Month: November 2018

How Do I Pay Employees or Why is Paying Employees So Hard?

Published by Brett Holubeck on November 30, 2018

Image of money to demonstrate that employers need to be concerned about how to pay employees — Photo by Sharon McCutcheon on Unsplash

It should be easy to pay employees. A company writes a check or does a direct deposit and then the company does it again a couple of weeks later. Unfortunately, paying employees is one of the most difficult tasks that employers do. Lawsuits alleging violations of the Fair Labor Standards Act (wage and hour lawsuits) are up by 415% since 1997. “The top 10 employment-related settlements in 2017 totaled $2.72 billion—up from $1.75 billion in 2016.” These lawsuits are expensive! Let’s also remember that companies not only need to follow the law at the federal level under the Fair Labor Standards Act, but they also need to follow laws at the state, city, and county level. So what should employers do? Answer: They should pay their employees correctly.

Here are the Various Ways that You Can Pay Employees

1. Hourly

This is (seemingly) one of the easiest ways to pay employees. An employer pays employees the same rate for every hour that they work. Companies use this method when employees do not qualify for an exemption from overtime, their hours vary from week to week, or they are primarily part time employees.

With hourly employees there are number of things that employers need to remember to minimize potential lawsuits:

Make sure that the timeclock captures all the time that the employee spends working. Starbucks recently lost a case (in California which is not friendly to employers) for time spent off the clock “activating the store alarm, locking the front door and walking co-workers to their cars,” which took one employee 4-10 additional minutes per shift. Employers need to be careful about time that is spent off the clock. Regularly occurring off-the-clock work may be considered compensable time (paid time) in some situations.

Have a policy for reporting off-the-clock work and explain that policy to employees. In one case, Chicago police officers lost a lawsuit claiming that they were not properly paid for answering emails off-the-clock because Chicago did not forbid these employers from reporting off-the-clock work and it did not have actual constructive knowledge that employees were working off the clock.

One final note. While employers have to pay employees for working off-the-clock even if their policy forbids employees from working overtime without approval, the company may still discipline employees for violating their policy against working overtime without getting proper authorization.

2. Salary Exempt

Some employees are exempt from being paid overtime. There are a variety of exemptions, but the most common exemptions are:

If an employee meets the required salary for the exemption (usually $455 per week) and the employee meets the duties for the exemption, then employers do not need to pay them overtime.

The issue for most employers becomes whether or not the employee actually meets the required duties to be exempt. For example, Taco Bell has been sued because they allegedly classified employees as managers that did not have the authority to hire, fire, or discipline employees or recommend that employees be hired, fired, or disciplined. The managers were essentially doing the same work as other staff: cleaning, cooking, bussing tables, etc.

3. Salary Nonexempt

Employees can be paid a salary even if they are not exempt from overtime. Employers must pay these employees overtime for any hours that they work over 40 hours a week (or more than 8 hours in a day if required by state law). The reason that some companies use this method is that many employees feel that getting paid a salary is a status symbol and it makes them feel more like a professional. Many workers are paid a salary even though they are not exempt from overtime. The employers just limit their hours to 40 hours a week to avoid paying them overtime.

4. Commission

Employees may be paid a commission. Employees will typically be paid a straight commission (they only earn money when they make a sale) or a draw against commission. A draw is essentially an advance that the company pays an employee before they make any sales. For example, the company may give an employee a draw of $500 a week. At the end of the month or the relevant time period, the company would pay the employee any excess commissions that they earned. If the employee earned $5000 in commissions by the end of the month, then the employee would be paid the remaining $3000. If an employee earns less than they were paid in advance (less than the draw: i.e. they earned $1000, but were paid $2000), then the employee will owe their employer money.

The advantage of the draw against commissions is that it balances out the employee’s earnings. They get consistency in their pay every week (assuming that they always meet their sales goals).

5. Tipped Wages

An employer may take advantage of the tipped credit and only pay on employee $2.13 an hour (if not prohibited in their state or city) provided that the employee makes at least $7.25 an hour or the state or local minimum wage with tips. Essentially, the employer pays $2.13 and the employee earns at least $5.12 in tips. If an employee does not make at least the minimum wage with their tips, then the employer has to pay the employee the difference.

