Summer is here and many seasonal businesses makes plans to hire more temporary employees. Here are some areas to look out for when hiring those seasonal workers in order to stay in compliance….
Minimum Wage: We remind you that the federal minimum wage is $7.25. Many states have their own minimum wage rates that may exceed the fed rate. Remember, employers who do less than $500K in revenue per year and do not engage in any interstate commerce are not subject to the the FLSA.
Teenage Workers: Workers younger than 18 are covered by the FLSA. When school is not in session, 14 to 15 year-olds can work 40 hours a week. Tennessee does have specific regulations regarding child labor that you can access at this link. However, take note that according to the Youth Opportunity Wage, under a provision of the Small Business Protection Act, first-time employees 19 or younger can be paid a minimum wage of $4.25 per hour for a 90 day employment period.
Internships: The Dept of Labor has been cracking down on those companies who hire un-paid summer interns. An internship should provide training and experience related to a student’s academic course of study and career goals. If this is not the case, then the positions are not considered internships and the employer must pay no less than the minimum wage. Under the Fair Labor Standards Act, you do not have to pay interns who qualify as learners/trainees. The U.S. Department of Labor has outlined six criteria for determining trainee status:
- Interns cannot replace regular employees.
- Interns are not guaranteed a job with your organization upon completion of the internship.
- Both you and the intern are aware that they are not entitled to wages.
- Interns must receive training.
- Interns must get “hands-on” experience with equipment or processes used in your particular industry.
- The skills learned on the job must be considered transferable.
To limit exposure to liability, it is generally a good idea to cover interns under your worker’s compensation policy even when they are unpaid. While interns are not specified in the language of the law, it is strongly recommend that you follow equal opportunity employment laws when recruiting and hiring interns.
Holidays and Vacations: While public sector employees must receive compensation for official holidays like the 4th of July or Labor Day, there are no such requirements for private sector employees. While employees must be paid for working on a holiday and those hours worked must be accounted for when determining OT, there are no other special stipulations regarding holiday hours worked. Likewise, federal law does not require employers to provide for paid vacations. Employers are encouraged to develop a vacation and holiday pay policy in an Employee Handbook. It is important that all employees be treated consistently according to those policies.
If you have any questions regarding this topic or other payroll and human resource related topics, please use our web site, our on-line resources resources or call us at 423-854-9042
Payroll clerks are vigilant regarding Federal or State Withholding Orders (garnishments) as they are well aware of the associated liabilities for the business for failure to comply. Good payroll administrators know that if a business is issued a garnishment …often times personally delivered by an officer of the court…. and the business fails to comply, the business becomes liable for the funds defined in the order. In other words if the business does not start withholding the specified amount from the employee in order to comply with the court ordered payments, the company itself will be liable for those payments. Garnishments usually consist of Child Support or unpaid debt payments that have gone to court for settlement. The IRS and State revenue depts can also levy wages via garnishments for unpaid taxes.
However, in recent developments, effective May 31, 2012, if the withholding order arrives and is not “regular on its face”, meaning that the individual who has knowledge in the area and, using their experience and good judgement, questions the validity of the order, it does not have to be honored. According to the Dept of Health and Human Services Office of Child Support Enforcement, if the order is not on the standard Income Withholding for Support form, the order must be returned to the sender and, again, does not need to be honored. The payroll clerk may also reject the withholding order if it is not payable to the state disbursement unit, if the amount to be withheld is not a monetary value, or if the information of the order is altered, invalid or incomplete.
The Advi$or also reminds those dealing with child support orders that the maximum that can be deducted from an employee’s pay check for child support is 60% of their disposable income, according to the Consumer Credit Protection Act. If the employee supports a second family, only a maximum of 50% can be deducted. However, if the employee is more than 12 weeks in arrears on child support payments, those maximums can be increased to 65% and 55% respectively.
Withholding orders must be addressed, but now the the employer has some leeway if the the validity of the order is in question. Payroll clerks should do their best to confirm that validity before complying knowing that they now have the right to do so if there is reasonable doubt.
