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.
While businesses for years have often used Independent Contractors (IC’s) to avoid payroll taxes and other liabilities associated with hiring employees, often times these workers were misclassified, sometimes intentionally, sometimes not. The Obama Administration’s initiative targeting employers that misclassify workers is changing the employment environment. Under the Administration’s and Congress’s direction, The IRS, the Labor Dept and state government agencies are all working together to share information and coordinate enforcement of labor laws in this area. The goal of these efforts is to identify and prosecute employers who misclassify workers. While employers may think they are saving money by classifying workers as independent contractors, if found to be non-compliant, prosecution by these multiple agencies as well as back taxes, wage and hour claims and additional fines can amount to a considerable financial burden. How can an employers protect themselves?
See previous Advi$or article on this subject here
Generally, federal and state courts have relied on the “economic reality test” to establish a workers classification. Factors of that test include how much control the employer has over the worker, who made the investment in the worker’s facilities or equipment, who has the opportunity for profit or loss, how permanent is the work and how vital is it to the operation of the business. While sometimes judging these criteria can be a little “grey”, the government in general is more likely to rule in favor of employee status.
Organizations that wish to use the IC classification but are not comfortable giving up the control factor of that worker that the IC status requires will want to reconsider that worker’s classification right from the start. While it may not seem like the most cost effective option at the time, in the long-term, the financial liabilities will probably be substantially less. For those organizations that wish to use the IC status and are willing to examine the working conditions to ensure compliance, here are some areas to keep an eye on to reduce the risks:
- Use a Independent Contractor agreement that defines the intention to establish an IC relationship and the terms of the relationship.
- Be careful not to issue policies that define work rules, guidelines, performance standards and other policies that may imply control. These types of policies are part of normal employer/employee relationships.
- Be careful not to provide the IC with tools or other equipment that will aid in the performance of the workers job. IC’s should be able to provide their own tools necessary to complete the task the individual was hired to perform.
- Organizations who try to dictate who an individual can work for while they are performing work for the organization will find it difficult to justify IC status. Along those lines, Non-Compete agreements should be avoided to maintain IC status.
- If the IC can demonstrate their establishment of their own business entity, their own insurance, their own EIN, their own licenses, it will go along way in helping the hiring organization prove to the regulators that they are working with an IC.
In this current business environment, organizations that perform these evaluations on a regular basis in their use of IC’s will ultimately save themselves considerable effort, financial resources and simply put, other hassles.
A bill touted as a job-creation bill that would increase the minimum wage and require mandatory paid sick leave, along with other regulations, was introduced in the Senate. The legislation was proposed on March 29, 2012 by Senator Tom Harkin (D-Iowa) who is chairman of the Senate Health, Education, Labor and Pensions Committee.
The wide-ranging bill includes provisions dealing with overtime pay protection, the minimum wage, employment for disabled workers, worker misclassification, paid sick leave, and pension protection. The measure is still awaiting a bill number.
The bill would amend the Fair Labor Standards Act to increase the federal minimum wage to $8.10 an hour in the first year of enactment and to $9.80 in the second year. The wage would be indexed to inflation starting with the third year. The minimum wage rate now is $7.25 an hour and was last increased by Congressional action in 2009.
Restaurant owners should also note that under the bill, the FLSA also would be amended to increase the minimum wage for tipped workers to $3 per hour for the first year of enactment, and an additional 85 cents each year thereafter until the wage equals 70 percent of the federal minimum wage. The current minimum wage for tipped workers is $2.13.
The Advi$or has to admit that it does not quite understand how this kind of legislation, which is going to increase the cost of doing business for many businesses, is going to help create jobs.
Some Tennessee employers have been offered some payroll tax filing relief by the IRS. Specifically, employers in Bradley, Claiborne, DeKalb, Hamilton, Jackson, McMinn, Monroe, Overton and Polk counties which were declared federal disaster areas after severe weather in late February allows the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. Certain IRS deadlines from February 29, 2012 to May 31, 2012 have been postponed to May 31, 2012. Failure to deposit penalties for employment and excise tax deposits due from February 29 to March 15, 2012 were waived as long as the deposits were made by March 15, 2012. (This includes the April 17 deadline for filing 2011 individual income tax returns, making income tax payments and making 2011 contributions to an individual retirement account (IRA).)
If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the postponement period.