Protecting Your Business as I9 Audits Increase

Here it is, another article aimed at keeping your business out of trouble.  Boring.  After all you didn’t open your club to worry about forms and regulations.  We get it; that’s why GYM HQ exists!  But if there is one thing that we know business owners hate more than boring paperwork, it’s paying large fines to Uncle Sam.  So, consider this your heads up for what’s coming this summer.

Immigration and Customs Enforcement (ICE) wants employers to understand that, going forward, the agency will increase Form I-9 audits, conduct more worksite raids and promote involvement in the government's voluntary compliance program (E-verify).  Under the current administration, audits are expected to go up 4000%.  It’s also important to note that civil penalties associated with violations have increased.  Current penalties are between $224 and $2236 per violation (employee).  Now more than ever, it is important that employers ensure that Form I-9’s are being completed accurately and on time for each new employee.

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So what can you do to prepare?  First, ensure that any employee hired moving forward has a proper I-9 completed.  Here are some of the most common mistakes:

  • The employee not checking a status box or checking more than one status box
  • The employee not signing or dating the I-9
  • Not completing List A, B or C correctly or not completing at all
  • Attaching documents as a substitute filling out section 2.
  • Not using the updated version of the form
  • Not filling in the employee’s hire date in the Certification section
  • Not completing the Business/Organization name and address section completely
  • Filing Form I-9 with the government. Form I-9 is meant to be kept by the business in case an audit is conducted. Should an employee leave the company, the business must retain the forms for a period of up to three years from the date of hire or one year after the employee's final day, whichever is longer. 

Note: Form I-9 cannot be utilized in any capacity prior to making a job offer to a potential employee. Doing so could violate restrictions regarding discrimination against workers based on their ethnicity, race or other identifying factors. 

Remember, the few minutes you spend reviewing the I-9 could potentially save you thousands of dollars in the future!

Next, conduct an audit of what you have on file for current staff.  If you’re missing an I-9 for an employee, ask the employee to complete Section 1 of the I-9 immediately and present documentation as required in Section 2. The new form should be dated when completed—never backdated. If an employee has been working without documentation authorization, this could be because an I-9 form was not properly completed in the first place, or because the employee’s work authorization has expired. If this is the case, notify the employee (in private) of the discrepancy.

You should provide the employee with a copy of the I-9 and any accompanying paperwork. Then ask the employee to provide correct or updated documentation. In either case, if an employee cannot present proper documentation, you should terminate the employee immediately. If you don’t, you risk penalties for “knowingly” continuing to employ an unauthorized worker. Be sure to apply this strict termination policy consistently to avoid potential claims of discrimination.

You may not correct errors or omissions in Section 1 of the form. If you discover a problem in Section 1, ask the employee to make the correction. Employers may only make changes in Section 2 or Section 3 of the I-9.

Employees needing assistance to correct or enter information in Section 1 can have a preparer or translator assist them.

In either case, the individual making the correction should:

  • Draw a line through the incorrect information;
  • Enter the correct or omitted information;
  • Initial and date the correction or added information.

The time you take now to review your personnel files and ensure a solid process for reviewing the I9 when onboarding new team members will more than pay off should you face an audit! 

Need help with HR or payroll? Let us know. We help thousands of fitness owners nation-wide navigate the less than fun aspects of their business!

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Employee Recognition and Rewards Part III: Creative Ideas From Top Companies

As promised, our third and final article on employee recognition highlights businesses successfully utilizing non-traditional methods of rewards and recognition.  While some of these may not be a great fit for your business model, I hope they encourage you to think creatively when contemplating a recognition program for your team. 

Bonusly

Bonusly is an employee recognition software that allows employees to award points to their peers.  Peer-to-peer recognition is very impactful and will likely become increasingly important as younger generations move into the workforce over the coming years.  Bonusly pairs P2P with a social network platform which is also a win with the younger elements of the workforce.  Points are redeemable for gift cards and prizes from major retailers like Uber, Nike and Starbucks.  A few companies using Bonusly: Hulu, Chobani, SurveyMonkey, Oracle and ZipRecruiter.

