Personnel e.bulletin – January 2013

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2013 Employment Law Trends & Changes 

Prepared for the PHCC Educational Foundation by TPO, Inc.

Federal and state laws change every year and new trends emerge. As an employer, you should be aware of the following.

Minimum Wage
Although the 2013 federal minimum wage will remain unchanged at $7.25 per hour, ten states have announced that their minimum wage will increase on January 1, 2013. They are:

  • Arizona: $7.65 to $7.80 per hour
  • Colorado: $7.64 to $7.78 per hour
  • Florida:  $7.67 to $7.79 per hour, tipped employees – $4.65 to $4.77 per hour
  • Missouri: $7.25 to $7.35 per hour
  • Montana: $7.65 to $7.80 per hour
  • Ohio: $7.70 to $7.85 per hour, tipped employees – $3.85 to $3.93
  • Oregon: $8.80 to $ 8.95 per hour
  • Rhode Island:  $7.40 to $7.75 per hour
  • Vermont: $8.46  to $8.60 per hour, tipped employees – $4.17 per hour
  • Washington: $9.02 to $9.19 per hour

 American Tax Payer Relief Act
Congress passed the American Taxpayer Relief Act of 2012. The legislation extends permanently a number of tax provisions that had expired at the end of 2011 and 2012; revises tax rates on income for married couples filing jointly at $450,000 and single at $400,000 of taxable income; modifies the estate tax; and extends unemployment benefits, Medicare payments and farm subsidies. Some specific payroll related provisions include:

  • Permanently extends employer-provided education assistance (Section 127 of the Internal Revenue Code), which allows an employee to exclude from income up to $5,250 per year in educational assistance at the undergraduate and graduate level regardless of whether the education is job-related.
  • Permanently extends the increase in the monthly exclusion for employer-provided transit and vanpool benefits.
  • Extends federal emergency unemployment benefits for one year.
  • Reinstates and extends the Work Opportunity Tax Credit through 2013.
  • The legislation does not include an extension of the 2 percent payroll “holiday” for Social Security (FICA) employee tax so the FICA deduction returns to the regular 6.2 percent on the first payroll of 2013 (during the “holiday” period, the rate was 4.2 percent).

Retirement Plan Limits
The Internal Revenue Service made cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2013. In general, many of the pension plan limitations will change for 2013 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. However, other limitations will remain unchanged because the increase in the index did not meet the statutory thresholds that trigger their adjustment.

Affordable Care Act (ACA)
Now that much of the healthcare reform uncertainty has been lifted, it’s time to get to work and focus on the many healthcare compliance obligations and possible economic impacts to your business.  While there are many issues to address immediately, the “big ticket” items won’t go into effect until 2014, including the “pay or play” mandate, new nondiscrimination requirements, and automatic enrollment.

Make sure to use 2013 to adequately plan for additional economic burdens. Access the link below for a fact sheet on the top things you should know and do as a small business owner associated with the Affordable Care Act.

http://www.healthcare.gov/news/factsheets/2011/08/sm-bus-aff-care-act.pdf

Paid Sick Leave Laws
Laws that require all employers to provide paid sick time to employees are on the rise.  Laws were passed in Seattle, Philadelphia, Connecticut, San Francisco, and Washington D.C. in 2012.  New York, Massachusetts, Miami, and Portland (OR) are just some of the jurisdictions considering passage in 2013. Be prepared for this legislation.  You will be worried about cost; however, some studies cite that the cost is minimal.  The yearly average number of sick days per employee is three.

Worker Misclassification
More active enforcement efforts are expected from the IRS and the US Department of Labor (DOL) in 2013 with regard to the misclassification of workers as independent contractors. Pending legislation at the state and federal levels, as well as executive orders at the state level establishing dedicated task forces to look at this issue, continued throughout 2012. Legislative reform as part of the resolution for the fiscal cliff is also expected to include provisions that would impose harsher financial penalties on employers who misclassify their workers. Further national and regional enforcement efforts/initiatives specific to industries in lower wage sectors, such as hospitality and construction, are also anticipated in 2013.

Ensure you are properly classifying your workers using this link from the IRS. You can also read more about this topic in our previous article here.

Equal Employment Opportunity Commission (EEOC) – Background Checks
In 2012, the EEOC released new guidance attempting to restrict the use of criminal background checks for new hires.  New laws restricting what employers can find out behind the scenes about their applicants and employees during credit report background checks are on the rise. Vermont became the eighth state to pass such a law in 2012, joining California, Connecticut, Hawaii, Illinois, Maryland, Oregon, and Washington.

The Equal Employment Opportunity Commission (EEOC) addressed in detail how an employer can use criminal record checks in employment decisions. While the EEOC has always cautioned employers not to use such records to disqualify employment across the board, they also provided guidance on how to use criminal record check information in employment decisions without violating Title VII of the Civil Rights Act or leading to discrimination claims. The EEOC recommends that employers:

  • Use criminal background check information in a neutral manner so as not to screen out applicants who are classified as “protected classes,” based on race and national origins. This can best be achieved by asking three questions:
    1. What is the nature and gravity of the criminal offense?
    2. How long has it been since the applicant committed the offense?
    3. What is the relationship between the offense committed and the job’s requirements?
  • Determine if there are mitigating circumstances regarding any information provided by the criminal records check. This can be accomplished by giving the applicant an opportunity to explain and demonstrate why the information discovered in the background check should not disqualify the applicant from the job.
  • Eliminate policies that bar employment based on any criminal records regardless of context.
  • Train hiring managers about Title VII and how to apply it to a criminal records check policy.
  • Create a policy that matches the job requirements and the offenses that potentially disqualify an applicant from a job.

