Coming Soon…Clarity on Tip Pools, Tip Credit, and Wages Paid to Tipped Employees

It feels right to share tips with those who support the servers, but is it legal? Currently, you cannot mandate that your tipped staff share their tips with other staff, such as hosts, dishwashers and bussers. But that may change soon for some hospitality employers. Last week, the federal Department of Labor (DOL) proposed a new regulation that, if enacted, will allow employers that pay their tipped employees the full minimum wage to include all staff in mandatory tip pools.

Under federal law, employers may pay tipped employees a reduced minimum wage of $2.13/hour, instead of $7.25/hour, by counting up to $5.12/hour of the employee’s tips toward the minimum wage requirement. This is a “tip credit.” If the DOL’s new rule on tip pooling is enacted, employers who do not claim a tip credit may include non-tipped workers, such as cooks and dishwashers, in mandatory tip pools. Tips must be re-distributed at least as often as wages are normally paid. The proposed new rule will continue to prohibit employers, including managers and supervisors, from keeping any portion of an employee’s tips, including from a tip pool.

The proposed rule will also effectively end the 80/20 rule, often called the 20% rule, and provide much needed clarity to employers about when they are required to pay the standard federal minimum wage of $7.25/hour to tipped employees. In 2011, the DOL enacted the 80/20 rule, under which employers are prohibited from taking the tip credit if the employee spends 20% or more time on non-tipped tasks, e.g. clearing tables, completing side work, making coffee, cleaning floors. The 80/20 rule has been difficult to administer and enforce, as is evidenced by the numerous lawsuits filed across the country challenging the rule.

In 2018, the DOL attempted to abandon the rigid 80/20 rule, however, courts have disagreed on whether it was effectively rescinded. The DOL’s regulations proposed last week will address the ambiguity. Under the proposed new rule, an employer may take the tip credit for any amount of time a tipped employee spends on non-tipped duties so long as those non-tipped duties are (1) related to the tipped duties and (2) are done at the same time as the tipped duties or within a reasonable amount of time before or after the tipped duties. The intent is to create a much more flexible system for calculating wages for tipped employees than the 80/20 rule.

The proposed rules are not yet final. They are open to public comment until December 9, 2019, at which time the DOL will analyze comments and proceed with the final rule-making process. The DOL does seem to be fast-tracking major initiatives in advance of the November 2020 election. We will continue to monitor the proposed regulations and keep you informed.

The attorneys and HR professionals at Lake Effect HR & Law are ready to assist and advise if you have questions related to federal or state labor regulations or your employee pay policies. Contact us at info@LE-hrlaw.com or 1-844-333-5253.

Be Careful What You Ask For!

Over the years, most employers have become accustomed to asking for salary history during the interview or pre-screening process to determine if an applicant should move forward in the hiring process. Most employment applications also inquire about an applicant’s prior convictions. However, more and more state and local governments are adopting bans on employer inquiries into a job applicant’s pay and criminal history. Employers need to ensure their hiring practices are compliant, especially as recruiting crosses state lines.

Over 20 state and local governments have adopted pay history bans. Pay history bans are frequently rolled into a state or local government’s overarching equal pay laws. Such bans are aimed at addressing existing pay disparities – especially those adversely affecting women and people of color – by ensuring that employers base compensation decisions on employees’ qualifications, duties and responsibilities.

Pay history bans prohibit employers from inquiring about an applicant’s prior pay during the pre-employment process or considering that information when making interview, hiring, or compensation decisions. Other facets of the laws are designed to eliminate secrecy and promote transparency by prohibiting employers from restricting their own employees from disclosing their current pay to applicants or to one another in the workplace. Some of the new pay history bans also require employers to provide the applicable pay range upon request by an applicant or include the pay range with any job posting.

There has also been an expansion of criminal history bans, often called “ban the box” or “fair chance” laws. These bans, adopted by over 30 state and local governments to date, are meant to even the playing field and provide a second chance for individuals with an arrest or conviction record. Criminal history bans prohibit employers from requiring applicants to disclose if they have been convicted of a crime. The laws generally permit employers to inquire into a prospective employee’s criminal history after subsequent steps in the hiring process: after an initial screening but before an interview, after an interview, or after a conditional job offer.

