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What the New Exempt Salary Threshold Could Mean for Your Business

What the New Exempt Salary Threshold Could Mean for Your Business

In December 2016, compliance with the Obama administration and the Department of Labor’s proposed wage minimum required extreme reclassification. (Read our 2016 blog on this proposal here.) The proposal would have raised minimum exemption wage to a jarring $47,476 from the previous $23,660. Push back from businesses combined with a late term lawsuit kept the proposal pending until Trump took office.

This Just In

As of last week, the Department of Labor has proposed an increase straight down the middle of the historic minimum and attempted Obama-era hike. The current proposed salary-level threshold for white-collar exemptions now sits at $35,308. According to the Society of Human Resource Management (SHRM), the proposal, if finalized, could result in the transition of more than one million currently exempt workers to non exempt, as well as many pay increases for employees below the new threshold.

Nonexempt employees (those who do not meet the salary base and do not match FLSA work requirements) must receive a “time and one half” pay rate for any hours worked over forty in a workweek. The FLSA “duties test” defines specific regulations for executive, administrative and professional work that make an employee exempt, in addition to the salary threshold.

Tricky Business

While compliance is mandatory if the proposal is finalized, the specific way of reaching compliance is left to employer decisions.

If exempt employees currently make salaries significantly lower than the threshold, reclassifying employees to non-exempt and overtime eligible might make sense.

But, employers can also avoid salary and overtime pay altogether. Hours for newly non-exempt employees may be reduced, part-time or contract workers may be hired to fill gaps, tasks may be re-assigned to other exempt employees, and perks may be dismissed since the exempt/non-exempt distinction is often used to provide benefits.

Employers must then weigh the cost of morale.

Overall, it makes more sense to reclassify to nonexempt if an employee does not work much beyond forty hours. But for employees who often work over 40, it may be less difficult and less expensive to increase salary to the new threshold, rather than paying consistent overtime.

What Now?

There is still a long way to go before reclassification. Proposals are always small first steps in a lengthy process before finalization.

However, employers do not have to wait for the final rule to review FLSA duty requirements. Jeffrey Ruzal, an attorney with Epstein Becker Green, recommends employers begin auditing their exempt workforces to determine how many might qualify under the criteria of executive, administrative and professional exemptions. Before raging re-classification, it is possible that employees currently or potentially exempt due to salary, may not pass the primary duties tests.

In general, this pending proposal offers valuable time for fixing current errors and planning for the future. We at Servant HR would love to help plan for yours. If you’re our client, we’re already on it. But if you have questions about the specifics of the proposal, or are wondering how a PEO can help manage these crucial details, please don’t hesitate. Contact us today!

Employee vs. Independent Contractor: The latest NLRB approach

Employee vs. Independent Contractor: The latest NLRB approach

A new National Labor Relations Board (NLRB) decision has drawn a blurrier line between employers and independent contractors. Returning to pre-Obama-era policies, the NLRB is now more likely to acknowledge independent contractor relationships.

A wide array of federal, state and local laws govern the relationship between employers and their employees. But often these laws do not apply to those classified as independent contractors.

The distinction between the two is critical, but hazy, as each law has a slightly different way of discerning independent contractors from employees. Courts and agencies add complication as well through differing interpretations of those laws, along with frequently changing standards according to appointed political party.

Back and Forth

Last year the California Supreme Court broadened the definition of “employee” for wage order claims. Obama-era guidance restricted an employer’s ability to classify workers as independent contractors. Now under President Trump, federal agencies are swinging back the other way.

According to Ryan Funk of Faegre Baker Daniels, the new NLRB decision returns to how it viewed independent contractors before Obama-era restrictions. Funk writes, “The main difference between the new test and the Obama-era one is how the agency looks at whether workers have ‘entrepreneurial opportunity.’”

Action vs. Opportunity

The Obama-era decision gave weight only to actual entrepreneurial activity (and even then, only when looking at just one part of a multi-factor test.) This narrow view makes the chance of meeting criteria significantly slim.

The new NLRB decision re-establishes the value of entrepreneurial activity. The principle of “opportunity for entrepreneurial activity” is used to evaluate the overall effect of each of the ten factors in a common-law analysis of an independent contractor relationship.

The decision is employer friendly, as it frees up employers to classify independent contractors and drop the host of governing laws.

