Legal Issues to Watch Regarding Employee Benefits

Benefits include perks such as health insurance and a retirement plan offered to employees in addition to wages or salary. Because benefits are optional in most states, it is less legally complex than some other areas of human resources management. (Hawaii is an exception to the generalization that benefits are optional. Employers in Hawaii are required to provide health insurance benefits for certain classes of employees.)
Still, if you opt to provide benefits to your employees—and many employers do, in order to remain competitive—some laws impose restrictions on those benefits and their administration.

Health Insurance

Perhaps the most common benefit, health insurance is impacted by several laws. Those you are most likely to encounter are: :

COBRA (Consolidated Omnibus Budget Reconciliation Act): This law requires that the insurance coverage of former employees be continued under some conditions, such as a reduction in work hours and termination of employment.

Anti-discrimination laws: A number of laws prevent group health insurance plans from discriminating against (denying coverage or treatment) employees on the basis of age, disability, or preexisting conditions.

Retirement Plans

Make sure you understand the caps and limitations on contributions to 401(k) plans, and other legal requirements regarding reporting and the proper administration of plans. The Employee Retirement Income Security Act defines such requirements.

You should also understand the IRS classifications of pre- and post-tax contributions and be certain that your plan is properly classified. Consult with a qualified attorney, plan administrator, or CPA to keep safe.

Also be aware of the Older Workers’ Benefits Protection Act—a federal law that prohibits you from providing reduced benefits to older workers in a group retirement plan benefit.

Other benefits

Your primary legal concern for other types of benefits is to make certain that the benefit meets IRS requirements to qualify as business expenses. While you may maintain employee morale if they do no qualify, you will lose a significant business benefit. Do your homework to remain compliant with the following benefits:

Dependent care benefits
Life insurance
Disability insurance
Tuition reimbursement benefits
Adoption aid programs

If you find these cautions and requirements daunting, consider outsourcing your benefits administration to Workforce Solutions. We put our Benefits experts to work for you so you can concentrate on growing your business.

Legal Issues to Watch Regarding Online Storage of Employee Data

If you are an employer, those aspects of your business that deal with your employees are among the most heavily regulated in your industry—or in any other industry, for that matter. Mistakes in these areas can be extremely expensive, so the costs of ignorance are large. That’s why it makes sense to outsource your Human Resource management tasks to Workforce Solutions. We are experts in these complex areas so you don’t have to be.  
One such area is the electronic storage of private employee data. What legal issues must you consider as you determine how to store and safeguard data? The issue is a relatively young one because rapidly advancing technology has increased the complexity of information webs; because of the interconnected nature of today’s networks, more information is available to more people than ever before.

Statutes have not yet had time to catch up with the technology, so there is some gray area with regard to employers’ legal responsibility for the privacy of their employees’ personal information.  However, even though some legal aspects of the issue are not yet settled, employers and their employees feel that private data should remain private. There is a great deal of “good will” pressure to safeguard data, even when legal pressure is less clear.

Avoid common mistakes

You can reduce your risk of legal liability and disgruntled employees by taking some common-sense steps in the collection, use, and electronic storage of employee information. Some common mistakes—and their remedies—are listed below.
Collecting too much information. Collect only the information necessary to allow your new hire to do her job and to receive pay and benefits. The less personal information you have, the better your position because you can’t be responsible for compromising information you do not have.

Failing to secure information. Paper copies of employee files should be kept in locked filing cabinets in a locked storage area. Electronic data must be given the same consideration regarding security. Use proper software and hardware controls (such as requiring authentication to access network computer resources) to ensure that no one has access to electronic employee data if it is not required to perform job duties. This generally means that some HR staff should have access to employee information; some information may be necessary for supervisors, as well, but care should be taken that data such as social security numbers and account numbers are not available to supervisors. Have a well defined “need-to-know” policy when it comes to private employee data.
Failing to secure hardware assets. Several recent headline cases have featured the loss or theft of laptops containing sensitive data on many thousands of employees and customers of large companies and government agencies. Laptops, iPods, flash drives, digital cameras and other devices can contain personal data and are easily stolen or lost. You must define and enforce strict policies to safeguard physical resources.

Unnecessary and/or unintentional disclosure. Those who have access to employee data may unintentionally disclose it, simply through carelessness or through incomplete knowledge or application of policy. It is important to have clear, written policies regarding use of employee data, and to thoroughly train employees who handle it to prevent such disclosures. It is also good policy to compartmentalize information to minimize disclosures. For instance, if an employee has a disability and requires accommodation, his record needs to include information on the disability. But that information should be kept separate from the portion of the record a payroll clerk uses to process pay.