An opinion letter from the Department of Labor released earlier this month also eliminated the 80/20 rule, which barred employers from using the tip credit for employees that spent more than 20% of their time doing non-tipped activities.

Employers can now use the tip credit as long as the duties are related to the tipped activities. For example, employers can utilize the tipped credit for servers that clean up and set tables and other tasks related to working as a waiter or waitress.

You can read more about this issue in this post on paying tipped employees.

6. Piece Rate

This is not a recommended approach. It is basically the equivalent of when you were a kid and were paid for every can that you brought to the recycling center. You are paid a set rate for how much you produce. For example, a farmhand may be paid a set amount for the strawberries that they bring in from the fields.

The most important point to remember with a piece rate is to be sure that employees still make a minimum wage and to properly determine the employee’s regular rate so that companies pay employees the right amount for any overtime.

Here is a helpful explanation from the Department of Labor:

The regular rate of pay for an employee paid on a piecework basis is obtained by dividing the total weekly earnings by the total number of hours worked in that week. The employee is entitled to an additional one-half times this regular rate for each hour over 40, plus the full piecework earnings.

Example: An employee paid on a piecework basis works 45 hours in a week and earns $405. The regular rate of pay for that week is $405 divided by 45, or $9.00 an hour. In addition to the straight-time pay, the employee is also entitled to $4.50 (half the regular rate) for each hour over 40 – an additional $22.50 for the 5 overtime hours – for a total of $427.50.

Another way to compensate pieceworkers for overtime, if agreed to before the work is performed, is to pay one and one-half times the piece rate for each piece produced during the overtime hours. The piece rate must be the one actually paid during nonovertime hours and must be enough to yield at least the minimum wage per hour.

7. Stock Options

This cannot be your only form of payment, but it is a way to encourage employees to work for a company. For employees, they have the option of taking less in salary for the chance to make more in stock when the company goes public or at some later point. Of course, employees may end up making less money by taking stock options in lieu of a larger salary. It is a bit of a gamble.

8. Bitcoin or Cryptocurrency

Bitcoin has fallen dramatically in price since it rose to record highs last year. Jon Hyman breaks down why it is probably not permissible to pay employees directly in Bitcoin under the Fair Labor Standards Act:

The IRS treats bitcoin and other virtual or cryptocurrencies as property, not as currency.

And, the Fair Labor Standards Act requires that employers pay employees in “cash or negotiable instruments payable at par.”

Because the IRS treats bitcoin as property, it’s very likely that the DOL will not consider it “cash” or a “negotiable instrument” (i.e., a paycheck) for purposes of wage payments.

Thus, if you are not properly paying your employees under the FLSA, you have failed to pay them a minimum wage (a big FLSA no-no), no matter how valuable the Bitcoins you’re providing may be.

Conclusion

There are a lot of ways to pay employees, but the key is to do it properly. No matter how companies pay employees they need to ensure that the company has good records so that it can adequately respond to any wage and hour claim that may be filed against the company.

The information provided in this blog is for educational purposes only and is not legal advice. If you need legal advice, then you should speak with a lawyer about your specific issues. Every legal issue is unique. A lawyer can help you with your situation. Reading the blog, contacting me through the site, emailing me or commenting on a post does not create an attorney-client relationship between any reader and me.

The information provided is my own and does not reflect the opinion of my firm or anyone else.

Why Employers Should be Thankful for Employees

Published by Brett Holubeck on November 21, 2018

Photo by Mikkel Bergmann on Unsplash

It is the week of Thanksgiving. What does this mean for employees? Does it just mean 2 extra days off this week? During this week all employers should consider thanking their employees. All employers from the giant corporations with tens of thousands of employees to the mom & pop shop should be thankful for their employees not just this week, but throughout each week every year.

Employees want to feel that what they do actually matters. Most people will spend 90,000 hours or 1/3 of their life at work. Whether we like it or not, whether we would prefer to spend more time with our family, helping the community, or just watching TV, we are destined to spend a large portion of our time at work and commuting to work. Many employees feel that their work does not matter. All companies need to change that for their employees.

Let’s look at 5 reasons that employers should be thankful for employees and 5 ways that employers can express their thanks.

