Employment-101 for HR/PEO/ASO Sales Professionals Compiled and written by PEO Consulting Group, Inc., March 2007,

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1 Being an Employer Employment-101 for HR/PEO/ASO Sales Professionals Compiled and written by PEO Consulting Group, Inc., March 2007, Most entrepreneurs go into business because they are good at something. They have a passion for that thing and they want to provide it to others and get the financial rewards of doing so. To be successful, most businesses also require the talent of other people employees - but with employees comes a whole new business that most business owners are not experts at. The employer business is getting more and more complex and litigious. Whether a business is new and an owner just doesn t want to mess with employment issues as the business grows, or a business is well established and has employment handled, PEOs can provide an extremely valuable service by allowing for increased focus on core business activities that drop money to the bottom line. To fully understand the challenges an employer business owner faces, it s necessary to look at many aspects of employment including: Government compliance, Paperwork, Employer Liability, Payroll, Benefits, HR Issues, Employer Costs Government compliance: (Graphic available at Disclaimer: Labor laws are complex and their provisions can change frequently. The following summary descriptions of these laws along with the size businesses to which they apply, are meant for cursory, general, salestraining familiarization only, and NOT for providing advice on how to implement compliance or any other legal basis. Page 1 Rev 3/2007 Case Law Common Law St Ca Co

2 Federal Labor Laws By Number of Employees (plus SUI and WC state laws) 1-14 Employees Fair Labor Standards Act (FLSA) (1938) (Major revisions in 2004) Immigration Reform & Control Act (IRCA) (1986) The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) Federal Insurance Contributions Act of 1935 (FICA) (Social Security) Federal Unemployment Tax Act (FUTA) State Unemployment Insurance (SUI) State Workers Compensation (WC) Employee Retirement Income Security Act (ERISA) 1974 (if company offers benefits) Health Insurance Portability and Accountability Act (HIPAA) of 1996 (if company offers benefits) Consumer Credit Protection Act of 1968 (CCPA) Equal Pay Act of 1963 (EPA) Employee Polygraph Protection Act of 1988 (EPPA) Fair Credit Reporting Act (1970) (FCRA) Labor-Management Relations Act (Taft-Hartley) 1947 National Labor Relations Act (NLRA) 1935 Occupational Safety and Health Act (1970) (OSHA) Uniformed Services Employment & Re-employment Rights Act of 1994 (USERRA) 11-14, add Occupational Safety & Health Act (OSHA) (1970) (maintain record of job related injuries and illnesses) 15-19, add Civil Rights Act of 1964 Title VII, Civil Rights Act of 1991 Americans with Disabilities Act of 1990, (ADA) 20-49, add Age Discrimination in Employment Act (1967) (ADEA) Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) 50 or more, add Family and Medical Leave Act of 1993 (FMLA) EEO-1 Report filed annually w/eeoc if organization is a federal contractor 100 or more, add Worker Adjustment & Retraining Notification Act of 1988 (WARN) EEO-1 Report filed annually w/eeoc if organization is not a federal contractor Federal Contractors, add Executive Orders (1965), (1967), (1969) Vocational Rehabilitation Act of 1973 Drug Free Workplace Act of 1988 Vietnam-Era Veterans Readjustment Act of 1974 Davis Bacon Act of 1931 Copeland Act of 1934 Walsh-Healy Act of 1936 Service Contract Act (1965) Page 2 Rev 3/2007

3 Below are brief, general descriptions of these employment laws, with those that have a good chance of coming up in a HR sales discussions highlighted in yellow. The number following the laws is the number of employees at which an employer must comply with its provisions. IRC Internal Revenue Code (1) The Internal Revenue Code is the source of federal regulation governing areas such as wage withholding and payment, employee benefit plans, retirement plans, and employer/employee tax withholding, tax deposits. IRS Circular E is worth reviewing for payroll tax overview. FLSA Fair Labor Standards Act (1) Enacted in 1938, the FLSA governs minimum wage and overtime rates, child labor record-keeping and equal pay requirements for employers. This law is also known as "Wage/Hour" law, as it is enforced by the Wage & Hour Division of the U.S. Department of Labor (DOL). The FLSA has four main components: minimum wage requirements, overtime requirements, child labor regulations, and equal pay provisions. The minimum wage rules apply to most employees for work done for most employers, although there are certain exceptions for certain industries and locations. Overtime rules require pay at 1.5 times the hourly rate of the employee for all hours worked over 40 in any workweek, unless the employee performs work which is considered "exempt" from overtime. Generally, to be exempt, the work must be of a "professional" character (e.g., work performed by a "knowledge worker," such as a lawyer, doctor, accountant, teacher, or other person in a profession which is predominantly intellectual in nature); or the person must be performing work primarily as a manager or supervisor (working foremen often are not exempt); or the person must be performing work of a highlevel executive or administrative nature (e.g., work as a negotiator or agent, with substantial discretion and authority); or the person must be an outside sales representative. Generally, the child labor provisions restrict the employment of youths below the age of 18 to no more than 20 hours per week when school is in session, and further limit their ability to work around dangerous equipment and machinery. Some special provisions exist for children working for parents/relatives on family farms. Often, work certificates may be required to employ youths during the school year, so it is advisable to contact Wage/Hour early to obtain guidance, as fines can be imposed for failure to comply with the law. Of course, as is common in federal employment laws, any employee who makes a complaint to DOL or assists in such a complaint or attempts to enforce his/her rights is generally protected from retaliation (and may seek damages for emotional distress, as well as punitive damages, if retaliation is shown). In addition, the FLSA provides for criminal penalties (including fine and imprisonment), which are most often used for repeat offenders. The DOL requires that a workplace poster be displayed which explains FLSA rights to employees. Major revisions to the FLSA in 2004 redefined Exempt / Non-Exempt, along with salaried employee pay guidelines, typically making overtime pay apply to a larger base of employees. Page 3 Rev 3/2007

