New Levels of Compliance in 2012

IAPD/IPRA Conference

Soaring to New Heights

&

New Levels of Compliance in 2012

Certified Public Accountants & Business Advisors

© 2012 Sikich LLP. All rights reserved.

Class Action and Retaliation – Beware! Recent Court Cases HR Best Practices – Some practical advice

for the new year Questions & Answers-Sharing stories from

the front lines

2

Overview of topics covered



Showed what can happen when class actions become too large

Recent Court Cases Wal-Mart V. Dukes



Big case which brings the subject of retaliation and anti-discrimination laws and their interpretation to the front burner.

Thompson V. North American Stainless



In this case the courts ruled that employers may not discharge any employee that has filed any complaint.

Kasten V. St.-Gobain



We learned about the “Cat’s Paw” Theory here….

Proctor Hospital



Google Ad: “How to start a union” Beefing up regional offices to help

employees who report unfair labor practices committed during union organizing campaigns.

Giselle order Complaint against Boeing

National Labor Relations Board



Payroll and Compensation Under Fire: What you Need to Know

Agencies (DOL, IRS) continue to focus on:

• Employee Classification

• Overtime Payment

• Independent Contractors

• Interns



FLSA Compliance DOL has added new investigators for wage and

hour

DOL is expected to be “very active”

DOL collections of back wages are up dramatically over the past decade

Class action cases have increased four fold since 1997



At least 75% of employers are not in compliance with the Fair Labor Standards Act – might actually be closer to 95%

FLSA Compliance



Employee Misclassification

U.S. Government Accountability Office reports there are at least 10 million workers in the U.S. who are classified as independent contractors

Labor Department estimates up to 30% of companies nationwide have misclassified employees



Employee Misclassification Employers are liable for:

• Payment of back taxes• Unpaid Social Security/Medicare

contributions• Unpaid unemployment insurance• Unpaid workers compensation

premiums• Penalties and interest



State Level Initiatives 11 states have signed on with the DOL

• Goal is to prevent, detect and remedy employee misclassification

• Illinois is one of the 11 states



DOL/IRS to Coordinate on Employee Misclassification

IRS and DOL sign Memorandum of Understanding

Result = increased number of employment tax audits = boost in compliance and increase in revenues



IRS Voluntary Classification Settlement Program

Initiative allows businesses to become compliant with worker classification requirements at significantly reduced penalty rates



IRS Voluntary Classification Settlement Program – Eligibility Employer must have consistently treated a group of

workers as non-employees in the past and filed appropriate 1099 forms for those workers during past 3 years

No current dispute between employer and IRS or applicable state agency

Going forward, employers must agree to treat as employees any workers they previously misclassified as independent contractors



IRS Voluntary Classification Settlement Program - Benefits

Employer will pay only 10% of employment tax liability

Employer is not required to pay interest or penalties

Employer will not be subject to employment tax audit regarding worker classification issues



IRS Voluntary Classification Settlement Program – Risks of not

Participating

IRS can force non-compliant employers to pay the appropriate employment taxes in full for several years

Significant interest and monetary penalties



Participation in IRS Voluntary Settlement Program

Submit an application (Form 8952) to the IRS at least 60 days from the date on which employer wants to begin treating misclassified workers as employees



Why you Need to be Concerned

Fair Labor Standards Act

Illinois Minimum Wage Act

Illinois Wage Payment and Collection Act

Immigration Regulation and Control Act

Lilly Ledbetter Fair Pay Act



Exempt vs. Non-Exempt Hourly pay equals non-exempt

Responsibilities determine status

Title/payment type don’t determine status

Duties test

• Relative importance of exempt duties

• Amount of time spent performing exempt work

• Relative freedom from direct supervision



Independent Contractors

Tests for Independent contractors include:

• Behavioral control

• Financial control

• Type of relationship



Independent Contractors Make decisions re: how work is done

Not required to abide by organization’s policies/procedures

Can hire/fire their own employees

Do not work on the organization’s premises; make own schedules

Use own tools/equipment/materials

Engaged by many firms

Cannot be disciplined or dismissed

Paid per contractual arrangement



Unpaid Interns Must be a structured educational

experience

For the benefit of the intern

No promise of a job



Records Retention At least three years

• Payroll records• Collective bargaining agreements• Sales/purchase records

At least two years• Wage computation records

Records must be available for inspection



Four Most Common Mistakes

Failure to have a good system in place

Failure to properly record hours worked

Falling down on technical issues

Failure to calculate overtime properly



To Do List Ensure you are following specific record keeping

requirements for non-exempt employees

Have job descriptions for all positions for classification purposes

Have a process for classifying positions and follow it consistently

Maintain accurate pay records

Watch for improperly docked pay



To Do List

Make sure you are paying overtime correctly

Don’t allow non-exempt employees to work through lunch periods

Maintain all time records for NE employees

Have safe harbor policies in place



Allows employees to keep track of their own time

Calculates overate DOL will allow it as evidence in

claim cases

Smartphone App now available



Expands the definition of “disability” Gives the EEOC more power to

define the terms related to “disability” Eliminates the reference to those with

disabilities as a minority

ADA/ADAAA



Bending

Speaking

Learning

Reading

Concentrating

Thinking

Communicating

Working

Definitions of Disability“Major Life Activities”

Seeing

Hearing

Eating

Walking

Standing

Lifting

Caring for oneself

Concentrating



Circulatory system Reproductive system Immune system Bowel Cell growth Neurological system

Major Bodily Functions



Cerebral Palsy Cancer MS HIV/AIDS Depression Diabetes Autism

EEOC Identified Impairments



Document good faith efforts

Update job descriptions

Update employment applications relative to essential job functions

Interactive Dialogue



Make sure your applications are up to date. Do you have the latest forms available? (W-2s, I-

9s etc.) Review your current offer letters for seasonal help Are your orientation checklists ready? Are your employee handbooks up to date? Are your training manuals ready? Do you have a performance appraisal tool in

place for your summer help?

Summer Hiring



Questions?



Useful References

www.dol.gov – Department of Labor Website

www.state.il.us/agency/idol/ - Illinois Department of Labor

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Contact Information:

Julie StrahlGovernment SpecialistSikich Human Resource ConsultingPhone: (630) 566-8453Email: [email protected]

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