Social Media Password Laws
There has been a proliferation of laws that seem to have sprung up out of nowhere in 2012 and threaten to go viral in 2013.  Three states (California, Illinois, and Maryland) passed laws preventing employers from accessing their employees’ Facebook accounts (and other social media sites).  This trend will likely continue so expect the spread of this law in 2013.

Employers need to be aware of the use of social media in the workplace.  At the very minimum, eliminate any employee expectations of privacy for personal social media activity on company computers. As a proactive measure, and particularly If you are concerned about social media use in your company, it may be time for a social media workplace policy.

Response to Natural Disasters
Hurricane Sandy created the most havoc our country has seen since Hurricane Katrina in 2005 and served as a preparedness wake up call for employers. As a small business owner, any disaster can be devastating and most small business do not properly plan and prepare for disaster situations. According to the Institute for Business and Home Safety, an estimated 25 percent of businesses do not reopen following a major disaster. If you have not done so, make it a priority to:

  • Preserve your data by utilizing cloud computing.
  • Maintain redundant data storage; maintain crucial documents at an alternative location for protection, avoiding a location close to your business.
  • Adhere to retention guidelines for materials such as tax returns, business filings, and other financial documents.
  • Ensure that your key vendors have adequate processes to ensure uninterrupted service in the event of extreme weather or other unforeseen circumstances.

This link will give you additional advance planning tips: www.preparemybusiness.org

Unemployment Discrimination Laws
Can you be sued because you chose not hire someone who is unemployed? It will become increasingly possible as jurisdictions follow the leads of New Jersey, Oregon, and Washington D.C. who all passed new laws prohibiting some form of unemployment discrimination in 2012.  All in all, seventeen states considered this type of law in 2012, so you can expect the list to grow in 2013. In the meantime, do not disqualify candidates because they do not currently have a job.

Medical Marijuana Laws
These laws are spreading across the country adding Connecticut and Massachusetts in 2012.  There are now 18 states with some form of legislation allowing medicinal marijuana, and while most employers are offered some level of protection through rule or court decision, the laws create some sticky situations.  Expect to see more states added to this list in 2013. If the law goes into effect in your state, at the very least, small business policies regarding drug testing will need rewriting if management wishes to demonstrate empathy. For employees who are under medical supervision and prescribed marijuana for medicinal reasons, it wouldn’t be fair to maintain the same harsh, zero-tolerance positions.

Cyber Fraud
Small businesses are particularly vulnerable to cyber fraud as they may lack the resources to implement sophisticated security measures. Federal anti-cyber fraud legislation is a distinct possibility to better protect the nation’s critical infrastructure against hackers and other criminals. Many states are also likely to further expand/strengthen regulations requiring businesses to employ adequate security over confidential personal and medical information.

While there are numerous technological steps small businesses can take to better secure their environments and IT infrastructure, controls alone are not effective in combating cyber fraud. Small business owners must also take steps to create a “culture of security” among both their employees and customers.

Below are five technological and cultural adjustments you can make to better defend your company against the myriad threats posed by cyber crime.

  • Perform a Risk Assessment: Analyze online and operating systems to determine the areas most at risk.  For example, is your customer data, internal accounting information, and other sensitive data linked to the Internet?  As part of this risk assessment, you should ensure that updated anti-virus programs, anti-spyware programs, and firewalls are installed on all computers and that employees are required to change their passwords every 60 to 70 days.
  • Back-Up Critical Information: Establish a schedule to perform critical data backups and system upgrades on a regular basis throughout the year. Creating back-ups on a regular basis ensures that critical data is not lost in the event of a cyber attack or natural disaster. Store all backup copies in remote locations away from the office, such as on an external hard drive, and encrypt any sensitive data about company or customers.
  • Develop a Contingency Plan: Draft a contingency plan to follow if the business suffers a cyber attack. This plan should include steps on how to continue business operations at an alternate location when necessary.  Be sure to test the plan annually.
  • Educate Employees: In order to create a culture of security, you must demonstrate to employees and customers that cyber fraud is a concern you take seriously.  This involves educating employees and training them on proper internet practices and technology solutions, as well as encouraging customers to protect themselves against cyber fraud.
  • Implement a Security Agreement: Require employees to sign a security agreement to demonstrate that they are active participants in helping to maintain a secure online environment.  This agreement should also require employees to report any suspicious online activity or known internet crime to the proper authorities.

Conclusion
The legal and regulatory environment is always changing. Keeping abreast of updates and making a good faith effort to keep compliant is essential. Knowing the trends and areas of focus by regulatory bodies can help you proactively address high risk areas for your business. Remember to round out your compliance plan by checking with the states where you do business for additional changes in employment laws and regulations. Be sure to work with an employment attorney as this article does not constitute legal advice.  Always seek counsel from a local HR professional to help navigate situations and to help develop new policies and practices.

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This content was developed for the PHCC Educational Foundation by TPO, Inc. (www.tpo-inc.com). Please consult your HR professional or attorney for further advice, as laws may differ in each state. Laws continue to evolve; the information presented is as of November 2012. Any omission or inclusion of incorrect data is unintentional. Please note this article is not intended to provide legal advice or to substitute for supervisor employment law training.

The PHCC Educational Foundation, a partnership of contractors, manufacturers and wholesalers was founded in 1987 to serve the plumbing-heating-cooling industry by preparing contractors and their employees to meet the challenges of a constantly changing marketplace. If you found this article helpful, please consider supporting the Foundation by making a contribution at http://www.phccfoundation.org.

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