4 IRCA Immigration Reform & Control Act of 1986 (1) Makes it unlawful for any person or entity to employ any individual with knowledge that the individual is not authorized to work in the US, as well as to continue to employ an individual if the employer subsequently discovers that the individual is an illegal alien. If employer has required the alien to fill out the necessary paperwork (I-9), and has obtained the required documentation, then the employer usually is entitled to a presumption that no intentional violation existed. Copies of the forms must be retained for three years (and it is advisable to also retain a copy of the documentation reviewed, in order to prove that the documents were produced and reviewed). The law prohibits an employer from knowingly hiring, recruiting, or referring for work aliens who are not authorized to work in the United States. The IRCA additionally prohibits discrimination with respect to hiring, recruiting, referral, or discharge against all individuals except unauthorized aliens. The IRCA covers all employers and employees no matter the size of the employer, requires completion of the I-9 form, establishing right to work in the U.S. PRWORA - The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (1) National new hire reporting system. The law establishes a Federal Case Registry and National Directory of New Hires to track delinquent parents across state lines. It also requires that employers report all new hires to state agencies for transmittal of new hire information to the National Directory of New Hires. This builds on President Clinton's June 1996 executive action to track delinquent parents across state lines. The law also expands and streamlines procedures for direct withholding of child support from wages. Requires states to institute a system of mandatory reporting of new hires, in order to establish a national database to track parents who are not paying child support. In general, new hires must be reported within 20 days of hire. Where a company operates in several states, the company may elect to report all workers in a single state or can file reports on a state-by-state basis. If electing to file in one state, the company must so advise the other states. Most states have detailed information on the internet on filing these reports, and many permit electronic filing. FICA Federal Insurance Contributions Act (1) Imposes two taxes on both employers and employees. The first, Social Security, finances federal old age survivors and disability insurance. And the second tax finances Medicare (hospital and hospital service insurance). These taxes are based upon wages paid to an employee in covered employment. The Social Security portion is paid until the employee's calendar year taxable wages exceed the annual taxable wage base ($97,500 in 2007), and Medicare portion is paid on all taxable wages. Page 4 Rev 3/2007

5 FUTA Federal Unemployment Tax Act (1) The Federal Unemployment Tax Act (FUTA), authorizes the Internal Revenue Service to collect a federal employer tax used to fund state workforce agencies. Employers pay this tax annually by filing IRS Form 940. FUTA covers the costs of administering the UI and Job Service programs in all states. In addition, FUTA pays one-half of the cost of extended unemployment benefits (during periods of high unemployment) and provides for a fund from which states may borrow, if necessary, to pay benefits. Only the employer is obligated to pay unemployment taxes on taxable wages earned by his employees in covered employment. FUTA taxes are paid until the employee's calendar year wages exceed the taxable wage base (currently (2007) tax of 0.8% of first $7,000 in calendar year wages = $56/year). SUI - State Unemployment Insurance (1) Employer paid tax to cover unemployment benefits for employees who are laid off. Generally, employers must pay both state and federal unemployment taxes if: (1) they pay wages to employees totaling $1500, or more, in any quarter of a calendar year; or, (2) they had at least one employee during any day of a week during 20 weeks in a calendar year, regardless of whether or not the weeks were consecutive. The rate the employer pays will depend on the claims experience at the company. The New Employer Rate, as well as the wage base to which it is applied, varies between states. See table to the right for 2007 SUI Wage Bases and New Employer Rates for each state. Note, the amount an employer would pay on an employee would vary from state to state. For example, an employee with a $30,000 per year wage, and an employer with a 2.00% SUI rate, would pay from a low of $140 per year (AZ, FL and others) to a high of $600 per year (HI, ID). Page 5 Rev 3/2007