Boiling It Down

While employers are freed up through the new decision, the line is still blurry. Those looking for a clear distinction between employee and independent contractor are in for a letdown. According to Funk, “Any legal test with ten factors is bound to boil down to a case-by-case approach.”

Even tests and their factors can vary case-by-case. Over the last thirty years the IRS has used an old revenue ruling twenty-point test, the tax court has used a seven-point test, and the IRS has espoused a three-pronged “control test.” Confusion is certainly understandable.

Therefore, independent contractor relationships should be re-analyzed in light of the new NLRB approach. Based on potential IRS involvement, it’s also important to note that the NLRB is just one voice in a crowd of agencies, so employers should stay up to date as independent contractor tests continue to evolve.

HR and automation: Integrating human and digital resources

HR and automation: Integrating human and digital resources

Since the agricultural revolution of the 18th century, the productivity and efficiency of technology has instilled fear of employment displacement. Everything from surgical automation to grocery store self-checkout has people wondering: Am I going to lose my job to a computer?

The concern is legitimate. According to the 2017 Global Future of Work Survey report from Willis Towers Watson, business leaders expect 17 percent of work will be automated by 2020. While some industries (i.e. manufacturing, military, etc.) have been highly automated for years, other sectors such as retail, finance, banking and insurance are currently reeling from increases in automation. Restaurant kiosks, ATM machines and even automated financial planning platforms are being offered in place of human talent.

Technology’s power to transform economic sectors is nothing new, and its influence is only speeding up. So what does automation mean for HR — a department namely for humans?

HR is not exempt from the impact of automation. According to the Society of Human Resource Management, “Software bots and sophisticated algorithms are making it much easier for recruiters to source and screen job candidates, a function formerly performed solely by very human HR employees.”

Technology provides a more user-driven employee experience and most commonly automates tasks that are tedious and time consuming. We at Servant HR have experienced this on a small scale through the implementation of electronic onboarding. Automation has lessened the paperwork shuffle and provides employees with forms they can fill out on their own laptop, on their own time.

Automation advances undoubtedly improve customer service and eliminate human error. It’s definitely good… but isn’t that kind of bad? For the ones who get paid for the paper shuffle?

It sounds like it, but it’s widely argued that humans still retain an edge. As smart as computers are, the human body itself is a flexible and adaptable work platform. Human workers see the details, weigh implicit factors and can make complex decisions in unique situations. While rote work can become more efficient, according to a KPMG study, jobs that involve networking, project management, sales, conflict resolution, hospitality, creativity and any level of social intelligence are insulated.

But insulated doesn’t mean isolated. The automation revolution is a revolution for a reason—it’s everywhere. Rather than viewing automation as the enemy, Lisa Buckingham, a brand officer at Lincoln Financial Group, encourages today’s businesses to “provide a blend of digital and human services.”

This analysis is based off of companies like Amazon and Lyft, who were born digital. These companies continue to raise consumer expectations across all industries for simple, transparent solutions. Even the most creative and human-centered jobs must embrace the efficiency and simplicity of technology.

Oxford University program directors, Michael Osborne and Carl Frey, have conducted extensive research on the future of employment. Their work also reveals that tasks requiring relationship building and an understanding of human needs in social situations are best-suited for humans.

We think so too. At Servant HR, relationship is our priority. Our people-centered approach to businesses makes our team of experts an irreplaceable asset to our clients, despite the imminence of automation.

Automation is not the enemy. Done right, automation frees up human workers to provide more hospitality, one-on-one interaction and detail-oriented customer service.

And service is what we’re all about.

To learn more about what our personal PEO can do for your business, contact us today!

Q + A:  Social media and the workplace

Q + A: Social media and the workplace

When it comes to legal situations around social media and the workplace, the best defense is a good offense. You may not be asking these exact questions today, but someday you might. Keep reading to learn how to avoid legal traps as an employer, and how to formulate a stronger social media policy as an HR professional.


Q: “My employee is making comments about me on his/her personal Facebook account. What can I do?”

A: Perhaps nothing has emboldened people more than the rise of social media. Comments one wouldn’t dare make in person can now be expressed quickly and frequently behind the perceived safety of the internet.

But as inappropriate or insulting as a post may be, employers do not always have the right to take action against an employee for social media behavior. The National Labor Relations Act enforces the right of employees to engage in “protected concerted activity.” This law allows employees, with or without a union, to act together to improve their pay and working conditions.