Laws are emerging that have a bearing on the use and control of electronic data—prominent examples being HIPAA (Health Insurance Portability and Accountability Act) and the Sarbanes-Oxley Act. While not directly speaking to the storage of electronic employee data, these laws dictate security, integrity, and privacy controls on electronic information. There is every reason to believe that similar controls on private employee data will be the focus of future laws.

Laws governing Human Resources are very complex; how people are treated, their working conditions, how they are paid and hired and fired are all matters of legislation. Sorting out the regulations and making sure your organization remains in compliance are not for the faint of heart, but few activities are as important to the stability and long term health of your company.

If you do not have the internal resources to safeguard employee data or to manage other aspects of your Human Resources functions, consider Human Resources Management services from Workforce Solutions. We can help you manage these complex requirements cost effectively so that you can focus on doing business.

Legal Issues to Watch Regarding Payroll Processing

Payroll and its calculation, processing, and issuance are the subject of many laws, both federal and state. Because payroll is so highly regulated, it is easy to run afoul of the law if you are not very careful in how and when you pay your employees. This article is a brief discussion of the most obvious regulations regarding payroll and of the legal pitfalls that sometimes trap the unwary.

You are probably already familiar with many legal requirements simply by having been in the labor market for a period of time. For instance, most everyone knows that applicable laws require that employers:

Pay a minimum wage
Pay for overtime at a different rate
Pay men and women equally for equal work
Withhold deductions as required by federal and state tax codes
Observe special requirements for young (school age) employees

In theory, paying employees is simple. You calculate wages according to contractual agreements, withhold taxes and other deductions based on well known formulas, and then write the checks. Although these steps are familiar you may not know about exceptions, special application, and less-familiar requirements of the laws. These lesser-known areas can be sources of trouble if you don’t take the time to educate yourself or to properly train those who process your payroll. 

FLSA

The federal statute with the most immediate bearing on payroll is the federal Fair Labor Standards Act (FLSA). Together with its amendments, it regulates virtually all aspects of employee pay where conflict could arise, and FLSA literacy is thus the first requirement of staying on the right side of payroll law. It is only the first step, though. There are other statutes on state and federal levels that you should be aware of.

FLSA has broad application: if your annual business sales are more than $500,000 or your employees engage in interstate commerce, FLSA is for you. Though these categories cover most businesses, it is important to know that independent contractors are not covered by the law. This fact hints at one of the most common sources of legal error and risk when it comes to paying employees: their proper classification.

FLSA establishes categories of workers to whom the law applies differently. Some workers, such as executive, administrative, and professional employees, are “exempt” from coverage under the minimum wage and overtime provisions of the law. If you incorrectly classify an employee as exempt who is not, you may become liable for back pay and legal fines.

And there are other risks regarding employee classification. Even if you correctly classify an employee as an exempt, so do not have to pay her overtime, subsequent actions you take regarding pay may change her classification, again making liable for back pay. The many tests, exceptions, and gradations in employee classification are sources of many mistakes and disputes.

Intersections with other laws

Some laws that are important to the way your employees are paid are appended to FLSA; the Equal Pay Act is an example. Others are not directly built upon FLSA but still have an impact on payroll. OSHA regulations, local, state, and federal tax codes, interstate and international commerce laws, and laws against discrimination should also be part of the vocabulary of you or your payroll processors.

For example, you may receive a court order to garnish an employee’s wages, also called a wage attachment, in order to collect a debt the employee owes to a third party. A separate law, the Consumer Credit Protection Act, dictates that no more than 25% of an employee’s net earnings may be attached. Divorce laws and individual court rulings may also be applicable in terms of salary deductions or attachments. The Federal Family Support Act may be invoked to forcibly collect child support payments, and the Employee Retirement Income Security Act dictates the management of employee retirement plans.  

Other problem areas

Other laws are also common sources of error—usually because of their complexity, but employers sometimes incur legal trouble for less innocent reasons. Watch for these potential minefields:

Taxes: You must make regular deposits of the income and Social Security/Medicare taxes withheld from payroll. Failure to do so is inviting trouble, and the IRS won’t be interested in whether it was an innocent oversight.

