Author: Mike Hayden

Avoid Ambigous Language When Terminating Employees

Employee’s who quit are not necessarily eligible for unemployment benefits. When you use ambiguous language during a disciplinary session or termination, it can result in an unwarranted claim for unemployment benefits. In this economy, the Employment Development Department is overwhelmed, insolvent and not capable (or desirous) of helping small business owners fight undeserved claims for Unemployment Insurance (UI) Benefits. This, coupled even with a minor misstep during a termination can result in unwarranted benefits being paid out to former employees. What can you do? Approach each disciplinary situation and termination with caution and determination to get it done right.

Let’s look at a couple ways to increase your odds of winning every UI case by eliminating some of the traps that employers face.

Bad Example

You bring an employee in for a counseling session and he gets up and says, “Well if you don’t want me to work here, then just fire me!” and you respond “Fine! Leave then, if that’s what you want!” The employee leaves and files for UI. Employee wins because of a lack of clarity on the employer’s part. Sounds nutty, but it’s happened before, maybe to you!

Be Decisive

When you’re dealing with employees in a disciplinary or termination situation, be clear, be decisive and make sure that you document everything including what the employee said, what you said and their responsive actions. Always have the employee sign documentation that clearly defines the employment action being taken. Never leave the decision up to the employee.

Other Situations

Employees that have moved away, or – for some other reason – no longer have reliable transportation to work, may have a reasonable justification to quit, and they may still receive UI benefits. If an employee seeks to leave his/her position due to something like a relocation or a transportation issue, be sure to make every attempt to accommodate their needs and determine if there is anything else causing them to quit. You may be able to help them continue employment with you if you so desire, but having complete information and attempting to assist the employee may persuade the UI judge to rule in your favor.

If an employee is deserving of and entitled to unemployment benefits, you should not attempt to prevent their claim from continuing.  However, in today’s economy, we frequently see employees seeking UI benefits for unwarranted employment separations, and this will cost you in the long run.

Don’t let employees take advantage of the overburdened UI system. Take the time to protect your business.

Sexual Tension is Dangerous in the Workplace

In an age where mixed-gender workplaces are the norm, every business faces the risk of claims related to sexual harassment, hostile work environment and discrimination. In this economy, tensions are high amongst workers that are dealing with financial problems and other personal crises and these issues can spill over into your workplace.  When they do, they can cause a multitude of complicated issues that unfortunately, you’re stuck with.  Can you really afford more complexity and stress right now?

Workplace sexual harassment and hostile work environment issues are more common than you think. Taking steps to establish an effective policy against harassment in your workplace is not only a critical step toward preventing such problems, but it is also a legal requirement for all businesses. There is some good news, however — it is a relatively simple process and can prevent time crushing, profit draining problems.

Legally Required?
If your business has even 1 employee, you are required to publish and  implement a formal harassment prevention policy. And if your business has more than 50 employees, you are also required to provide 2 hours of supervisors’ harassment prevention training every 2 years. For all businesses, it is highly recommended that you adopt a comprehensive harassment policy that addresses topics like Policy Enforcement, Complaint Procedure, External Reporting, Retaliation, etc.
First Step
You should first adopt an anti-harassment policy, communicate it in writing to your employees and have them sign a copy. The policy should include a zero-tolerance approach, a procedure for complaints and a full description with examples of what is considered unacceptable speech and behavior. Every employee should also receive a Sexual Harassment pamphlet (available from the CA Dept. of Fair Employment and Housing – DFEH), and a poster from the Department of Fair Employment and Housing should be visible to all employees. (This could be included in a “all-in-one” Employment Law Poster.)

Train Supervisors
Employers over 50 are required under the law to provide sexual harassment training to their supervisors according to specific regulations that calls for 2 hours of interactive training. For businesses under 50, it is still recommended that you train your supervisors to handle workplace situations involving sexual harassment and discrimination. All employees should be notified of the company’s policy on harassment and should acknowledge their receipt and understanding of the policy.

