As a small business owner, I work with – and network with – many business advisors and coaches. And I keep hearing that I need to schedule time before the end of the year to focus on analyzing my business efforts in 2019 and update my business plan for 2020 accordingly.
Well, I cannot speak to financial matters or organizational structure, but here are my Top 3 employment law “end of year” tasks for 2019:
- Confirm Correct Exempt Positions to Avoid Personal Liability. The Department of Labor has issued updated guidance and requirements for certain positions that are exempt from minimum wage and overtime. In particular, the required base salary for certain exemptions is increasing to $35,568/year. We haven’t been given much time; these changes are going into effect January 1, 2020. For more details, see our previous blog post HERE.
What do we do now?
Now is a good time to make sure that relevant positions have been classified correctly as exempt. Importantly, review the duties requirements of the relevant exemption(s). Just paying the required salary does not mean that the position is exempt; the duties must comply as well. Once you’ve confirmed that the positions are properly classified, start planning for any additional expense necessary to bring salaries up to the required $35,568 starting January 1st. Remember, business owners and key decision-makers can be held personally liable for improper classifications and wage payments, so put this at the top of your list.
- Evaluate Vendor and Staffing Relationships. The Department of Labor has issued a proposed rule to help determine whether a “joint employment” relationship exists between two companies; we’re waiting on a final rule – expected early 2020. We typically see joint employment relationships with (i) outsourced services by a vendor, such as a landscaping service for our business, (ii) staffing or temporary services, and (iii) multiple store or franchise locations where there is common management – even if these locations are technically owned by separate corporate entities. Remember, if you are a joint employer, you can be held responsible for any wage payment errors made by the other company.
What are we looking for?
Review your business relationships with vendors, staffing firms and sister businesses and consider the following:
- Can you hire or fire employees of the other company?
- Do you supervise and control the work schedules or conditions of employment, such as providing breaks, of the other company’s employees?
- Do you determine the rate and method of payment for the other company’s employees?
- Do you maintain any employment records of the other company’s employees?
If you answer “yes” to these questions, you may be a joint employer. If so, it is a good time to reassess the relationship structure and/or make sure you have some contractual protections in place to start fresh in 2020.
- Assess Compensation Structures. Even under a conservative presidency, the Department of Labor had a banner year, collecting over $322,000,000 in wages owed to employees. What’s the lesson for employers? We need to make sure that our compensation structures are legally compliant and accurate.
Need some tips?
- Make sure that you are paying for all hours worked by non-exempt employees, such as travel time (as opposed to mileage reimbursements), breaks under 30 minutes, and work performed remotely. This includes checking and responding to emails at home!
- If you pay commission or variable compensation, make sure that you have a written Commission Plan that clarifies, among other important details, when the payments are earned and whether there are any conditions on payment.
- Confirm that you are calculating overtime correctly. Remember, in NC, overtime for non-exempt employees is based on 1.5 times the “regular rate” for all hours worked over 40 in one 7-day workweek. Make sure that you are not averaging hours worked across a pay period greater than one workweek. Confirm that you are including the following payments into the regular rate calculation: non-discretionary bonuses, commission, premium shift differentials. Remember, the regular rate may be greater than the employee’s hourly rate.
If you have any questions about your employment law “end of year” planning, please feel free to contact us.