These bans have not yet been adopted in Wisconsin, but they impact employers recruiting with national searches or for locations outside of Wisconsin, and they aren’t going away. It’s a good time to review your hiring policies and procedures to make sure that they comply with these legal requirements and reflect your organization’s culture, mission, and values.

The attorneys and HR professionals at Lake Effect HR & Law are ready to assist and advise if you have questions related to your recruiting and hiring policies and procedures in Wisconsin or other states. Contact us at info@LE-hrlaw.com or 1-844-333-5253.

Department of Labor Releases Overtime Final Rule

On September 24, 2019, the Department of Labor (DOL) announced the long-awaited final rule on overtime and the salary level threshold for exempt workers. This final rule will become effective on January 1, 2020. Under the new rule, an estimated 1.3 million additional workers will be eligible for an estimated $298.8 million in overtime pay.

The DOL’s final rule:

  • raises the standard salary level from the currently enforced level of $455 per week to $684 per week (equivalent to $35,568 per year for a full-time worker);
  • allows employers to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level;
  • raises the total annual compensation requirement for “highly compensated employees” (HCEs) from the currently enforced level of $100,000 per year to $107,432 per year (NOTE: Wisconsin does not recognize this exemption); and
  • adjusts the special salary levels for workers in U.S. territories and the motion picture industry.

The DOL also noted that, while it did not incorporate automatic updates to the salary level, it intends to update the standard salary and HCEs total annual compensation levels on a more frequent basis in the future.

Please see the DOL’s Fact Sheet on the final rule here.

Notably, the DOL made no changes to the duties tests for exempt workers and HCEs. Please keep in mind that, to be exempt, employees must satisfy both the salaried basis test and one of the exempt duties tests.

The attorneys and HR professionals at Lake Effect HR & Law are ready and willing to assist and advise if you have questions about how this final rule may impact your workforce and pay practices. Contact us at info@le-hrlaw.com or 1-844-333-5253.

The Complex Web of Paid Family and Medical Leave Laws

Several states have now enacted laws mandating that employers provide paid family and medical leave (FML). These laws generally apply to employers in or out-of-state with 1 or more employees working in that state. It is important for Wisconsin employers to carefully manage their leave policies when they have employees in other states.

States that have adopted mandatory paid family and medical leave laws are: Massachusetts, Washington D.C., California, Washington, New Jersey, New York, Connecticut, and Rhode Island. The leave benefits available under these laws vary from state to state, so employers need to do their research – or rely on experienced employment law advisors.

For example, in Massachusetts, employers must pay into an FML fund with a .75% tax on the wages of any employee working in Massachusetts. Some employers, depending on the number of workers they employ, may deduct a portion or all of this amount from the employee’s wages. Starting in 2021, employees will be entitled to up to a total 26 weeks of paid family and medical leave per year for life events such as the birth or adoption of a child (12 weeks), a serious medical condition (20 weeks), a family member’s serious medical condition (12 weeks), or to care for a family member injured while in military service (26 weeks). While the employer must allow the employee to take the leave, the financial benefits are administered by the state’s Department of Family and Medical Leave. Employees apply for a claim and, if approved, receive their weekly benefit from the state. The maximum benefit an employee can receive is $850/week.

In Washington D.C., employers must pay a .62% payroll tax into the state’s FML fund, and employees apply for and receive their benefits from DC’s Department of Employment Services. Starting July 1, 2020, DC employees will be entitled to up to 8 weeks of parental leave, 6 weeks leave to care for a sick family member, and 2 weeks leave for personal medical leave. The maximum benefit is $1000/week.

In addition to paid FML laws, over 20 states, cities, and counties have enacted paid sick leave laws. These laws also vary as to how much leave must be given to employees, how that leave must be tracked and carried over, and how the paid sick leave intersects with other leaves, like FML.

Wisconsin employers who employ workers in other states must take these various leave laws into account. It is a complex task. Carefully crafted policies and procedures can help you navigate these unchartered waters without creating an administrative nightmare for your HR team.

The attorneys and HR professionals at Lake Effect HR & Law are ready to assist and advise if you have questions related to family and medical leave matters in Wisconsin or other states. Contact us at info@LE-hrlaw.com or 1-844-333-5253.