Response to Claims
The key to protecting a business from problems associated with sexual harassment and discrimination is to respond immediately to complaints or as soon as you are aware that there is, or may be, a problem. You must quickly and thoroughly investigate without bias, any complaints in order to determine what is actually happening, who is involved, who has witnessed the incident(s) and what steps are necessary to correct the problem. The response an employer provides can make the difference between being dragged into court and diffusing the situation without undue harm to the business and the individuals involved. Get it all in writing!

Seek help for complicated situations, any misstep can land you in court!

Follow-up
Do not expect that establishing a policy up front will continue to be effective for the long haul. At least annually, provide refresher training in company meetings and be sure to have every employee sign an acknowledgment of his/her participation. Preventing harassment, and other employment-related problems, is part of the cost of having employees so don’t think you can make the excuse that you did not have the time or the funds to handle it. The Government and the plaintiff’s attorneys will not have concern for your difficulties.

The steps outlined above are only a basic guide to establishing an effective harassment policy in your workplace. This is not meant to be a complete description of all the steps you should take. Seek professional assistance to be sure your business complies with the law. Contact Champion at (800) 513-2153 for complete assistance.

The more effective you are at controlling your human capital, the more profitable your business will be.

EDD Cracks Down on Independent Contractors

As tempting as it may sound to classify your fringe workers as Independent Contractors, Beware! The EDD and the IRS are working together to crack down on misclassified employees and are seeking to boost their revenue in this down economy.

Sure, there is much less compliance paperwork, no workers’ compensation, no withholding, no payroll and no employment law liability, but don’t be too quick to take the easy path. Saving a few dollars now may not be worth the fines and penalties later should you get it wrong, and it’s easy to get it wrong.

Let’s review some basics about Independent Contractors and the EDD’s efforts to be sure you are in compliance.

The Crackdown

Every CPA and accountant will tell you, the EDD and the Federal Department of Labor in particular, are on a mission to ferret out any misclassified Independent Contractors and convert them into employees. They say this is for the sake of the poor contractor that needs to be protected. In reality however, they will be more than eager to send you assessments for personal income tax, state disability income, unemployment insurance and employment training taxes and overtime. The fines are steep!

The Misconceptions

It’s critical that we differentiate between Independent Contractors and Employees for all of the above mentioned reasons. Whether it’s due to a simple misunderstanding of the IC criteria or an intentional effort to skirt around the edges of the law, misclassification can cost you a bundle. Let’s look briefly at a few of the critical differences:

Control

Employee – under company control as far as schedule, hours, pay, and at-will status

Independent Contractor – works independently according to his/her own hours and direction

Training and Work Methods

Employee – trained in your work methods and works according to your direction.

Independent Contractor – not trained by you and expected to use his/her own preferred methods.

Pay

Employee – paid by the hour or according to a salary at regular intervals

Independent Contractor – paid according to his/her own rates and schedule by invoicing the business

Integration with Business

Employee – the business relies on the efforts of employees to produce its’ primary product or service

Independent Contractor – support only, work does not create or produce the primary product or service

Of course a detailed analysis of the differences is far more complex than this comparison. While the “right to control” the manner, means, method and mode of performing the work is the key test, there are many other “factors” that must be weighed, all of which are designed to determine if the worker truly has his/her own business, which is independent of yours.

Bottom line – any CPA will tell you that businesses today are facing an onslaught of scrutiny when it comes to classifying Independent Contractors. If you need advice regarding an existing problem or help determining if you are in compliance, please don’t hesitate to contact Champion right away. We offer 60 minutes of free consultation.

Are You a Sitting Duck for Employee Theft?

Among the many threats to your business, one of the most critical is employee theft. You can actually encourage employee theft through a lack of financial controls, lax hiring and supervision and a casual attitude regarding policies and procedures. These failures in management can lead to an environment that is ripe for internal theft and fraud.

It is estimated that the typical business will lose an average of six percent of revenues from employee theft. The U.S. Chamber of Commerce survey reported that one-third of business bankruptcies are due to employee theft.

Small business owners can help protect their businesses from employee theft and fraud by following these eight recommendations.