5 Reasons that you Should be Thankful for Employees

Employees help ensure that your company is a success

No company can succeed without employees. Even companies in the gig economy like Uber have actual employees (even though they may have lots of workers that are independent contractors). A good employee adds value to the company. They make the company more profitable. Forbes has a great example of this:

In early 1994, Continental Airlines’ culture was toxic. Employee morale was virtually dead and the company went through ten CEOs in ten years’ time. The low morale translated into being ranked last in every measurable airline performance category, and the airline was on the verge of its third bankruptcy. Then Gordon Bethune took over as President in October of 1994.

And further:

By looking inside, at the core of Continental’s culture, and starting with themselves, he transformed the airline from ranking dead last in every customer service ranking to winning more J.D. Powers and Associates awards for Customer Service than any other airline in the world. The stock price rose from $2 a share to over $50 a share and the company was ranked as one of the top 100 companies to work for by Fortune.

Companies succeed in large part because of their employees.

They serve as your ambassadors in the real world

A good employee serves to promote the company and draw more people to the company. They help increase sales, employee retention, and performance even if that is not what they are responsible for. Good employees talk positively about their work and what they do. They are brand ambassadors.

They help you grow and learn

Employees, even the ones that need improvement, help companies learn how to succeed. When an employee fails it is an opportunity for the company to determine whether the policy needs adjusted or if the worker needs more help. By helping employees grow in their skills the company grows too because it has better employees.

New employees bring new ideas to your company

New employees bring new ideas to a company. They come without understanding that things “have always been done this way” at your company, which is a good thing. New employees may question why things are run the way they are which may lead to improvements and changes. They also bring ideas from the prior places that they worked.

Good employees share your mission and want you to succeed

A good employee is invested in your mission and helps you to succeed. Nearly 70% of employees are not engaged at work. According to one report, 76% of workers cited a “positive corporate culture as the single most important quality in an employer.” By hiring the right people (see my earlier post) and engaging them in your mission early on (you should really have a company mission) you have something that most workplaces don’t: employees that care and want you to succeed because they are invested and believe in the company.

Here are 5 Ways that you Can Show Thanks to Your Employees

Reach out when they do not expect it with a note or other word of encouragement

Many employees are only spoken with (formally) when they make a mistake. A good manager will let employees know when they are doing something right.

Do not just meet with them when they are not performing well. Do actual quarterly updates with them.

Quarterly updates are a great way to let employees know when they are succeeding and what they can do to improve. An employee that does not know how they are succeeding and whether they can make improvements is flying blind. Telling an employee what you like allows them to do it consistently for you, and telling them what you dislike allows them the opportunity to reroute their habits.

Give them more responsibility

Give employees the opportunity to do more when they are successful, and not just the work nobody else wants to do. Employees enjoy the opportunity to have ownership over what they are doing, and they appreciate being given a voice in their work- saying what skills they would like to grow and having you (the employer) give them the opportunities needed to grow them. No one wants to be stagnant.

Ask employees for their opinion/help

A good employee is a resource. Ask for their advice on important issues especially something that they had success with. If one employee landed a big client, then you should ask them what they did to do that. See if they are willing to share what makes them successful with other employees.

Step in to help an employee

Many employees put in long hours with little thanks. If you are a manager, then a great way to show thanks to employees and to get a better understanding of what they do is to get your hands dirty and spend some time working directly with them. I’m not talking Undercover Boss, although that’s one way to do it. Go with your employee on a sales call. If an employee is staying late and seems to be overloaded with work, then ask the employee if there is something that you can do to help them. The fact that you noticed their hard work will mean a lot to the employee.

Conclusion

No company can succeed without their employees. Now (and all the time) is a great time to let them know why you appreciate them. It is almost the end of the year. Soon many employees will be thinking about their goals for next year. By showing appreciation now, you can help employees figure out what they want to do for their careers in the coming year.

Oh and obviously all employees like bonuses… but even if that’s not an option, genuine appreciation still goes a long way.

The information provided is my own and does not reflect the opinion of my firm or anyone else.

How to Prevent Sexual Harassment in the Workplace

Published by Brett Holubeck on November 16, 2018

Woman holding a #Metoo sign to show support with the #Metoo movement's goal to end sexual harassment — Photo by Mihai Surdu on Unsplash

Sexual harassment is not going away. It’s on the news daily. You hear it whispered about in the walls of many offices. At the one-year anniversary of the #MeToo movement 425 prominent people have been accused of sexual misconduct. Most recently, Google employees led a workplace strike on November 1 to protest a multimillion-dollar settlement offer to a high ranking executive.

