Red Hot Thoughts

Posts Tagged ‘employment law’


October 14th, 2014


The Work Opportunity Tax Credit (WOTC) was first introduced by the Small Business Job Protection Act of 1996. Its intent was to provide employers with an incentive to reach out and hire employees from economically disadvantaged populations.  As the program demonstrated its success in increasing employer’s participation, there has been a succession of federal acts to keep this tax credit in existence.  In December of 2006, Congress passed the Tax Relief and Heath Care Act of 2006. The provision retroactively extended the WOTC through 2006. In 2007, the provision combined the Welfare-to-Work (WTW) tax credit with the WOTC and extended both through Dec. 31, 2007.

For an employer to benefit from the WOTC, it must determine whether its new hires come from one of the following groups:

• Qualified welfare recipients.

• Qualified food stamp recipients.

• Qualified Supplemental Security Income recipients.

• Qualified veterans.

• Qualified ex-felons.

• Vocational rehabilitation referrals.

• Qualified summer youth workers.

• High-risk youths.

• Eligible work incentive employees.

To help you determine whether a new hire is an individual from one of the targeted groups, the “Pre-Screening Notice and Certification Form for the Work Opportunity and Welfare-to-Work Credits,” the IRS Form 8850, must be completed on or before the date a job offer is made. Although the WOTC is a federal program, it is administered by each state, and some of the administrative processes may vary depending on the state.

If it is found that the new hire is from a targeted group, the employer may then need to send the form to the state WOTC coordinator within 28 days after the employee begins work. For employees who have been conditionally certified, the “Conditional Certification” form, ETA Form 9062, may need to be completed. For employees who have not been conditionally certified, the “Individual Characteristics Form,” ETA Form 9061, may need to be considered instead. Please check with the state WOTC coordinator for additional information and guidance.  The HR eBook will have a listing of all state coordinators to help you locate the state specific information you’ll need!

When the company files its taxes, it should complete the IRS Form 5884, (use the appropriate year when filing) to take the tax credits for the employees who qualify. The value of the tax credit is 40 percent of the first $6,000 of wages paid the first year to a certified employee who works at least 400 hours. For employees who work less than 400 hours but more than 120 hours, the tax credit is 25 percent of the first $6,000. For youth hired for summer work, the percentage is applied to the first $3000.

While filing federal forms might seem intimidating and time consuming, the effort can be well worth it.  It can add up to a real win—for your business and for your community!

Salary Compensation for non-exempt Employees

October 1st, 2014


While in a meeting last week, our client brought up a question regarding salary compensation for one of his non-exempt positions.  He had originally hired an employee to work for him on a temporary, trial basis so he could determine whether or not the individual was capable of performing the job.  While the individual was classified as a temporary employee, our client paid her $11.00 per hour.  He eventually decided that the individual was capable of performing the functions of the position and offered her a permanent position, which pays a monthly salary of $2,000.  However, our client stated that by definition, the position is a non-exempt (paid hourly) position.

Several weeks ago, on a Wednesday afternoon, the employee left work early in the afternoon.  It was the first of the month, and there was a lot of work she had not yet completed for the monthly reports that were due on the second.  She also did not show up to work the following Thursday and, although she claims to have called in to report her absence, our client was unable to find any record proving that she did.

While the employee was out of the office on Thursday, our client had to access her email inbox as he needed some valuable information for a project he was working on.  While viewing her email inbox, he found some valuable information he wasn’t even looking for.  He learned that the employee had been applying for other jobs, using company equipment and time to do so.

When she came to work on Friday, our client terminated her employment.  The employee was paid for the 6 hours she worked on the 1st in addition to her time worked between the 15th and 31st of the previous month.  Upon arriving home, the employee called our client stating that she should be paid for the entire first pay period of the current month since she was a salaried employee and not just the 6 hours she actually worked on the 1st.

Our client was not sure how to respond and asked for our clarification on what payment the employee truly was entitled to as a non-exempt, salaried employee.

Under federal law, when it comes to paying a non-exempt employee, employers must ensure that the employee is paid for all time worked, including time and one-half for all hours worked over 40 in a workweek, regardless of whether the employee is paid a salary or an hourly wage rate.

In this case, if our client had not been paying the employee overtime on all hours worked over 40 in a workweek, he may have inadvertently made her an exempt employee.  This is why we always caution our clients to pay non-exempt employees on an hourly basis instead of on a salary basis.

The law does not require employers to pay any non-exempt employee for time that he/she did not work. However, if the employee is exempt, she should be paid for a full 8 hours on the 1st instead of just the 6).  While our client had not been specifically tracking the employee’s hours worked per week, he was certain she has never been entitled to overtime as she worked approximately 6 hours per day, 5 days per week.

Our client confirmed that the terminated employee was indeed paid for all hours she worked, specifically the 6 hours that she worked on the 1st.  So, unless the employee had any accrued but unused paid time off for which she should have been paid for or if she is in fact exempt, we told our client that he does not owe the terminated employee any additional funds.