Slippery classification: Though FLSA covers the classification of employees, it bears mentioning again. If you treat an employee as an independent contractor or vice versa, or pay someone based on inconsistent classification, you are violating not only FLSA, but likely other laws such as tax codes.

Unusual situations: If you employ foreign workers, clergy, statutory employees, or railroad workers, you must be especially careful and knowledgeable. Other laws apply.

Privacy and security of records: As electronic networks and the information available on them proliferate, laws are emerging to mandate the protection of data and penalties for failure to do so. You must stay abreast of developments in this emerging area of law.

Outsourcing options

You need only take a short journey into the legal jungle of payroll processing before you begin to wonder if it’s smart to navigate this territory by yourself. Fortunately you don’t have to. Workforce Solutions offers a full range of payroll processing services. We can help with all aspects of payroll, from employee classification under FLSA to insuring your deductions are correct and deposited promptly. You get our expertise, thorough and regular reports, and the peace of mind knowing that your payroll is being handled properly.

Legal Issues to Watch Regarding Workers Compensation

If you are an employer, those aspects of your business that deal with your employees are among the most heavily regulated in your industry—or in any other industry, for that matter. Mistakes in these areas can be extremely expensive, so the costs of ignorance are large. This is one reason it makes sense for many organizations to outsource the management of personnel issues. Workforce Solutions is an expert in the complex areas of Human Resource management so you can get on with building your business.

Workers compensation is one such area. Workers compensation laws require benefits for employees injured on the job; specifically, the employee’s medical bills are paid and a portion of wages lost during recovery are paid. (This portion varies by stated, but is typically about 2/3.) The law also provides disability benefits if on-the-job injury is permanent and disabling, and in some instances, death benefits for dependents, retraining, and more. No benefits for pain or emotional suffering are available under workers compensation laws. Employers pay premiums to the provider of workers compensation insurance, which is usually a private insurance company or a state agency. Employers should be happy to pay the premium considering the direct costs of injury. In fact, according to Liberty Mutual, “[E]mployers spent $50.8 billion in 2003 on wage payments and medical care for workers hurt on the job” (see Liberty Mutual press release).  Workers compensation insurance is a “no-fault” system; an employee receives benefits, but that does not imply the employer was in some way responsible for the injury.

Fortunately, employers do not need to be experts in workers compensation law. Attorneys for the insurance companies will assess legal ramifications and litigate cases, if necessary. Still, careful employers should know some important basics about the law in order to protect the rights of both the injured employee and the organization.

The Basics

Know the procedures. Every employee from the shop floor to mahogany row should know the proper procedures to follow in case of injury. Improper or delayed reporting of the injury, for example, may result in legal complications for the insurance provider. Such complications could in turn result in additional costs or even litigation for the employer. So make sure your organization has clearly defined procedures to follow in case of injury, and that everyone knows them.

No indemnity. Although the insurance policy pays all medical costs and a portion of lost wages resulting from the injury, the employer may still be legally liable for additional damages in case of neglect. Your organization may be at risk of legal action if it has failed to provide a safe working environment; workers’ compensation insurance will not pay damages resulting from such action.

Research your state’s laws. The general outlines of workers’ compensation laws are the same in all states, but each state could have important variations. For instance, Texas state law does not currently require employers to have it.

Scope of coverage. It is often obvious what injuries are covered by workers’ compensation. If an employee loses a hand to a piece of factory machinery, it’s clearly a work-related injury. Other injuries are less obvious, but may still be covered under your organization’s insurance policy. Repetitive motion injuries, such as carpal tunnel syndrome, are also covered, as are some diseases if it can be established that the disease is related to job performance. Stress-related disorders fit in this category. 

Classify workers correctly. If your organization uses independent contractors, they are not covered by your workers’ compensation insurance policy. For this and other reasons, it is important to classify workers correctly as either employees or contractors. It is advisable to make certain that people you hire as contractors have insurance of their own, decreasing the likelihood that they will seek compensation from you in case of injury.

Prevent injury. The most common sense approach to managing workers’ compensation is to minimize the risk of employee injury. Familiarize yourself with the risks inherent in your industry, and seek OSHA guidelines that will help you cut them.

Outsourcing makes sense

Due to the complex and state-to-state variations in applicable laws, it makes sense to turn over administration of your workers’ compensation needs to Workforce Solutions. We’ll help you minimize risk, cut costs, and navigate the muddy legal waters so your staff can turn its attention to keeping your business profitable.