6 Workers Compensation A system that varies by state and provides benefits for medical expenses, loss of wages, rehabilitation, disability, and related expenses, to workers in that state who suffer occupational injuries and illnesses. Under workers' compensation, benefits are generally provided on a no-fault basis without regard to cause, but the employee may not sue his employer for negligence. Workers' compensation benefits are the "exclusive remedy" for the worker, in that the employee generally may not also sue the employer for negligence. The cost of WC premiums are based on a manual rate for each occupation (expressed as a four-digit workers' compensation classification in most states, and a three-digit code in PA and WV) per $100 of wages paid in that classification. For example, a rate of $5.25 means the manual premium for that occupation is 5.25% of payroll. Rates will vary, often widely, between states and carriers. The table below shows what typical rates might be like for several types of jobs in several states. $$ Rate/$100 wages Job Code MD VA DC METAL SCRAP DEALER ENGINEER/ARCHITECT CONSULTING GEO PHYS EXPLOR FIELD BONDED WAREHOUSING SALES - OUTSIDE MESSENGERS, COLLECTORS NEWS AGENT AUTO SALES PERSON MAILING & ADDRESSING CO TRAVELING ACCNT/AUDITOR CLERICAL, DRAFTING, LIBRARY An Experience Modifier (E-Mod) is further applied to premium, based on the loss experience for that particular employer. For example, an E-Mod of 1.10 means the loss experience has been about 10% worse than average, while an E-Mod of 0.88 means loss experience of about 12% better than average. There is a minimum annual standard premium in each state (ranging from $1,500 to $10,000) in order for an E-Mod to be calculated. A Premium Discount is a further discount allowed for larger premium accounts and is applied to the Experience Modified Rate. Standard Premium is the premium calculated after all modifiers, credits, discounts, surcharges, and adjustments (except retro adjustments) have been applied. Page 6 Rev 3/2007

7 EXAMPLE The estimated Workers' Compensation premium calculation is found on the policy s Declaration Page or Schedule of Operations, or Information Page (different carriers use different terms). It can also be found on the most recent Premium Audit paperwork. CLASSIFICATION: Code Description Payroll Rate Premium 8810 Office, Clerical 18, Outside Sales 39, Millwright 110, , Drivers 24, , ,173. Experience Modification (.94) Premium Discount (4.80%) (on Modified Premium) Expense Constant Annual Premium 13,759. ERISA Employee Retirement Income Security Act (1) ERISA is a complex and lengthy statute, which creates certain rules with respect to retirement plans and other benefit plans (mainly insurance plans) offered by companies to their employees. There are a number of areas covered by ERISA. First, ERISA places certain duties and responsibilities on plan sponsors and plan administrators to act in prudent manners to safeguard the assets for plan participants, and to treat plan members fairly. Various types of self-dealing are prohibited, and various requirements are imposed for filing reports with the government with respect to the plan. In addition, retirement plans may be assessed premiums which are used to insure against defaults by certain plans. Secondly, ERISA places duties on plan sponsors and administrators to advise employees of their rights under the plans (including the obligation to periodically provide the employees with summary plan descriptions (SPDs) of the basic provisions of the plan); to timely provide information requested by employees with respect to their rights under the plan; and to establish procedures to allow employees to obtain review of disputes concerning the operation of the plan or payment of benefits under the plan. Thirdly, ERISA establishes certain minimum requirements for retirement plans, including minimum funding requirements. Other requirements include provisions regarding which employees must be allowed to participate in the plan, as well as when they must become eligible; setting limits on the time before rights will vest under the plan; and establishing rules concerning benefits to persons who terminated employment before retirement, as well as rules concerning payment of benefits to those eligible to receive retirement benefits. Certain amendments to ERISA also establish extensive requirements for health insurance plans, including provisions requiring non-discrimination against those with mental illnesses, setting minimum hospitalization times for childbirth, and setting an assortment of requirements with respect to initial eligibility, premiums and continuation of coverage after termination. Page 7 Rev 3/2007

8 HIPAA Health Insurance Portability and Accountability Act of 1996 (1) Establishes broad requirements and protections for health coverage that include Portability of Coverage, Pre-existing Condition Limitation, Certification of Prior Coverage, Accessibility of Coverage, and Special Enrollment Periods. Generally effective for plan years commencing on or after June 1, Applies to any company which provides group health insurance to 2 or more current employees (including self-insured plans), and also has some provisions which apply to individual policies. Forbids group plans from adopting eligibility rules based upon health-related factors (i.e., cannot refuse to allow entry into the plan, or drop someone from the plan, based upon poor health), and also prohibits charge of higher premiums due to health factors. Prevents companies from applying any pre-existing condition exclusion to an employee who was covered under a prior company's plan within 63 days of the time of hire. Allows exclusion of pre-existing conditions of employees without prior health plan coverage for up to a period of 12 months (except that pregnancy cannot be excluded, nor can coverage of newborns or adopted children enrolled in plan within 30 days of coming into the family). Where an employee initially declines coverage, the pre-existing condition exclusion can be extended to 18 months. Where a medical condition was excluded under an existing plan as a pre-existing condition, this exclusion is barred after 12 months of coverage under the plan. Defines pre-existing condition as a condition for which medical treatment was received (or about which the employee consulted a doctor) within 6 months of the time when seeking entry into the new health plan. Additionally in 2003 stringent regulations regarding the handling of private medical information went into place for employers, medical providers, and anyone else who accesses medical information. CCPA Consumer Credit Protection Act of 1968 (1) Garnishment guidelines: Places limits of the amount of wages which may be garnished by a creditor to no more than 25% of disposable income (i.e., net amount after tax withholding). However, in addition to the general 25% limit on garnishments, there is further protection for lower-paid or part time workers, as they have the right to receive all wages up to 30 times the current minimum wage (and only the sums above this amount can be garnished, up to the limit of 25%). Exceptions exist which allow garnishments beyond the 25% limit to pay a tax lien. Exceptions also exist to allow higher garnishments to provide payment of child/spousal support (which vary, depending on the current marital status and current other dependents of the employee). Generally, a single employee with no other dependents may be required to pay up to 60% of disposable income for support obligations, while someone who is supporting additional dependents usually will be required to pay up to 50% of disposable income. Garnishment law can be complex in the support area, especially if other garnishments also are being served, and consultation with the court and/or company legal counsel is advisable. The Act also prohibits the termination of any employee because of garnishments which arise out of a single debt (i.e., an employee cannot be terminated because of multiple garnishments to pay off an overdue account at Sears). However, employees may be terminated for garnishments arising out of 2 or more different debts which occur in a 12 month time period (e.g., separate garnishments from Sears and Visa). Page 8 Rev 3/2007