We also suggested before a replacement is hired, the position be moved to hourly pay and not salaried so there would be no confusion about the non-exempt status of the job.


Employee handbook… a good idea?

February 25th, 2014

Given the litigious society we live in today, we often hear from new clients that the main reason they didn’t have an Employee Handbook is because they feared being sued.  While it is true that it is better to not have a handbook than to have one that is out of date or poorly written, the benefits of having a handbook far outweigh the costs.  Employees need to know that the company follows federal and state employment laws.  Even more importantly, they need to be able to access all of the company’s policies and guidelines so they understand what the company rules are as well.  Too often, we have encountered managers and business owners who have to reinvent the wheel every time they are asked a question about company policy, such as the amount of vacation time that can be taken or if the business will pay for classes outside of the regular work day.

A well written Employee Handbook is a valuable resource not only for the employee but for management as well.  During the hiring and orientation process, the handbook serves to introduce new employees to the company and can answer many of the questions managers are asked during the employee’s first few weeks on the job.  We feel it is very important that the company’s handbook have a section that discusses the company’s history, along with its Mission Statement and vision for the company’s future.


The handbook needs to include a section on federal and state employment laws that pertain to your company.  These include policies and procedures concerning harassment and discrimination among others.  If your company is covered by FMLA, an employee handbook is also a good place to include notices of FMLA rights.  With the many changes to Employment Law legislation both on the federal and state levels, we strongly advise that companies review their handbooks at least once a year.

There should be sections in the handbook that provides the employee with the guidelines the company has in place regarding safety, pay and benefits, training and other employment topics that impact your workforce.  When you make any change to a policy, make sure it goes into the handbook and that all of the employees know of the change.  We recommend employees sign that they have read the handbook; we also recommend that they sign when a change has been made. Employees deserve to know what the rules are—and be confident that they won’t change on a whim.

Managing employees successfully demands good communication and consistent supervision.  The company policies and rules are much easier to follow if they are clearly spelled out in the manual…and then followed!  When reviewing client handbooks, we find companies who have pages (and pages) of policies ranging from internet usage to lunchroom clean-up.  The first thing we ask management is:  “Do you consistently apply all of these policies?”  More often than not, the answer is “NO”.  If you are currently not following a policy that is presented in your handbook as a company rule, you need to assess the reason why this is so.  Is the rule too vague or too rigid?  Is it something that really needs to be there in the first place?  Successful companies have policies and rules in place that fit the needs of business, the customer, and the employees.  If it doesn’t benefit at least one group of stakeholders, it probably needs to be reevaluated.


The handbook provides both the employee and the manager an excellent opportunity to better understand what rules and policies need to be followed for the company, and those who work there, to be successful.


When the Employee Handbook is only taken out of the file cabinet when a new employee is hired, or a policy has been broken, the document is not the effective management tool it was designed to be.  Good managers know they need to keep it current, keep it visible, and follow the company policies and standards  consistently!

Independent Contractor vs Employee

January 14th, 2014


Historically, companies used ‘independence’ as a yardstick for defining an independent contractor vs. a true employee.  Was the person able to set his own priorities?  Did he supervise his own work?  Did he use his own equipment/tools while working on the project?  Was he able to contract work with others?  If so, then most employers felt comfortable labeling this person an independent contractor.  The benefits to the company were many, including exclusion of payroll taxes and benefits along with contracting with someone with needed skills only for the duration those skills were needed.

However, like many things dealing with employment law, the interpretation of what constitutes an independent contractor has changed over the past few years.  Many states, along with the federal government, are using other yardsticks to define if someone is actually independent or are indeed an employee.  The Washington State Supreme Court, for instance, recently made a ruling that will have a significant impact on this issue for all employers in the state.

To determine whether a person was an employee or independent contractor under Washington’s Minimum Wage Act, courts will use the Economic-Dependence Test:

Whether, as a matter of economic reality, the worker is economically dependent upon the alleged employer or is instead in business for himself.”

In its recent decision in Anfinson v. FedEx Ground Package System, Inc.1, the Court ruled that the Economic-Dependence Test, not the Right-to-Control test, in the proper determination.  This Economic-Dependence test looks to several factors which may be useful in distinguishing employees from independent contractors, including the following:

The degree of the alleged employer’s right to control the manner in which the work is to be performed;

  • The alleged employee’s opportunity for profit or loss depending upon his managerial skill;
  • The alleged employee’s investment in equipment or materials required for his task, or his employment of helpers;
  • Whether the service rendered requires a special skill; 
  • The degree of permanence of the working relationship; an
  • Whether the service rendered is an integral part of the alleged employer’s business.

The presence of any one individual factor is not exclusive of whether an employee/employer relationship exists.  Rather, such a determination depends upon the circumstances of the whole activity.

This ruling is similar to rulings by Federal courts under the Fair Labor Standards Act, so employers should research federal decisions to determine how Courts may rule on their employees/independent contractors.

Businesses should also be prepared for a threat of litigation based on a broader definition of “employee” and review their Employment Practices Liability Insurance to confirm coverage for wage and hour claims.