Flexible Hours

Dallas Web Design Inc. uses flexible working schedules as a way to motivate staff to become better.  They claim an 80% increase in productivity!  According to a 2016 Gallup survey, 51% of employees said they would change jobs for one that allowed them to work more flexible hours, while 37% would change jobs if they could work from where they want at least part of the time. Job seekers are demanding a flexible work environment, and if you don’t offer that in 2018, you will lose talent to your competitors who are. Use this as a perk for top performers who can be trusted with remote work or handling a non-traditional schedule.  Keep in mind, this may not work for all staff who must be onsite to directly interact with members/clients.

Training Responsibilities

At GYM HQ, we made our own employees subject matter experts in designing our employee training program.  We asked our top performers to assist in developing our onboarding process for new hires.  This practice fulfills two functions: recognizing the employees for their strengths and developing our company-wide training program.  It also allows employees to be exposed to additional functions and responsibilities which is vital for employee growth and development. 

Create a Company Mascot

At Moncur, they have a biweekly employee award program where team members pass a little wooden statue they call Peggy to another member who has done outstanding work or showed incredible acumen.

Being a digital and creative agency, they take it to the next level by requiring each member to dress Peggy up in a style that reflects the awardee and encouraging them to post her “adventures” on a designated Instagram channel.

Access to the Leadership

Many leading companies such as Whole Foods and CarMax, open up access to their senior leaders for all employees.  Whether its town hall meetings, cookouts, or visibility into company decisions, it’s clear that employees crave this access.  Consider sharing more that you’re comfortable sharing if you want your employees to commit to the cause.  One of your future members of leadership is likely sitting amongst your current ranks.  Access to senior leadership is one way to ensure the right exposure is happening long before succession planning is even a thought.

Milestones

Recognizing employee anniversaries is still important.  At Groupon, instead of the traditional certificate or pin, yearly milestones are recognized with a top-of-the-line, bright green Adidas track jacket. Employees can even personalize their jackets with unique nicknames and receive star patches for each additional year at the company.  These personalized jackets are great daily reminders to new staff of what they’re striving for and a source of pride for veterans. 

The take away after three articles on recognition is that your company should have a program!  From a team to 5 to a team of 5000, recognition is important.  It helps retain and attract the best talent, sets you apart from your competitors, and encourages a positive, perhaps even fun (gasp!) work environment.  There’s a reason why the top 100 companies to work for are just that.  Employee perks, programs, environment and recognition all play a part in employees being excited to go to work every day!

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Understanding Employee Classification (Exempt vs. Non-Exempt)

Aside from guidance on the use of 1099 Independent Contractors, exempt vs. non-exempt employee classification is perhaps the most popular topic amongst fitness business owners that our HR team fields here at GYM HQ.  Tracking and keeping accurate records of employee time can be a substantial administrative burden; so the draw to pay someone a salary and throw caution to the wind is strong! It’s also very enticing to demand work of a team member in excess of 40 hours a week (or 8 hours a day in California) without the need to pay them additional compensation. Today we review the vital steps for employee classification to keep you in compliance and out of hot water.

Are they an employee?

First, let’s tackle the question of 1099 Independent Contractor vs. W2 Employee.  Review our previous article for guidance on that topic here.  Spoiler alert, I’d wager you have yourself an employee. 

Salary Basis & Threshold

Next, let’s talk pay.  Employees must be paid on a salary basis and at not less than $455 per week or two times the state’s minimum wage, whichever is higher, to qualify for an exemption.

Being paid on a “salary basis” means an employee regularly receives a predetermined amount of compensation each pay period.  The predetermined amount can’t be reduced because of variations in the quality or quantity of the employee’s work.  Subject to the exceptions listed below, an exempt employee must receive the full salary for any week in which the employee performs any work, regardless of the number of days or hours worked.  Exempt employees do not need to be paid for any workweek in which they perform no work.  If the employee is ready, willing and able to work, deductions may not be made for time when work is not available.