9 Equal Pay Act of 1963 (1) Applies to all employers who are covered by the Fair Labor Standards Act (which covers most businesses). Prohibits discrimination due to sex in the payment of wages, by barring payment of a lower wage to one sex than to the opposite sex for jobs of equal skill, effort and responsibility which are performed under similar working conditions. Limited exceptions for pay differentials where employer can show that difference is due to a seniority system, merit system, a system which bases earnings on quantity or quality of production, or some other bonafide factor other than sex. Burden of proof is on employer, not on employee, once it is shown that jobs are equivalent and pay is different. A company cannot justify lower pay to a woman employee who is doing identical work to a male employee, simply because she did not bargain as well. Likewise, it is not considered lawful to set starting pay rate based on prior salary alone (as so many women receive lower pay in the job market that this is considered a subterfuge for sex discrimination). EPPA Employee Polygraph Protection Act (1) The Employee Polygraph Protection Act of 1988 (EPPA) generally prevents employers from using lie detector tests, either for pre-employment screening or during the course of employment, with certain exemptions. Employers generally may not require or request any employee or job applicant to take a lie detector test, or discharge, discipline, or discriminate against an employee or job applicant for refusing to take a test or for exercising other rights under the Act. In addition, employers are required to display the EPPA poster in the workplace for their employees. Exceptions include use of polygraphs for employees working for defense contractors or in national security-related activities with private companies; security guards and other security-related personnel; and employees in protective service jobs. JSIA Jury System Improvement Act (1) Makes it unlawful to discharge or threaten/coerce any permanent employee because of participation or expected participation as a juror in the federal system. Employee is entitled to be treated as if on leave of absence during jury service, and is entitled to full reinstatement upon conclusion of jury duty. Insurance and other benefits must be the same as offered to other employees on leaves. Hourly employees may be docked for time spent on jury service. It is unclear whether this is true for exempt employees, in light of the DOL regulations which appear to require payment of full salary (at least for partial weeks of jury service). However, given the clear statutory wording that employees who are absent due to jury service are to be treated as being on leave, it seems likely that the courts will permit docking of exempt employees (at least for jury service of one week or longer). FCRA - Fair Credit Reporting Act (1) Forbids obtaining or using a "consumer credit report" in connection with decisions about employment (including initial employment) without: obtaining the separate written consent of the employee before the report is ordered; giving written notice to the employee of rights under FCRA; and then, if adverse action is taken based on the report, giving notice to the employee, allowing the employee to obtain a free copy of the report, and giving the employee the right to dispute its accuracy. Separate procedures apply to certain DOT-covered jobs where the only prior contact has been electronically or by mail. Page 9 Rev 3/2007

10 Also forbids obtaining an "investigative consumer report" about an employee, without sending a notice to the employee within 3 days to advise that such a report has been requested, which informs the employee of the name of the consumer reporting agency which is providing the report; advises the employee of applicable FCRA rights; advises the employee of the nature/scope of any investigation, upon request; and allows the employee to see the entire contents of the file kept by the consumer reporting agency (except that sources may be excluded). NLRA National Labor Relations Act Prohibits employers in any industry from discriminating against employees who choose to engage in (or to decline to engage in) any union-related activities. Protected activities include: joining a union or asking others to join; banding together collectively for "mutual aid and protection" (whether or not a union is involved); seeking to deal on a group basis with the employer about working conditions; and engaging in other concerted activities for the purpose of negotiating more favorable employment terms. The act broadly covers collective action by employees, whether or not any formal union represents the workers. There also may be coverage for an individual employee who tries to stand up for collective rights of all employees (depending on the circumstances). This Act prohibits employers from interrogating employees about union -related actions, making threats to dissuade them from engaging in such actions, making promises to induce them to abandon these activities, and spying upon employees to find out about their union-related activities. The law provides procedure for a union which seeks to represent employees of a company to seek a government-supervised election to certify the union as the bargaining agent for a group of employees, as well as procedure which employees may follow if they wish to decertify a union or get rid of "union shop" rules. This law also has rules which govern collective bargaining with the union, as well as rules which bar certain misconduct by unions towards disfavored employees and employers. In addition, there are rules against kickbacks, graft or corruption by unions and companies in the negotiation of union contracts, and provisions which allow employees to sue unions under certain circumstances where the union failed to represent them fairly (as well as to sue companies which breach the provisions of the union contract). LMRDA Labor- Management Reporting & Disclosure Act Requirement for Union reporting and disclosures. USERRA Uniformed Services Employment and Reemployment Rights Act (1) Unlawful to refuse to hire, or to discriminate during employment, because an individual has military service obligations (covers all aspects of employment, including denial of raises, promotions or other benefits of employment). Also unlawful to deny reinstatement to an individual who leaves employment to perform military service if total length of absences due to service is not more than 5 years (unless time is extended under DOL regulations due to war, emergencies, etc.); and individual was not released from duty by bad conduct or dishonorable discharge (or under other than honorable terms); and individual was employed in a position which was not temporary or short-term in nature; and individual reapplies within 90 days after discharge Page 10 Rev 3/2007