Tread Carefully on Independent Contractor Classifications

Employers should carefully review their practice of classifying a worker as an independent contractor. The increased scrutiny over worker misclassifications is spreading across the country, as states are grappling with how to attract a modern workforce and prevent employers from misclassifying workers to avoid some of the burdens of conventional employment.

California is a stark example. Earlier this month, the 9th Circuit Court of Appeals ruled that California’s stringent test adopted in 2018 for determining whether a worker is appropriately classified as an independent contractor applies retroactively. This means that employers may be forced to pay for lost wages and other benefits that were not paid to an independent contractor who should have been classified as an employee under the new law even if the employer fixed the misclassification after the new law was adopted. This has serious implications for a business with independent contractors in California.

Here at home, the law has not changed, at least not yet. But Wisconsin Governor Evers recently created the Joint Enforcement Task Force on Payroll Fraud and Worker Misclassification. Its stated purpose is to address the purported problem of employers classifying workers as independent contractors when they should be employees. Among other things, the Task Force will facilitate the coordination of state agencies involved in investigations and enforcement activities and recommend any necessary changes to current state law.

Wisconsin employers should expect a potential increase in investigations and enforcement actions as a result of the work by the Task Force. The state agencies involved are interested not only in recoupment of wages to workers but also in unpaid taxes to the state.

The attorneys and HR professionals at Lake Effect HR & Law are ready and willing to assist and advise if you have questions related to independent contractors and other worker classification matters. Contact us at info@le-hrlaw.com or 1-844-333-5253.

U.S. Supreme Court to Rule on LGBTQIA Workplace Protections

The United States Supreme Court recently announced that it will hear three cases that address whether Title VII of the Civil Rights Act applies to workplace discrimination claims based on sexual orientation and gender identity. Two consolidated cases from the 2nd Circuit (CT, NY, and VT) and 11th Circuit (AL, FL, and GA) involve discrimination claims based on sexual orientation and transgender issues. In Zarda v. Altitude Express, Inc., the Second Circuit held that sexual orientation discrimination is motivated by sex and thus is a form of sex discrimination under Title VII. In Bostock v. Clayton County Board of Commissioners, the Eleventh Circuit reached the opposite conclusion, ruling that “[d]ischarge for homosexuality is not prohibited by Title VII.” Bostock, 723 F. App’x 964, 965 (11th Cir. 2018).

The third case that will be heard by the Supreme Court comes out of the Sixth Circuit. In Equal Employment Opportunity Comm’n v. R.G. &. G.R. Harris Funeral Homes, Inc., 884 F.3d 560 (6th Cir. 2018), the court ruled that Title VII bars discrimination based on a person being transgender. The court explained, “It is analytically impossible to fire an employee based on that employee’s status as a transgender person without being motivated, at least in part, by the employee’s sex.” Equal Employment Opportunity Comm’n, 884 F.3d 560, 575 (6th Cir. 2018).

According to recent polling by PRRI, 69% of Americans favor anti-discrimination laws that protect LGBTQIA employees from discrimination in the workplace. The current administration, however, opposes any such protection. In the face of this tension, the Supreme Court’s upcoming decisions in these cases will be closely watched. They will likewise have sweeping impact across the county, much like Obergefell v. Hodges, the landmark civil rights case in which the U.S. Supreme Court ruled that the fundamental right to marry extends to same-sex couples.

Employers in Madison will likely welcome greater certainty on this issue at the federal level. The Wisconsin Fair Employment Act, which is the state-wide statute covering workplace discrimination and harassment, considers discrimination based on sexual orientation to be a form of sexual discrimination, but does not yet prohibit discrimination based on gender identity. The Madison Equal Opportunities Ordinance is more expansive and expressly prohibits discrimination on the basis of sexual orientation and gender identity.

The attorneys and HR professionals at Lake Effect HR & Law are ready and willing to assist and advise if you have questions related to workplace discrimination, or you want assistance with professional development or respectful workplace training. Contact us here or call 844-333-5253 (LAKE).

Hannah Joins the Team

We are excited to announce the addition of Hannah L. Renfro, J.D. to the Lake Effect HR & Law team!

Hannah has over 15 years of experience representing clients on a wide range of matters, including employment litigation; crisis and communication management; governmental relations; compliance and risk management; strategies for hiring and retaining staff; and general employment matters.