Create a positive work environment. A positive and fair work environment with solid communication and documentation encourages employees to follow established policies and procedures.

Implement internal controls. Establish financial controls to create redundancy and accountability. No employee should be responsible for both recording and processing a transaction. Access to physical and financial assets and information should be restricted to authorized employees.

Hire honest people. Pre-employment background checks are an excellent way to cut down on hiring employees with sketchy backgrounds. A thorough pre-employment background check should include:

  • Criminal history
  • Civil history
  • Driver’s license
  • Education verification
  • Employment verification

Provide a deterrent. Inform your employees about your policies and procedures related to fraud, and the organization’s code of conduct and ethics policies. Explain what procedures to prevent fraud are in place and how violations of these policies will be disciplined.

Implement an anonymous reporting system. Every organization should provide a confidential reporting system for employees, vendors, and customers to anonymously report any violations of policies and procedures.

Perform regular and random audits. Every company should have regular assessments as well as random, unannounced financial audits and fraud assessments. This is a regular reminder to all employees that fraud prevention is a high priority for the organization.

Investigate every incident. A thorough and prompt investigation will give you the facts you need to make informed decisions and reduce losses. Consistently investigate all policy and procedure violations, allegations of fraud, and warning signs of fraud.

Lead by example. Business owners and their managers should set the example for the organization’s employees. A casual attitude toward rules and regulations will soon be reflected in the attitude of employees. Every employee, regardless of position should be held accountable for his/her actions.

Implementing these recommendations can dramatically reduce the opportunity for employee theft and protect the assets of your business. If you suspect fraudulent activity by an employee, seek professional assistance to conduct the investigation. Determine what’s necessary to protect your business and prevent a recurrence.

Employee or Independent Contractor – The Choice May Not be Yours to Make

Are you classifying the people performing services for your business as independent contractors for IRS tax purposes? Is it possible that they might really be employees for IRS tax purposes?

This is a decision that you must get right or you could face disastrous consequences.

How these workers are classified can have major tax and expense consequences because employees and independent contractors are treated differently by the IRS, the EDD and your Workers Compensation Carrier. Improper classification for tax purposes can cause problems that could financially harm your business. Business owners must withhold income tax on employees’ wages, and must pay all the necessary Employer taxes that are due. They must provide the employee with a Form W-2, “Wage and Tax Statement,” showing the amount of wages and tax withheld for the year. You could also wind up on the hook for injury claims if they get injured on the job and it turns out that they are an employee.

Additionally, payments to an independent contractor that total $600 or more for the tax year must be reported by the business owner on Form 1099-MISC, “Miscellaneous Income,” and filed with the IRS. A copy also must be given to the independent contractor.

Independent Contractors that either cross the line or could make the case that they are employees can challenge you in court and win if you aren’t careful.

The key factor which determines whether a worker is an independent contractor is who has the right to control the worker as to how and when work is accomplished. The IRS has developed twenty common law factors which are used on a case by case basis to determine whether a worker is an independent contractor or an employee for IRS tax purposes. Independent contractors do not have to satisfy all of the twenty common law factors. It is best to think of the factors as weights on a balance scale. (Contact Champion for a copy of the 20 factors)

If a worker clearly is an independent contractor, an Independent Contractor Agreement is useful and recommended; however, any agreement, no matter how well drafted will not change the situation if it is determined by the courts or the IRS that an Independent Contractor is truly an employee.

The laws surrounding the employee versus independent contractor issues are extremely complex and you should consult with an HR professional before acting, or to review a current situation.

For many business owners, it’s tempting to reduce their tax bill and push the envelope a bit on classifying employees but it may not be worth the risk. Contact Champion today and we can assist you with making the right decision before it ends up costing you more than anticipated.

Employee Timekeeping Rules – Guidelines for Trouble Free Time Tracking

Employers who don’t follow the rules regarding time sheets and electronic time-keeping records are receiving very costly rulings from the California Division of Labor Standards Enforcement (DLSE).

