workers as independent contractors is not as easy as issuing a 1099 instead of a W-2 at tax time.  Rather, there are a variety of factors employers must analyze regarding each of their independent contractors to ensure they are properly classified.  And the risk of improper classifications can be steep.  However, the Fifth Circuit Court of Appeals, covering Texas, Louisiana, and Mississippi, recently proved it is not impossible.

In the case, which can be found here, an attorney working as a consultant for an oil and gas company filed suit under the Fair Labor Standards Act (FLSA), alleging that he was improperly classified as an independent contractor and seeking to recover unpaid overtime.  The court, in analyzing whether the attorney was an “employee” for purposes of the FLSA, examined the attorney’s working relationship with the company under the framework of the following five non-exhaustive factors:

• The degree of control exercised by the alleged employer;
• The extent of the relative investments of the worker and the alleged employer;
• The degree to which the worker’s opportunity for profit or loss is determined by the alleged employer;
• The skill and initiative required in performing the job; and
• The permanency of the relationship.

Ultimately, the court ruled that the attorney was properly classified as an independent contractor because he signed an “Independent Contractor Master Consulting Services Agreement,” worked independently and managed his own workload and schedule, was not expected to be at the office during set hours each day, did not receive performance evaluations or an access key card, supplied his own computer and telephone, paid for his own continuing legal education courses, purchased his own home office equipment, and could select which projects he wanted to work on.  Because the attorney was an independent contractor and not an employee under the FLSA, he was not entitled to overtime wages.

Companies that utilize the services of independent contractors would be wise to review their working relationships with contractors to ensure they are properly classified under not just the FLSA test, but also the IRS test and any applicable state law tests.

To learn more about protecting your business and your employees, contact the Employment Law group with WFJ today!

In a move that stunned even some Minnesota lawmakers who voted yes, Minnesota Governor Tim Walz signed H.F. 4065 into law, legalizing the sale and consumption of “edible cannabinoid.” The law mandates that the edibles do not contain more than a legally proscribed amount of THC, the THC be derived from hemp, and that the product be edible, either through food or beverage.  It is important to remember that Minnesota law still prohibits the use of recreational marijuana, and only individuals who are on the Minnesota Medical Cannabis Registry may use marijuana medicinally.

Unfortunately, the statute does not provide much guidance for employers.  The most critical questions revolve around employer drug testing and whether companies must accommodate employee use of edibles.  For example, Minnesota law prohibits employers from discriminating against employees based on their status on the Medical Cannabis Registry.  Whether further laws will be passed to provide this same level of protection for edibles remains unclear.

Further, individuals might use hemp-derived edible products to alleviate symptoms associated with anxiety, PTSD, or other medical conditions.  For this reason, if an applicant or employee fails a drug test, an employer may need to consider accommodating an employee’s use of edibles to avoid disability discrimination claims.

It also remains difficult to gauge current marijuana intoxication. THC and its metabolites are often stored in a body’s fat cells, which means THC can remain detectable for up to 30 days after use.  Until tests like those used to test for alcohol can be developed, determining whether an applicant or employee is currently intoxicated for purposes of a pre-employment drug screen, or while working on an employer’s premises, is difficult, if not impossible.  Minnesota law allows employees to use lawful products during non-working hours, so employers may consider removing TCH from its drug test panel and focus, instead, on prohibiting use during working hours and on company property.

The bottom line is that without much guidance from the statute itself, employers must consult knowledgeable counsel to determine what drug-free workplace policies should look like in wake of H.F. 4065.

It is no secret that the construction industry has been facing significant issues completing its project backlog that have caused stress on business.  Since construction is one of the largest sectors of the U.S. economy, most can appreciate these concerns, as they in turn impact many other sectors of business.  The two main problems most of the industry is navigating are: supply chain issues and shortage of workers.  First, current supply chain issues are pushing delivery dates to double or triple their typical timelines, which make planning projects difficult and deadlines tough to uphold.  Further, even when materials or equipment are available, US Inflation at a current rate of 8.52% is driving costs to unprecedented highs.  Second, the effects of the pandemic have left a significant shortage of skilled workers in the US labor market.  It is difficult to retain quality employees and challenging to hire new or replacement workers.  This labor shortage puts pressure on any project to complete the work on time and within budget.  In some instances, construction firms have taken a laxer approach to compliance, often with dire consequences.

However, these pressures on construction firms should not cause HR departments to “throw out the baby with the bathwater.”  In May, during hearings, the EEOC cited the construction industry’s culture of racism and sexism and commented that, with much of the $1.2 trillion Infrastructure Investment and Jobs Act being earmarked for construction firms, the Act should not fund an environment of hate.  It is safe to say that construction firms are squarely in the EEOC’s enforcement crosshairs, which is never a good place to be.

Consider a case that a Washington HVAC contractor recently settled with the EEOC.  The case involved allegations against the HVAC contractor’s owner who was accused of sexually harassing female employees, including telling women they did not belong in the building trades, engaging in nonconsensual touching, leaving condoms and lubricant out in public areas of the building, and asking women to wear more revealing clothing.  Ultimately, the contractor reached a settlement with the EEOC agreeing to be subject to federal oversight for five years and pay out a total of $361,000 to seven women who were subjected to the owner’s harassing conduct

Against this backdrop, it has never been more important for construction firms to recommit to compliance: starting with its anti-discrimination and anti-harassment policies.

Review: HR representatives should review existing policies and ensure they are up to date.  If any changes are needed, or an audit reveals some employees have not received the policy, HR should undertake to ensure all employees receive and acknowledge receipt of the policies.

Train: All employees and managers should receive anti-discrimination and anti-harassment training, ideally on an annual basis.  Companies should ensure that they comply with any specific state or local laws requiring employee and manager training.

Enforce: Compliant policies are no good if they are not properly enforced.  HR must take all allegations of discrimination and harassment seriously, regardless of the position of power the alleged perpetrator may occupy.  Companies should conduct thorough investigations.  Employees should be subject to appropriate remedial action, including termination of employment if the circumstances warrant.

Simplify your compliance needs by partnering with Wagner, Falconer & Judd. Let our experienced employment law attorneys assist you with everything from employee handbooks, onboarding and training to termination. Contact us today to learn more about our services.