Under the Affordable Care Act (ObamaCare), payroll depts. should note that employers are now required to report the cost of health insurance coverage under an employer-sponsored group health plan on Form W-2. Originally legislated to kick in in 2011, the IRS granted transitional relief to all employers for 2011. For the year 2012, only employers with 250 or more employees will be required to report this benefit on employee W-2’s. The IRS noted that reporting the cost of health care coverage on the Form W-2 does not mean that the coverage is taxable. The value of the employer’s excludable contribution to health coverage continues to be excludable from an employee’s income, and it is not taxable. The IRS also noted that this reporting is for informational purposes only and will provide employees useful and comparable consumer information on the cost of their health care coverage. Employers that provide “applicable employer-sponsored coverage” under a group health plan are subject to the reporting requirement. This includes businesses, tax-exempt organizations, and federal, state and local government entities (except with respect to plans maintained primarily for members of the military and their families). However, federally recognized Indian tribal governments are not subject to this requirement.
What is the purpose of this new reporting requirement? Under ObamaCare, there is a legislated penalty for those employers and taxpayers who are not covered by health insurance. The reporting requirement will eventually assist the IRS in verifying that taxpayers have coverage. Additionally, the new reporting requirements will help identify those taxpayers who will be subjected to the so-called Cadillac tax on high-dollar insurance plans (effective in 2018)
The IRS has also recently defined other transitional relief details. For certain employers, types of coverage, and situations, there is transition relief from the requirement to report the value of coverage on the 2012 Forms W-2 (the forms for calendar year 2012 that employers generally are required to provide employees in January 2013). This relief will apply to future calendar years until the IRS publishes additional guidance. However, any guidance that expands the reporting requirements will apply only to calendar years that start at least six months after the guidance is issued.
The value of the health care coverage will be reported in Box 12 of the form W-2 with Code DD to identify the amount. There is no reporting on the Form W-3 of the total of these amounts for all the employer’s employees. In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee.
An employer is not required to issue a Form W-2 solely to report the value of the health care coverage for retirees or other employees or former employees to whom the employer would not otherwise provide a Form W-2.
It is to be noted that the IRS has stated that they are not discouraging early compliance and judging by the fairly limited transitional relief being granted, it is expected that many businesses will comply earlier than required as payroll systems are modified to account for the requirement. Note that Time & Pay is already set to comply!
For further information on this topic, you can visit the IRS site here.
Tipped employees already provide challenges to employers, especially their payroll management. The Tennessee General Assembly just added another challenge. Effective May 17, 2012, the state’s meal and rest break law has been amended to require meal breaks for tipped employees in the food and beverage industry. The new law, however, also allows tipped employees to waive their right to meal breaks as long as their employers follow certain requirements. This bill may significantly impact the food and beverage industry especially if employees choose to take advantage of their right to a meal break forcing employers to adjust employment accordingly.
Currently under Tennessee law, employers must grant employees a 30-minute unpaid meal break for every 6 hours of consecutive work unless the nature of the business provides for plenty of opportunity for employees to take a meal break, such as in a restaurant during slow periods. Prior to this recent amendment, Tennessee food and beverage employers were not obligated to give rest breaks to their tipped employees as the Tennessee Dept. Of Labor provided guidance to food and beverage employers noting that due to the nature of their business, there was usually plenty of opportunity to take a meal break. As a result of this TDOL guidance, employers in the food and beverage industry we allowed to not grant lunch breaks to their employees thus averting any disruptions in vital customer service.
This recent amendment, however, supersedes the Tennessee DOL’s guidance and requires employers in the industry to provide meal breaks to all tipped employees in food and beverages industry. However, the Tennessee General Assembly, realizing that the food and beverage industry may not appreciate this new rule, inserted a provision in the law that allows tipped employees to waive their rights to unpaid meal breaks by signing a waiver request form. This lunch break waiver is also available to other industries. However, it is essential the employee voluntarily agrees to such a waiver.
To obtain a valid meal break waiver, an employer must develop a waiver request form that acknowledges an employee’s right to an unpaid meal break and allows the employee to knowingly and voluntarily waive that right. In addition to providing a valid waiver request form, the employer also must post in at least one conspicuous place in the workplace a reasonable policy that permits employees to waive their meal breaks subject to the demands of the work environment. The employer’s meal break waiver policy must contain the employer’s waiver form, must identify the length of time the waiver will be effective, and outline the procedure for rescinding the waiver agreement. For a waiver to be valid, the employee must submit the waiver request knowingly and voluntarily and both the employer and employee must consent to the waiver. Employers cannot coerce the employee into waiving a meal break.
Any one wishing to get advice on the waiver form can call Time & Pay’s professional partner, SESCO, for consultation.