The DLSE is very clear about how time records should be handled.  Time records are considered inadequate if  employees’ time sheets are filled in with the same times each day.  For example, the employee reports he started work at 8:00 AM every day, took a meal period at Noon every day, and then left for the day at 5:00 PM every day.  Employees do not, in actuality, report to work or take their lunch at exactly the same time everyday.  There is always at least a slight variation.

Check time sheets to be sure employees are writing in the exact times they arrive, take meal breaks and leave for the day.  It doesn’t matter if an employee has taken and recorded every meal period.  If the time sheet shows exactly the same time every day, the labor commissioner will accept the employee’s word that the meal period was written in but not taken or that the employee worked overtime but forgot to write it in.

While nobody wants to be the time sheet police, it can be very expensive to allow inaccurate time reporting.  Electronic records have become the target for a large number of complaints to the labor commissioner. Issues with time cards can support other complaints if they contain inaccuracies or other problems that would invalidate your defense.  Here are a few simple things you can do to ensure you don’t end up defending a time sheet issue in court:

  • Employees must sign their time records – even the electronic versions.  An unsigned time record is not adequate and will not be considered valid by the labor commissioner.  You must design some means for employees to review their time and sign the time record. They don’t have to sign the record prior to payroll, but it should be within the week following the end of the pay period.
  • Employees must sign an acknowledgment of their work time on their time sheet, time card or electronic record stating that, under penalty of perjury, it is an accurate record.  Contact me if you need the recommended language for the acknowledgment statement.
  • Be sure employees are credited for the time it takes to clock in.  It’s fine if it’s simple and takes very little time.  However, waiting for a computer to load may take more than a few minutes. Many employees have been awarded back pay and overtime because they were not compensated for the time required for their computer to load before they could clock in.  If the employee only has to wait a minute or two, it is not a problem.  However, if it is more than that, employers should determine the amount of time the employee must wait to clock in and automatically add the wait period to the employee’s work hours for the day
  • Does your time clock round up or down to the nearest ¼ hour?  Rounding must sometimes benefit an employee who is late and sometimes benefit the employer when the employee is early.  If employees are generally a little early, the benefit to the employer may be greater than the benefit to the employee.  Unfortunately, that is true in many organizations.  If the rounding benefits the employer more often than it benefits the employee, a complaint to the labor commissioner can be very expensive.  Set the time clocks to record exact times. The potential problems far outweigh any valid reasons for rounding.

If you have any questions, please contact Champion and we can help you tighten your procedures or develop an automated time tracking  system to properly track your employees’ time while saving time and money.

IRS Standard Mileage Reimbursement Rates for 2011

Beginning on Jan. 1, 2011, the following standard mileage rates for using a vehicle (cars, vans, pickups or panel trucks) will apply:

  • 51 cents per mile for business miles driven
  • 19 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

The new rates for business, medical and moving purposes are slightly higher than last year’s rates. These are the tax deductible rates that the IRS allows you to reimburse your employees for their driving on behalf of your company. You can go higher or lower if you choose but if you pay higher, the IRS will not allow you to deduct the amount over their designated rates.

The IRS website explains:

“The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.

“A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.

“Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.”

What Should You Do?

  • Review your policies to ensure reimbursing employees at the proper rate for 2011.
  • If you intend to change the reimbursement rate, notify your employees.
  • Consult with Champion to be sure you are prepared all the HR compliance changes in 2011

Disgruntled Employees are Inevitable – Are Your Trade Secrets Protected?

As business owners and employers, we all expect to have “Gruntled” employees forever, but in reality, someone will likely leave their position unhappy, carrying the power to harm your business or solicit your clients at some point in the future. From the perspective of an HR Services firm, it happens more often then you think. Ask yourself, are you absolutely confident that current or former employees wouldn’t consider misappropriating internal company data, or attempt to benefit  from the competitive information gained during their employment with you? If the answer is no, read on.

Its likely that you have information that could be valuable to someone, somewhere, and your employees have access to that information. Consider your internal financial data, client lists, employee lists, internal processes, recipes and product secrets. There are specific things you can do to protect this proprietary information but caution is advised. Missteps can dilute the power of your protection or get you in legal hot water. You should take time out to think about these issues now, or certainly before you hire your next employee, and then take the steps necessary to protect your assets.