11 (14 days if period of military service was less than 181 days). Leaves for short-term training duty also are covered, and reinstatement from those leaves typically is immediate. Reinstatement generally required to comparable job, although exceptions arise where job has been eliminated, or where the veteran no longer can do the job, but can be reassigned elsewhere. During time in military service, the employee is treated as if on an unpaid leave of absence. Thus, the employee may continue health benefits and other benefits by payment of the same sums required from employees on other leaves of absence of similar duration (e.g., general COBRA rules apply to long-term absences, but the employee only must pay the regular employee-side contribution if the absence is less than 30 days). Full insurance coverage must be given immediately upon reinstatement (no waiting period can be applied - however, treatment for service-connected health problems may be excluded in some cases). The employee may use accrued paid leave during the absence if desired, but cannot be required to use such leave by the employer. Upon reinstatement, the veteran is entitled to be treated for benefit purposes as if seniority was unbroken (i.e., years spent in service are treated as years of service with the employer). OSHA Occupational Safety & Health Act (11) Imposes general duties to maintain safe place to work and to comply with regulations issued by the DOL. OSHA also requires that certain records be maintained with respect to work-related injuries and exposures, and that certain reports be filed (especially in case of workplace deaths). In addition, a poster explaining OSHA must be posted. OSHA has right to enter into facility to check compliance with safety standards, and to review records. Generally, the employer and a union representative may accompany the OSHA inspector during the inspection. Where violations are found, a citation may be issued which requires correction of the hazard by a set date and which imposes a fine for the violation (usually with additional fines if the correction is not made). A copy of the citation must be posted in the workplace, near the location of the hazard cited. The citation is presumed correct unless the company files a prompt notice of contest. Employees and/or their unions also can file a contest and seek shorter times for abatement or other similar remedies. Administrative review and enforcement procedures apply, similar to those under the NLRA. Generally applies to all employers with more than 10 employees but there are exceptions by industry. There are also exemptions for (typically) safer industries, as shown in the chart below. The law creates highly detailed workplace safety standards. Page 11 Rev 3/2007

12 Employers are not required to keep OSHA injury and illness records for any establishment classified in the following Standard Industrial Classification (SIC) codes, unless they are asked in writing to do so by OSHA, the Bureau of Labor Statistics (BLS), or a state agency operating under the authority of OSHA or the BLS. All employers, including those partially exempted by reason of company size or industry classification, must report to OSHA any workplace incident that results in a fatality or the hospitalization of three or more employees. SIC SIC Industry Description Code Code Industry Description 525 Hardware Stores 725 Shoe Repair and Shoeshine Parlors 542 Meat and Fish Markets 726 Funeral Service and Crematories 544 Candy, Nut, and Confectionery Stores 729 Miscellaneous Personal Services 545 Dairy Products Stores 731 Advertising Services 546 Retail Bakeries 732 Credit Reporting and Collection Services 549 Miscellaneous Food Stores 733 Mailing, Reproduction, & Stenographic Services 551 New and Used Car Dealers 737 Computer and Data Processing Services 552 Used Car Dealers 738 Miscellaneous Business Services 554 Gasoline Service Stations 764 Reupholstery and Furniture Repair 557 Motorcycle Dealers 78 Motion Picture 56 Apparel and Accessory Stores 791 Dance Studios, Schools, and Halls 573 Radio, Television, & Computer Stores 792 Producers, Orchestras, Entertainers 58 Eating and Drinking Places 793 Bowling Centers 591 Drug Stores and Proprietary Stores 801 Offices & Clinics Of Medical Doctors 592 Liquor Stores 802 Offices and Clinics Of Dentists 594 Miscellaneous Shopping Goods Stores 803 Offices Of Osteopathic Physicians 599 Retail Stores, Not Elsewhere Classified 804 Offices Of Other Health Practitioners 60 Depository Institutions (banks & savings institutions) 807 Medical and Dental Laboratories 61 Nondepository Institutions (credit institutions) 809 Health and Allied Services, Not Elsewhere Classified 62 Security and Commodity Brokers 81 Legal Services 63 Insurance Carriers 82 Educational Services (schools, colleges, universities and libraries) 64 Insurance Agents, Brokers, & Services 832 Individual and Family Services 653 Real Estate Agents and Managers 835 Child Day Care Services 654 Title Abstract Offices 839 Social Services, Not Elsewhere Classified 67 Holding and Other Investment Offices 841 Museums and Art Galleries 722 Photographic Studios, Portrait 86 Membership Organizations 723 Beauty Shops 87 Engineering, Accounting, Research, Management, and Related Services 724 Barber Shops 899 Services, not elsewhere classified CRA Civil Rights Act of 1964 (Title VII), Civil Rights Act of 1991 (15) Covers all companies with 15 or more employees. (Note, in some cases, part time or temporary workers, as well as leased employees or employees of affiliates, may be included to achieve coverage). Title VII prohibits discrimination due to race, color, religion, sex (gender), and national origin in hiring, employment (all terms, conditions and benefits), and termination. Prohibits discrimination due to pregnancy and requires that pregnancy be treated the same as any other non-work-related disability. Also bars retaliation against the person who made a complaint or assisted the complaining party. One of the key provisions is prohibition of sexual or racial/religious/ethnic harassment by supervisors, coworkers or even by third parties. Companies usually are strictly liable for discrimination by supervisors Page 12 Rev 3/2007