Prior to joining Lake Effect, Hannah served as Chief Legal Officer at the Wisconsin Economic Development Corporation for 7 years. She was instrumental in creating the organization and establishing its legal and compliance functions. Hannah oversaw the development of the organization’s policies and procedures, and training the Board of Directors, officers, and employees on those policies and procedures.

In addition to her in-house experience, Hannah practiced at Foley & Lardner (Madison), Godfrey & Kahn (Madison), and Rathje Woodward (Madison). While in private practice, Hannah litigated complex commercial matters involving non-compete agreements, employment discrimination, intellectual property and contract disputes, antitrust law, and campaign finance. She also has a broad range of experience in negotiating disputes and advising clients on how to minimize exposure to litigation.

“I am thrilled to be working with the amazing team at Lake Effect,” Renfro said. “The firm has created a unique, comprehensive approach to HR and employment law. I look forward to applying my background to help achieve Lake Effect’s mission and vision for our clients.”

Jane Clark, CEO and Managing Partner, remarked on what an exceptional coup it was to recruit Hannah, “She fits perfectly within the Lake Effect model with her blend of in-house and external advisory experience.  Even better, she is a terrific culture fit, supporting our core values with a keen intellect, quick wit, and ready laugh. “

Check out Hannah’s full bio here.

You’ve Got Mail… Gulp!

This March, employers around the country began receiving letters, the likes of which they have not seen in 7 years. These letters are not so affectionately known as “Social Security No Match Letters,” but are officially referred to as “Employer Correction Request Notices (EDCOR)” by the Social Security Administration. A sample can be found here.

In a significant departure from past practice, the letters do not include the names or social security numbers of employees with a mismatched SSN. To obtain this information, employers must register with the SSA’s Business Services Online (BSO).

Employers should be proactive if they receive a no match letter and promptly contact a trusted legal or HR advisor about the appropriate next steps. Those next steps should include:

  • Registering with the SSA’s BSO;
  • Checking the employer’s records for a clerical mistake;
  • Notifying the employee of the mismatch (a sample letter can be found here) and working with the employee to resolve the mismatch

Employees should be given a reasonable amount of time to resolve the mismatch. There is no law or regulation that defines what constitutes a “reasonable” amount of time. However, the U.S. Department of Justice has acknowledged that resolving a mismatched SSN may take some time.

Employers should also be cautious about jumping to conclusions and taking any adverse action against an employee subject to a no match letter. Keep in mind that the mismatch may not always be an indicator that the employee has provided fraudulent social security information. The mismatch may be innocuous, and the result of a data entry error, a change of name due to marriage or divorce, or even the employee’s identity being stolen. Employers may be subject to liability based on employment discrimination for adverse action taken against an employee if that is action is solely based on a no match letter. Employers should wait for the final results of its investigation into the mismatch and hope for the best resolution: correction of the error. If there is a legitimate mismatch, then the employer should consult with HR and employment law advisors to develop a plan of action.

The attorneys and HR professionals at Lake Effect HR & Law are ready and willing to assist and advise if you receive a no match letter, or have questions related to compliance with Social Security Administration laws and regulations. Contact us at www.LE-hrlaw.com or 1-844-333-5253.

Trump Era Proposed Overtime Rule: Hurry Up and Wait

On March 7, 2019, the Department of Labor released a Proposed Overtime Rule that would increase the salary level threshold for positions that are exempt from the overtime provisions of the FLSA from the current $23,660 per year ($455 per week) to $35,308 ($679 per week). While this may seem like a big leap, recall that under President Obama, the proposed increase was even greater, to $47,476 per year ($913 per week).

Rest assured, there is no danger that this change will be implemented tomorrow or anytime in the near future. Procedurally, the Proposed Rule will be published in the Federal Register, and there will be a 60-day period for public comment. After that, the DOL will review the comments, which could take several months. Following DOL’s review, there is likely to be litigation that will also impact the review and implementation of this Proposed Rule. At the conclusion of that entire process, the DOL will develop a Proposed Final Rule and submit its Proposed Final Rule to the White House Office of Management and Budget (OMB) for still more review. As a point of reference, in 2016, the OMB’s review of the Obama era Proposed Final Rule took nearly 2 months. Even after a proposed Final Rule is released, the DOL will likely give employers 120 to 180 days before the Final Rule becomes effective. All of this means that we are months and months away from a Final Overtime Rule implementing a salary level threshold increase. Keep in mind, we will also have a federal election in the fall of 2020. Certainly, the Trump Administration will want its Final Rule in place before then, but it could run into the same problem as the Obama era Final Rule – a change of administration may derail its plans.