Protect the Disclosure of Your Sensitive Corporate Information

A properly written Confidentiality Agreement, or Non-Disclosure Agreement can be used used to protect trade secrets and other proprietary information. A Confidentiality Agreement generally requires the named party agree to treat certain corporate information (as specifically set forth in the agreement) as confidential and prohibit that party from personally using or disclosing such information to third parties. Keep in mind, there is a limit to the amount of time you can bind the party to the terms of the agreement, typically during the course of employment and 2-3 years after separation.  Its always wise to protect company secrets internally but this agreement can deter inappropriate disclosure and make it easier to pursue employees or former employees that decide to divulge sensitive information.

Prevent the  Solicitation Clients and Employees

Protecting your employees and clients is possible through the use of a Non-Solicitation Agreements. A Non-Solicitation Agreement typically prohibits the party named from directly or indirectly soliciting customers and company employees in ways that would directly compete with your business. While the courts are not entirely in support of the Non-Solicitation Agreement, with proper wording, and in the defense of provable trade secrets, it can be effective in keeping former employees from raiding your clients and employees to build their own competing business or benefit their new employer. A Non-Solicitation Agreement is much more powerful when combined with a Non-Disclosure or Confidentiality Agreement. With both, the legal restraints on using confidential information should give you the power to prevent a former employee from contacting clients or employees for business purposes.

What about using a Non-Compete Agreement?

A Non-Compete Agreement is a contract that generally states that an employee, former business partner, or former business owner will not engage in the same type of business as the employer, or former business partner or owner in which the individual had an ownership interest for a specific period of time. Despite being very desirable, these agreements are typically illegal and invalid in the state of California unless the non-compete clause is part of the sale or dissolution of a corporation, limited liability company, or partnership.

Its best to avoid any use of Non-Competes, a judge could throw out any accompanying Non-Solicitation or Non-Disclosure agreements if you try and pursue the provisions of the Non-Compete.

Caution Advised

Many employment contracts and severance agreements, especially those downloaded from the internet or picked up off the shelf at an office supply store, may included clauses that are not legal in California or may not withstand legal scrutiny.  It is advised that you avoid use of such agreements, unless you plan to spend some serious money defending a lawsuit for wrongful termination or unfair interference with business. Its best to get wise legal and HR advice when looking to protect your company’s client list and confidential information. Contact Champion if you need more information.

Employers Survival Tip #4

Establishing Performance Standards to Achieve Success

Competitiveness, profitability and growth are rooted in the ability of your human capital to execute your strategy. Setting benchmarks for what constitutes success, measuring performance against those benchmarks and finally, rewarding achievement are keys to maximizing the potential of your employees.

So what factors contribute to low performance, low productivity and lack of business success?

Lack of communication, or improper communication greatly contribute to low quality performance and low productivity. Business owners and customers tend to assume that employees and managers see things the same way they do but in reality, not many employees think like business owners because they don’t have the same goals for achievement as an owner does. Creating a crystal clear set of performance standards and communicating it effectively to your employees is the key to business success.

Time Barriers

Unfortunately, due to limited time and resources, businesses owners are typically too busy just focusing on revenue generation, operations and keeping the business growing to really focus on the people that make it possible. Subsequently, small businesses consistently fail to transition to the next level and succeed to their potential. Performance Management is a necessary function of every business to invest the time necessary to accomplish what needs to be done.

Making the Complex Simple

Managing performance involves many complex factors, but can easily be accomplished and scaled down to meet the needs of a small business within the time and resources available to most small business owners. The following steps are foundational to an effective performance management strategy:

  • Determine what needs accomplished, when and who should be responsible
  • Set short term and long term goals, corporately, by department and then individually and break them into small steps
  • Set measurable standards for each goal and make it clear what defines success. Ensure there is consistency between employees with similar duties
  • Communicate in writing what is expected from your employees. Have the employee(s) sign the performance plan. Encourage the employee to take ownership of the goal and be open allow the employee the freedom to choose how to best succeed, within certain boundaries of course
  • Monitor performance on a regular basis, even before the goal is due to determine progress and make adjustments as necessary
  • Avoid linking performance to pay increases or bonuses unless you set up a specific compensation for the performance plan
  • Recognize achievement and completion of goals – recognition drives future performance

Start with the big goals and break them into small goals. Set up a system to review your goals regularly and make adjustments as necessary. Always communicate your goals to your employees and get that “buy-in” factor in place.