 

Q: “What exactly qualifies as protected concerted activity?”

A: According to the National Labor Relations Board, an employee simply griping about their job is not concerted activity. Whatever an employee says or posts on social media must have “some relation to group action, or seek to initiate, induce or prepare for group action or bring a group complaint to the attention of management.”

However, the NLRB decides what actions deserve protection, and because every situation is different, the law is intentionally vague. Sometimes comments made on social media are interpreted as protected concerted activity because they are supported by other coworkers or simply directed at management.

In one case, an employee of a New York catering company was fired for profane Facebook comments directed at his boss and his boss’s family. Still, the NLRB found this employee protected, since the comments were made during a work break, expressed the employee’s concern about management and ended with an all caps call to join the union. The NLRB ordered reinstatement and back pay for the employee.

Less extreme examples of concerted activity include talking with coworkers about wages and benefits, circulating a petition for better hours, participating in refusal to work in unsafe conditions or joining with coworkers to address issues directly with an employer, government agency or media outlet.

The law does not protect spreading maliciously false information, or bashing an employer’s products or services without linking back to a labor controversy. However, the still-vague terms have caught many employers in legal traps.

 

Q: “So employers can never terminate employees for online behavior?”

A: Not exactly. Off duty conduct laws vary state to state, but employers do have the right to regulate online activity. For example, an employer can discipline employees for online behavior during work hours. However, they must be consistent in enforcing this policy. Discipline must be enforced for all online activity during work hours, not just when negative comments about the company are made.

Employers must also take action when an employee’s online actions place the employer at legal risk. Examples of this include betraying confidential information, violating rules about company product endorsements or harassing a coworker.

Employers should intervene when an employee acts disloyally online as well. Complaining about a manager or pay rate on Twitter isn’t considered disloyal, but if an employee claims online that the hospital where they work is unsafe, this is considered disloyal. However, if employees address legitimate safety concerns with an employer or government agency, this activity is protected.

 

Q: “What other ways can I prevent legal situations around social media in the workplace?”

A: Employers must welcome feedback. Many attacks on social media happen out of pent up frustration. If frustration can be expressed early on when everyone is still rational, the extreme cases can be avoided.

Consistent communication about social media policy is also essential. Along with routine education and training, it is important for company handbooks to have compliant social media policy in order for interceding action to take place fairly and consistently. Any employer action in response to employee behavior on social media must be in line with previous action and easily traceable to a clear handbook policy.

However, even “airtight” social media guidelines leave employers susceptible to accusations and lawsuits. Focusing on prevention is first, but staying up to date on labor relations laws is a close second.

 

Still have questions? We have answers and experience. Contact us today to see how Servant HR can serve your administrative and consulting needs.

Practicing workplace gratitude + Servant HR updates!

Practicing workplace gratitude + Servant HR updates!

Few things are more contagious than recognition, encouragement and gratitude. Creating an office culture of thankfulness is not seasonal work, but a year-round initiative sparked most often by leaders. The humility demonstrated by employers, managers and HR professionals in acknowledging and appreciating others can spread quickly through an organization. Simple “thank-yous” have the power to transform a workplace.

As we approach thanksgiving, we thought we would practice this gratitude with you, as well as share a few Servant HR updates! We have so much to be thankful for this year.

 

1. Our people

 

In the midst of our office remodel this week, our team still gathered together for our Monday prayer meeting. We shared personal and work-related prayer requests in a circle on the floor of our empty new conference room. We are grateful for our dedicated team members and their flexibility in transition. Each person brings a variety of skills and personality traits and we appreciate their hard work.

 

Our temporary team meeting spot, since no shortage of furniture can keep our team from Monday mornings together.

Our small but mighty team manages payroll, benefits administration and all things HR for clients across the Midwest.

 

 

 

 

 

 

 

 

 

2. Our clients

 

Lately we have been given opportunities to see our clients in action and we are so thankful for the organizations we serve. Edge Mentoring’s EDGE|X conference reinforced our values about servant leadership and provided us with unique networking opportunities. Hosting a booth at Truth at Work’s Transformation conference also introduced us to new people and ideas on leadership and humility. We are proud of the work our clients do and feel blessed to partner with so many different missions and organizations.