13 which results in tangible loss of job benefits. Otherwise, companies normally are liable only when the company failed to make reasonable efforts to stop the harassment (at least where the company had alerted employees to their right to complain and provided a reasonable avenue to receive complaints). Another key provision is prohibition of unintentional discrimination by use of requirements which have an adverse effect (disparate impact) on protected groups, such as use of educational requirements, tests or lifting restrictions which exclude disproportionate numbers of certain protected groups, unless the employer can prove that the requirements are job-related and that the use of these standards is required by business necessity. Enforced by the U.S. Equal Employment Opportunity Commission (EEOC) and by state agencies in states which have comparable civil rights laws. Investigations will include complaints filed by applicants, employees, or by a commissioner of the Equal Employment Opportunity Commission. EEOC also requires that display of a poster explaining rights under the act (a copy is available from the EEOC site). ADA Americans with Disabilities Act (15) Applies to companies with 15 or more employees. Prohibits employment discrimination against individuals with a serious disability (or who have a past history of a serious condition, such as cancer) if they can perform the essential functions of the job with no special accommodations, or if they can perform such functions with special accommodations which are "reasonable" based upon the size of the company; the nature of the job; and the costs of the accommodations. Employers do not have to make accommodations which would place an undue hardship on the business, or which would not allow the employee to become able to perform the essential job functions. Also prohibits discrimination against individual because of relationship with a person who has a disability (such as refusal to hire individual who has a disabled child, or refusal to provide equal benefits to such an individual). Requires case-by-case analysis as to whether individual is able to do the essential job functions and regarding what accommodations may be necessary. Usually also requires accommodations to applicants to allow them to complete the application process (even if applicant may be found unable to do the job). Bars pre-offer inquiries about medical history or existence of disabilities, but does allow physical exam after offer to determine ability to do the job. Requires that employee medical information be kept confidential. Public Accommodations Provisions: The ADA also contains many provisions which require architectural modifications of buildings (including restrooms, elevators, walkways, etc.) in various circumstances. These modifications also may impact disabled employees, and companies need to be alert to the possible requirement to modify facilities (especially when remodeling work is being done). ADEA Age Discrimination in Employment Act (20) Applies to all companies with 20 or more employees. Prohibits discrimination in hiring, employment or termination against applicants and employees age 40 and over (no upper limit), with certain very limited exceptions. Also prohibits retaliation against person making complaint or those assisting complainant. Bars release of claims by older worker in exchange for severance pay or other benefits unless provisions of Older Workers Benefit Protection Act (OWBPA) are followed. Page 13 Rev 3/2007