Sexual harassment seems so pervasive in society. Movies often portray “funny” or “romantic” scenes (like chasing after a love interest that wants nothing to do with the main character) that in real life would simply be creepy. Ever seen the movie 9 to 5 with Dolly Parton? Yeah… that’s what we are talking about- creepy bosses exploiting their employees. It is hard to turn on the news without hearing about another victim of sexual harassment or a discussion of the #MeToo movement. So, what are some steps that companies and employees can take to combat sexual harassment when it seems to be everywhere?

Have a Policy in Place to Address Appropriate Workplace Behavior.

All companies need workplace rules. When the employee handbook has clear rules for the employees, then they understand what they can and cannot do. You can take a look at Facebook’s policy as an example. The anti-harassment policy should explain that the company does not tolerate discrimination based on any protected characteristic, list the characteristics (sex, race, etc.), and give examples of what would be a violation of the policy (slurs, sexual innuendos, etc.). When the rules are public and well drafted, employees have no excuse for not following them.

Have a Procedure to Report Sexual Harassment and Ensure that there is More than One Person that People can Report to

The policy should have a procedure that people can follow to report incidents of sexual harassment. It should give multiple people that the person can report to (human resources, manger, etc.) and how they can make their reports (in person, email, etc.). People should be made to feel as comfortable as possible when they are making these reports. These are tough subjects to discuss much less bring up when sometimes the person who harassed you is in a position of power.

Train your Staff about Sexual Harassment

Some states require employers to train their staff regarding sexual harassment. California, Connecticut, Delaware, Maine, and New York require some form of sexual harassment training to either all employees and/or supervisors. There are important reasons to train your staff on this issue even if you are not required to do so. It can help reduce your liability by decreasing the likelihood that an incident will occur, which is especially important if you work in an industry where sexual banter or other misbehavior is more likely to occur (like restaurants). When you talk about sexual harassment at work you are making it known that the company will not tolerate this kind of behavior. People will be more likely to speak up.

Train your Managers

Companies need to train managers separate from their staff. The training is not the same for managers as it is for staff. Not everyone that is subject to inappropriate workplace behavior will speak up. Managers must be appropriately trained to recognize harassment, how to respond to it, and the procedures that must be followed. They are a company’s frontline of defense against sexual harassment claims.

Ensure that Upper Management Does Not Tolerate Sexual Harassment

Upper management sets the tone for the rest of the company. For example, Under Armour’s practice of allowing employees to charge strip club visits and other adult entertainment to the company was a bad policy. It is incredible that this ended just this year. If employees are allowed to do this, and if the CEO’s and other C-suite officers are allowed to expense this sort of “entertainment”, then the company’s management is not leading by example (and is likely exposing itself to sexual harassment lawsuits).

Upper management should care about sexual harassment because the average cost of a sexual harassment lawsuit runs from $75,000-$125,000, but can often result in multimillion dollar losses for a company.

Beware of Instances Where Sexual Harassment is More Likely to Occur

If the company has a party where alcohol is present, then a problem is more likely to arise. Some workplace studies have shown a link between drinking and harassment. If you are going to have an office party, then you need to ensure that you provide drink limits to the people that will be there (2 drinks per person is a good limit).

Speak Up

I’m not addressing this to the victims of sexual harassment. There are a number of reasons why they do not always report an incident. Those that do report sexual harassment or inappropriate behavior deserve to be applauded.

I’m talking about the other people. The people that witness something, but do not say anything. The people that hear about an incident, but don’t do anything about it. Everyone is responsible for creating a positive and safe workplace where people want to work. It is people (like this) that do the right thing by taking action to make their workplace a better place that deserve to be held up as an example. Bystanders can help stop sexual harassment. They can run interference, get a manager, intervene and do a number of different things to prevent sexual harassment. We all need to do our part.

Conclusion

Sexual harassment can be severely reduced, but it will take everyone working together. If there is one thing that is evident from the past year and the #MeToo movement, it is that a lot of people have been hurt by people that they worked with. Hopefully, we can work together to end sexual harassment.

The information provided is my own and does not reflect the opinion of my firm or anyone else.