What does this potential salary level threshold increase mean for employers and employees? It means that any employees who earn below the $35,308 per year threshold will be reclassified as non-exempt and eligible to receive overtime pay for hours worked in excess of 40 hours per work week. Unlike the Obama era Final Rule, the Proposed Rule does not call for automatic and regular increases to the salary threshold on an ongoing basis. Also, keep in mind that simply increasing an employee’s pay to at or aboe the $35,308 threshold does not automatically mean the employee or position is exempt from overtime pay requirements. To be exempt, the employee's job duties also must satisfy one of the duties tests set forth in the Fair Labor Standards Act and/or your state wage and hour laws.

Given the uncertainty of the landscape relating to yesterday’s proposed Final Overtime Rule, what should employers do to prepare?

  • Conduct an internal audit to gain a sense of how many employees’ annual salaries fall between $23,660 and $35,308. This will identify the pool of potentially affected employees and the possible financial impact to the organization in the event you decide to increase salaries to satisfy the proposed new threshold.
  • Remember the second prong of federal exemption testing: duties. Work with your in-house HR Department or external HR and employment law advisors to assess the duties of the employees in the pool to determine if their duties satisfy any of the FLSA exemptions. If they do not, the organization may need to reclassify the position as non-exempt and start paying those employees overtime – if and when the Final Rule is implemented and effective.
  • Sit tight and wait to see what the Proposed Final Rule is after the comment period and likely litigation. Lake Effect will continue to keep you apprised on the status of a Final Rule.

The attorneys and HR professionals at Lake Effect HR & Law are ready and willing to assist and advise as your organization conducts its exemption audit. Contact us or 1-844-333-5253.

How Do I Appreciate Thee? Let Me Count the Ways. . .

It is the first Friday in March, and that means it is National Employee Appreciation Day. Today presents a good opportunity for employers to stop and review the steps they are taking to make their employees feel valued in the workplace. Employees who feel valued are more likely to be positive, engaged and productive at work.

A 2015 survey conducted by Glassdoor Economic Research revealed that for almost 57% of people, benefits and perks were among their top considerations in accepting a job. In fact, 4 out of 5 people reported that they would prefer new perks over a pay raise at work. The survey confirmed that the three core benefits that matter most to today’s workers are health insurance, vacation/paid time off, and 401(k) retirement plans. 

In this time of low unemployment when many employers are struggling to attract and retain high-performing employees, surveys like this one provide valuable food for thought. Employers who want to attract the best and the brightest should offer more than a competitive salary. Based on the Glassdoor Survey Results, they would be wise to offer quality health insurance and 401(k) plans, as well as generous vacation and paid time off policies. Employers should also consider non-traditional employee benefits such as educational assistance/tuition reimbursement, gym memberships/employee wellness programs, paid sabbaticals, flexible work arrangements, workspace choices/improvements, regular employee outings, and formal programs for employee coaching and mentoring. Think, too, about furthering your unique organizational mission, vison and values with your benefits: Provide time off to clean the lakefront, tutor local kids, or work at a food pantry? Pay for audible accounts to encourage learning about the latest management trend? organize teams for local walks, runs, swims and paddles? Offer a weekly in-house massage therapist or yoga instructor? Have an office share for tickets to local arts, sports, and community events? Finally, Employers should ask themselves whether and how often they stop to recognize their employees’ hard work. Providing consistent feedback, routinely celebrating employee successes, and embracing rewards and peer recognition programs can go a long way towards making employees feel like valued members of a team.

So, by all means, take time out on this National Employee Appreciation Day to thank your employees. But, more importantly, consider the unique benefits that you can offer every day to reward employees for their contributions to your organization.

Contact the attorneys or HR professionals at Lake Effect HR & Law to if you have questions about how to make your employees feel appreciated.

Lake Effect HR & Law, LLC
(844) 333-5253 (LAKE)
info@le-hrlaw.com

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