14 COBRA Consolidated Omnibus Reconciliation Act (20) Applies to companies with 20 or more employees at work for more than 50% of the work days in the prior year (whether fulltime, part time or otherwise). Allows employees (and/or dependents) who otherwise would lose coverage under company medical insurance plans to continue their existing insurance coverage by payment of the company's cost for such insurance (plus a 2% administrative fee). For noncontributory plans, the employee picks up the entire share of the premium for coverage. For contributory plans, the employee picks up the company's share, plus his own regular contribution. For example, if the company's monthly total premium to the insurance carrier for the employee's coverage is $300/month, the employee would have to pay $300/month to continue the coverage, plus a 2% administrative fee of $6/month. Premiums are due by the first day of coverage for the month (e.g., January 1), except that initial premiums after electing coverage are not due until 45 days after election of coverage (but the initial payments must pick up all premiums outstanding, retroactive to the date of the qualifying event). Coverage cannot be cancelled if payment is received by no later than 30 days after due (e.g., by January 31st if due on January 1). Eligible employees and dependents can extend their health insurance coverage for up to 18 months in most cases (36 months coverage allowed for spouses and minor children in the event of death, disability or divorce). Events which may trigger the right to COBRA coverage include termination, layoff (or substantial reduction of hours), divorce or legal separation, qualification by the employee for Medicare (usually due to disability determination), or death. If the employee or family members have pre-existing conditions, it is very important to obtain COBRA coverage if laid off or terminated, as this helps to preserve the right to obtain immediate benefits at a future employer (see HIPAA). Insurance can be cancelled if the employee fails to pay the premiums by the end of the grace period, or when the employee gets insurance coverage from another employer without pre-existing condition exclusions, or if the company stops offering any health insurance plan to any of its employees, or if the employee uses up all COBRA benefits available. Several states have adopted some form of mini-cobra law which permit almost any employee in a small group plan sponsored by his employer to extend coverage after termination or layoff (regardless of the size of the employer), so companies which are not covered by COBRA should check state law and/or to check with the insurance carrier which handles the plan to determine whether such extended benefits must be offered. FMLA Family & Medical Leave Act (50) Applies to companies with 50 or more employees, at all facilities which have 50 or more employees in 75-mile radius of location where employee worked. Allows up to 12 weeks of unpaid leave when employee or covered family member has serious health condition which requires medical care or treatment and physician certifies that leave of employee is necessary. Requires extension of health insurance coverage during leave on same basis as prior to leave, and requires reinstatement to same or equivalent job in most cases. Provides for intermittent leave under certain circumstances. Prohibits retaliation against employees who take FMLA leave. DOL also requires display of a workplace poster to advise employees of their rights under this act. Page 14 Rev 3/2007

15 WARN Worker Adjustment & Retraining Notification Act of 1988 (100) Applies to companies which have 100 or more fulltime-equivalent employees (i.e., any combination of 100 workers or more who work a minimum of 4,000 hours per work week, excluding overtime). Generally requires 60 days advance notice to be given to employees of plant closures which will result in job loss for 50 or more employees. Also usually requires 60 days advance notice in cases of mass layoffs which are expected to last for 6 months or longer. Mass layoffs include any layoff resulting in loss of 500 jobs, as well as any layoff affecting 1/3 of the workforce (as long as at least 50 employees are laid off). Where multiple layoffs are occurring, any layoffs within 90 days of the latest layoff are counted to determine if WARN notice is required. Notice must be given to each affected employee (or to the union, if they are represented), as well as to state and local officials designated to handle such notices. Once notice of the impending job loss is received, the state and local governments are expected to provide assistance to affected workers. DFWA Drug Free Workplace Act Applies to employers having contracts with the federal government of more than $25,000. Requires federal contractors to take certain actions to insure that they maintain a drug-free workplace, including advising employees that possession, use or distribution of drugs in the workplace is prohibited; initiating a drug-free awareness program about the dangers of illicit drugs and the availability of EAP programs for employees, as well as penalties which can be assessed for violations of the policy; and advising employees of their obligation to promptly report a conviction for workplace drug violations, so that the company can report the same to the contracting agency. There are also many state regulations regarding Drug Free Workplaces. Less commonly discussed employment laws include: TEFRA Tax Equalization & Fiscal Responsibility Act The Tax Equalization and Fiscal Responsibility Act amended the Internal Revenue Code by providing tests to determine if a leased employee can be treated as an employee of the client company for certain pension plan purposes. The TEFRA also amended the ADEA by requiring employers to provide the same group health plan coverage to an employee, and/or their spouse, who are age 65-69, as offered to another employee, and/or their spouse, under the age of 65. Executive Orders & 11478: These executive orders require that federal contractors and subcontractors adopt affirmative action programs to correct under-utilization of minorities and women. As a result of these executive orders, the DOL formed the Office of Federal Contract Compliance Programs (OFCCP) and issued extensive regulations with respect to the format and coverage of these affirmative action programs. VEVRRA Vietnam Era Veterans Reemployment Rights Act Applies to federal contractors and subcontractors providing personal property and non-personal services pursuant to any federal contract in the amount of $10,000 or more. Requires contracts to contain a provision that the employer will take affirmative action to employ and advance in employment "qualified special disabled veterans" and veterans of the Vietnam era. Requires contractors to submit annual reports to the Secretary of Labor. Page 15 Rev 3/2007