 

Our Truth at Work conference booth featured details about Servant HR, information about our upcoming network series and a drawing to win a free drone.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3. Our space

 

For our friends and clients a few states away, you may wonder where we actually work! While we serve clients in over twenty-five states, our team of eleven works out of an office complex in Fishers, Indiana. Now, after several months of prayer and planning (and a few demo days!) we are operating out of a new office that better fits our growing team

 

Demolition of our old space continues as our team works on the other side of the wall.

The new expansion provides more office space, several conference rooms, a break room and a waiting lounge.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The new space is an expansion of our old one into a vacant neighboring office and God has been so faithful to provide this smooth transition. We are especially thankful for Avera Commercial LLC and their quick, diligent work through the construction process. Adrian Sodrel and his team have been a huge blessing, working many late nights and early mornings to keep our workplace clean and functional.

 

Adrian and his team hard at work in one our new office spaces.

Avera Commercial workers rip up old carpet with cheerful smiles.

 

 

 

 

 

 

 

 

 

We have been richly blessed and still have much to be thankful for. So, are you infected yet? We hope our gratitude is contagious and inspires you to spend time intentionally thanking your family, your boss, your friends, your managers and coworkers this season.

Wishing you a Happy Thanksgiving from all of us at Servant HR!

The politics of perks: Bonus benefits have laws too

The politics of perks: Bonus benefits have laws too

U.S. companies are fighting hard in the war for loyal talent. Their strategy?

Being really, really nice.

Salary makes up a smaller part of compensation than it used to, and lifestyle benefits are filling in the gap. According to a Bank of America report, a survey of 2,000 employees found that 88% would consider lower-paying jobs to get better perks. Paid time off, onsite fitness centers, casual dress, catered meals and a constant flow of free coffee are all approaching standard as companies work to attract and retain their people.

But amid the deluxe whirlwind of benefits, the saying holds true­—no good deed goes unpunished.

 

The Lawsuit

 

In 2003, New York-based Estee Lauder, one of the world’s leading manufacturers of skin care, makeup, fragrance and hair products, implemented an exceptionally generous parental leave policy. In addition to the 12 weeks of unpaid leave required by law, “primary caregivers” were offered 6 weeks of paid leave specifically for “child bonding,” along with flexible return-to-work benefits. “Secondary caregivers” were offered two weeks of paid leave.

The policy is certainly warmhearted on paper. However, in 2017, a male stock worker at a Maryland store, requested six weeks of child bonding leave as the primary caregiver and was denied. He was granted two weeks, as the cosmetic company claimed the “primary caregiver” designation was intended only for mothers and those in “surrogacy situations.”

On August 30, 2017, the Equal Employment Opportunity Commission filed a lawsuit against Estee Lauder, stating the additional parental leave policy discriminated against male employees. The EEOC claimed the practice of allowing women six weeks and men only two weeks, violated the Civil Rights Act of 1964, outlawing discrimination based on race, color, religion, sex and national origin. The policy also was found in conflict with the Equal Pay Act of 1963—outlawing wage disparity based on sex.

 

Costly Consequences

 

Estee Lauder paid a $1.1 million settlement to the class of 210 male employees who received two weeks of paid leave, as compared to the six weeks offered to new mothers. Sex-neutral criteria was used to revise return-to-work policy, ensuring equal benefits for both mothers and fathers. Benefits were applied retroactively to all employees who experienced birth, adoption or foster placement since the beginning of 2018, and training on sex discrimination was mandated by court decree and monitored by the EEOC.

A weighty consequence for such a well-meaning idea. Fortunately for us, we can learn a few things from a distance.

 

Take-Aways

 

“Parental leave policies should not reflect presumptions or stereotypes about gender roles,” Philadelphia District Office Attorney Thomas Rethage said. “Mothers and fathers should be treated equally.”

This equal treatment applies not only to parental leave, but to all benefits offered beyond what is required by law.

With the rising corporate trend of providing extended parental leave and other lifestyle benefits, companies must ensure treatment consistent with the prohibition of discrimination based on sex. Sincere, routine attention to policy and practices is necessary in catching unwritten stereotypes and protecting against disparate treatment.

Kindness can quickly turn unkind if not shown equally. Fair company values must match the way a company actually operates; otherwise, generous perks are an expensive and empty investment.

 

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