Three serious changes on the horizon

First- There is the NEW ‘Guidelines’ for deciding if a person is an Independent Contractor person or an employee.  This went into effect July 15, 2015 and will require a company to look at each person individually as the six (6) guidelines are to be taken as a whole and not a checkoff list.

Six Factors

In conducting an economic realities test, an employer should look to six factors, the DOL noted:

  • The extent to which the work performed is an integral part of the employer’s business.
  • The worker’s opportunity for profit or loss depending on his or her managerial skill.
  • The extent of the relative investments of the employer and the worker.
  • Whether the work performed requires special skills and initiative.
  • The permanency of the relationship.
  • The degree of control exercised or retained by the employer.

“In undertaking this analysis, each factor is examined and analyzed in relation to one another, and no single factor is determinative,” the DOL noted. “The ‘control’ factor, for example, should not be given undue weight.”

“The factors should not be applied as a checklist, but rather the outcome must be determined by a qualitative rather than a quantitative analysis,” the DOL stated. (SHRM/ Allen Smith 7-2015)

Again, the employer is left with vague guidance as to the application of the new ruling.  My advice would be to keep detailed documentation as to how you arrived at your decision, so that if you are  challenged, you will have the logic and the thinking associated at the time of the decision.

Secondly– Major changes in Fair Labor Standards Act (FLSA) and Wage and Hour laws.  Under today’s rules you are able to place an employee on a salary as long as you pay them $455/ week  and they do administrative job duties.  Technology has made it difficult to define ‘administrative’ duties as most managers do their own PC projects and may not even have a secretary.  It is expected that the new ruling will have a cut off salary of $50,440 and there will be guidelines as to Administrative duties requirement.  Anything less than this will require an hourly wage and overtime pay.  Articles are projecting that both of these steps may not come at the same time, but the dollar amount is pretty set.  So will the ‘guidelines’ be like the same guidelines for the Independent Contractor and how soon AFTER the wage limits are active will the means requirement process be initiated?

Few other thoughts are:  overtime, recession, part time employees, cut backs, minimum wage, technology, working from home, checking emails, answering a company cell phone on the way home or to work, etc.  If you look back in history you will discover that overtime and the 40 hour work week came into effect as a means to get more employers to hire more employees.  That worked for a long time and then the cost of the benefit package for an employee made it cheaper to pay overtime then to hire a new employee.  In 2008 companies laid off massive numbers of employees and unemployment costs skyrocketed.  Employers are still paying for the costs associated with the extensions granted under both Federal and State agencies.  This includes interest that States owe to the federal government and interest the federal government owes to ?.  Since the change in the economy, businesses have reaped higher profits, but have not increased their employee numbers to share the additional productivity.  Employees who used to be ‘happy just to have a job’ are now reaching out to see what is available in the market.  Economic advisors would say that this is an automatic correction and needs to be left alone.  However, there are a multitude of workers no longer on the unemployment lists due to 1) Laid off for too long or 2) found job(s) that may have required off hours or low pay and multiple part time jobs to survive.  Even if they are working, their lifestyle and income is depressed.

Companies have always complained that raising the minimum wage would cut back on the number of employees that could be hired/retained.  Maybe initially, but eventually more manpower is necessary.  Many States are presently paying a higher minimum than the Federal requirement and there is a strong push to move the federal minimum higher.  Why?  because people need a living wage and there is a large segment of society that does not have this basic need.  Companies are now stating that raising the salary minimum will again cause more part time employees, less employees, lower wages for employees going from salary to hourly due to projected overtime, and numerous other scenarios.  Again, let’s look at history:  HR laws have been knee jerk reactions to business not following the ethically correct measure to take when it comes to the Human Capital in their employ.  The only law I have noticed that came BEFORE companies abused a right was the Genetics (GINA) discrimination ruling from EEOC.  All the employment laws came about due to business abusing a right.

Employees are not going to be any more happy than the employers in too many circumstances.  Employees who have become accustomed to a salary are not going to want 1) punching in and out 2) being held to an hour or half hour lunch 3) not having a set $ in their paycheck and having time deducted when they leave a bit early.  Employees seem to think that they can negotiate overtime and they cannot.  Neither the company nor the employee can bargain over the FLSA.  Even in a contract situation there is a clause that if found to be in conflict- Federal law supersedes.

So what are the options?  First take a very close look at what the company needs in the way of Human Capital.  Do you need to update job descriptions to reflect what is actually being performed in that job?  Do you have people in the right slots/ departments/ positions?  If you have more than one shift- is it necessary?  Is this the time to look at flexible work schedules, telecommuting, shared jobs, etc.  How creative can you be?  How can you make this look positive for both you and the employee?  The work environment has changed and the family friendly culture has become prominent.  How about offering shorter hours to those who would like to cut back and using the balance of hours for new employees?  That would make a heck of a transition and succession plan.  Whatever you do, be careful and take Moral into consideration.  Companies deserve to make a profit; Employees deserve a fair day’s pay for a fair day’s work.  Striving to find a happy medium will create a Win Win for everyone including the customer and the stakeholders.

and Thirdly– Paid sick leave.  Face it, this is like the voting on the casinos.  If we talk about it enough it will eventually come to be and we keep seeing it being discussed.  There is a very nice article in The Cleveland Plain Dealer this Sunday (8-2-15) if you would like to see the direction that this is going.

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