Performance Standards Provide Liability Protection

Additionally, failing to set performance goals and measuring performance opens the doors for employer liability. When you have clear documentation illustrating an employee’s shortcomings as compared to organizational/individual goals and objectives and subsequently, to other employee’s performance, you stand a much better chance to defend claims or lawsuits associated with wrongful termination and discrimination.

The primary purpose for goal setting is for everyone to individually succeed, and for the business objectives to succeed. By measuring performance against reasonable goals, the weaknesses in your team will stand out. You can then begin the process of strengthening the weakness or eliminating it.

Employers Survival Tip #3

Taking a Bath in the Sink is NOT ok and 5 Other Reasons to Have an Employee Handbook

Yes, we’ve all heard of the employee that was video taped taking a bath in the sink at the Burger King restaurant he was working. While that’s not likely to happen in your workplace, it’s still a critical that you clearly communicate your company policy to your employees.

Your employees need to know what your policies are so they can confidently work at their optimum level knowing that you have a solid strategy regarding their employment. Additionally, in today’s litigious environment, labor board claims, discrimination lawsuits, sexual harassment claims and employees doing really stupid things are all too real and can drain your time and focus or worse, devastate your business.

Here are 5 top reasons you need to have and Employee Handbook:

Save Time and Money

Comprehensive Employee Handbooks, clearly written and carefully compiled will  save time and avoid confusion about your policies and simply keep the redundant questions about vacation, sick-time, benefits and other policies to a minimum. Employees can focus on their work instead of worrying about the little things and trust me…..they worry about the little things.

It Creates Uniformity and Consistency

One of the worst things you can do as an employer is treat employee disparately or handle employment situations inconsistently. The Employee Handbook is a guide not only for you and your managers to consistently respond to workplace situations, but it will help the employees to know that they are being treated equally and fairly.

Employee Handbooks are a Great Motivational Tool – For You and your Employees

When you  clearly define your mission in language that employees will understand and buy into, it can inspire your own leadership and that of your managers to help keep your employees and your business in line with your mission and values. When your employees understand where you’ve been (company history) and buy-in to where you’re going (mission statement), they can help you not just survive, but thrive in a difficult business environment.

Written Policies Can Avoid Legal Disputes

Written policies, consistently enforced, can help diffuse threatening situations before they get out of control.  A well drafted and enforced handbook can ward off accusations of misapplied benefits, pay or overtime. It can provide clear guidance on the company’s position(s) against discrimination/retaliation/harassment as well as how to manage situations like substance abuse, inappropriate behavior, dress code, etc.

The Government Says You Have to Communicate Certain Employee Rights

That should be good enough but we’ll provide some further clarification. You as an employer are obligated to inform your employees of such programs as Family Medical Leave (FMLA) Pregnancy Disability Leave (PDL) Paid Family Leave (PFL) Sexual Harassment, Workers Compensation, Unemployment, Voting rights, and many more. In addition to required postings, the Employee Handbook is the place where the required notification needs to be.

Okay, 6 Reasons

In addition to covering policies designed to help you manage your workforce and protect your business, an effective employee handbook should tell the story of your company, your business philosophy and where you want to go in the future. Information like this is invaluable to employees as it helps them to understand how their lives can be enhanced by a partnership with your business.

I hope we’ve made the case. An Employee Handbook should be part of your strategy to provide a solid foundation your employees can stand upon so they can work efficiently, effectively and profitably. It should also be updated at least annually to ensure all new laws and changes to existing law have been incorporated.

Don’t have time to make it happen? Contact Champion today and we’ll get you started for less than you can do it yourself.