16 Electronic Communications Privacy Act (ECPA) Makes it unlawful for any employer to use any type of electronic or mechanical device to intercept the conversations of employees, except where the employee has no reasonable expectation of privacy or one party to the conversation has consented to the interception of the communication (or where a court order requiring the employer to permit wiretapping has been obtained by appropriate law enforcement personnel as a part of a criminal investigation). Prohibited types of mechanical or electronic interceptions include: interception of telephone calls, interception of personal discussions through the audio feed of a video camera, use of a hidden tape recorder or microphone, use of a parabolic listening device, or even use of a water-glass against a partition. Companies are entitled to monitor phone calls by using an extension line in order to check for quality, or even to see if the employee is making personal calls on working time. However, as soon as the company determines that the call is private in nature, it is generally unlawful to continue to listen (although an exception may exist where clear notice has been given that all calls will be monitored and employees have been given access to pay phones or other private lines to make personal calls and employees are aware that actual routine monitoring is being done). The prevailing view is that companies should not listen to voic messages which are plainly personal, as there may be an expectation that such messages are private (at least, in the absence of plain notice to the contrary). States are free to impose broader restrictions, and several states prohibit interception of any conversation unless both parties have agreed to the interception. Some states even have statutes to protect privacy of message. RLA Railway Labor Act Applies to most forms of transportation. MSHA Mine Safety & Health Act Established to provide mandatory health and safety standards and practices in the nation's coal or other mines. FDA Food and Drug Act Prohibits any person at least eighteen years of age to employ, hire, or use a person under eighteen years of age or violate any provision of the act. DTB Discriminatory Treatment in Bankruptcy Prohibits employment discrimination against an individual who has participated in bankruptcy proceedings or who is associated with an individual who has participated in bankruptcy proceedings. TSCA Toxic Substances and Control Act Regulates the manufacturer, distribution, use or disposal of toxic substances. Prohibits adverse employment action against an employee who reports possible violations of the Act or participates in proceedings under the Act. Page 16 Rev 3/2007

17 Numerous Government Websites provide additional information regarding employment laws and the compliance requirements. One of numerous pages on the Department of Labor s (DOL) is illustrated below. Several additional links include: Internal Revenue Service Bureau of Labor Statistics Occupational Safety and Health Administration - Department of Labor - Federal Trade Commission Page 17 Rev 3/2007

18 Employee Files / Paperwork: May and/or should include Employment Application a detailed document asking identical pre-employment information from ALL applicants in a non-discriminatory manner. Employment Agreements/Contracts, often including Non-Compete terms, Non-Disclosure terms W-4 withholding form Page 18 Rev 3/2007

19 State Withholding form(s) (if applicable) I-9 Form (Front shown below) Page 19 Rev 3/2007

20 I-9 Form (back) Page 20 Rev 3/2007

21 EEO-1 (if over 50 employees) Medical and other offered insurances both Enrollment documentation or Waiver documentation 401k or retirement enrollment, Other employment filings and paperwork include: FUTA Annual filing Page 21 Rev 3/2007

22 SUI Similar quarterly filings for State Unemployment IRS Form 941 Quarterly filings for Federal income Tax withholding, Employer and Employee FICA Workers Compensation Annual audit At the end of each policy year, an audit of actual wages paid against the estimated payroll that the policy was issued on is conducted. Many policies are initially underestimated, unintentionally or intentionally, and a lump payment in additional premium is due after audit, although refunds are also possible. Page 22 Rev 3/2007

23 The Cost of Non-Compliance: In addition to the huge risk of civil litigation and penalties, general government terms include: FLSA Fair Labor Standards Act: Employees who are not paid in compliance with the law may complain to DOL or can file their own actions in federal court. They can recover the sums which they should have been paid (going back 2 years from the date of suit, or 3 years if the violation is found to have been willful), and also can recover an equal amount in liquidated damages unless the company can establish substantial justification for failure to comply with the law. They also may recover attorney fees. Title VII: Damages recoverable include back pay, reinstatement (or front-pay, if degree of hostility prevents reinstatement), damages for emotional distress and punitive damages for intentional bias (the combined totals for punitives and compensatories are capped, and range from $50,000 for companies with under 101 employees to $300,000 for employers with more than 500 employees). ADEA - Age Discrimination in Employment Act: Damages include backpay, reinstatement or front pay (similar to Title VII), attorney fees, and possible liquidated damages equal to the actual damages (only for willful violations). EPA - Equal Pay Act : Damages are the same as for the ADEA. The employee can elect to file charges under both the EPA and Title VII, or proceed directly to court on the EPA claim. Suits under the EPA must be brought within 2-3 years (depending on whether the violation was willful). FMLA - Family & Medical Leave Act: Damages awardable include backpay, reinstatement, and possible liquidated damages equal to the actual damages, as well as an award of attorney fees. ADA - Americans with Disabilities Act: Damages are identical to those provided by Title VII. DFWA - Drug-Free Workplace Act: Penalties to companies for failure to comply with these requirements includes possible termination of the federal contract and debarment from future contracts (although this is only likely if persistent problems occur, and the contractor appears to be doing little or nothing to penalize such behavior). WARN - Worker Adjustment & Retraining Act: Failure to provide required notice results in liability for up to 60 days of back pay, plus reimbursement for medical or other expenses which would have been covered during the time period. Newly-hired workers (less than 120 days) can receive back pay and lost benefit coverage only up to 1/2 of the days actually worked. Company also may be subject to a fine, as well as payment of attorney fees to the plaintiff(s). USERRA - Uniformed Services Employment & Reemployment Rights: Rights can be enforced by Labor Department, or by private suit. Remedies include reinstatement, back pay, attorney fees and liquidated damages (equal to back pay sums) for willful violations. Some states also have military leave laws which may provide greater damages or greater rights to employees performing military service. Page 23 Rev 3/2007