Deductions from pay are permissible when an exempt employee: is absent from work for one or more full days for personal reasons other than sickness or disability; for absences of one or more full days due to illness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness; to offset amounts employees receive as jury or witness fees, or for military pay; for penalties imposed in good faith for infractions of safety rules of major significance; or for unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions.  Also, an employer is not required to pay the full salary in the initial or final week of employment, or for weeks in which an exempt employee takes unpaid leave under the Family and Medical Leave Act.

Once you’ve determined that the employee’s compensation passes the salary basis and level tests, your next step is to take a look at their regular duties.

 Duties Test

The employee should fit squarely into one of the exemption categories below:

For the executive exemption, employees must have a primary duty of managing the business or a department or subdivision of the company; must customarily and regularly direct the work of at least two employees; and must have the authority to hire or fire, or their suggestions and recommendations as to the hiring, firing or changing the status of other employees must be highly considered. 

For the administrative exemption, employees must have a primary duty of performing office or non-manual work directly related to the management or general business operations of the employer or the employer's customers, and their primary function must include the exercise of discretion and independent judgment with respect to matters of significance.

For a professional exemption, employees must have a primary duty of work requiring knowledge of an advanced type in a field of science or learning customarily acquired by prolonged, specialized, intellectual instruction and study, or must specialize in a few other similarly, highly specialized fields, such as teaching, computer analytics, and engineering.  Aside from a select few members of a corporate team (legal, accounting, etc.), this exemption is rare in the fitness industry.

Examples:

An Assistant Fitness Manager may be one of several employees who direct the day-to-day activities of other team members but may have no discretion as to whether to hire or fire employees.  He may spend more than half of his time selling training packages, assisting members, or doing other routine tasks that require little or no discretion and independent judgment.  Even if he were to meet the requirements of the salary basis and salary threshold tests, he would not qualify for an exemption because he would not meet the duties test requirement.

 A General Manager oversees the entire club’s operations (often with little interaction from ownership for days on end).  She is tasked with managing the entire staff (hiring, firing, coaching, scheduling) and making decisions which significantly impact the business.  Though she may also engage in sales or menial administrative or manual tasks (cleaning, paperwork, etc.), she clearly passes the duties test under two both the executive and administrative exemption.

Owners often wonder what the consequences would be if they are found to be misclassifying their team members.  There is a litany of legal cases which point to how severe and costly these consequences can be. In 2011 Levi Strauss agreed to pay over $1 million in back pay to 596 (12%) of its employees who were improperly classified and therefore not paid overtime. In 2014 US Bank settled a misclassification suit for $1.9 million. After seven years of litigation, 24 Hour Fitness settled a misclassification case in 2013 for $17.4 million.  They’d previously settled another wage and hour class action in 2006 for $38 million.  These figures and cases are tied to very large businesses, and it’s sometimes challenging for a single club owner to correlate that to the impact he’d see for his company.  Here’s the easiest way to look at it, when has anything involving hiring a lawyer or law firm ever been less than costly?  Wage and hours claims are one of the most common for small businesses and aside from any money paid out to the claimant, are very costly to defend. How much are you comfortable dishing out to defend a claim?  How sure are you that you have a strong defense?  Is your team currently classified correctly?  As the old adage says, “An ounce of prevention is worth a pound of cure.”  Or in this case, an ounce of preparation (doing things right starting now) is worth a pound of defense.

 

Employee Recognition Part II: Who's Your MVP?

While installing a rewards and recognition program does take effort, it need not be overly complex or time-consuming.  And the positive effects are invaluable!  Think of recognition as a communication tool which helps to reinforce the behaviors and outcomes your organization values most.  It provides a pathway for you to say, “YES, that’s exactly what we’re looking for.  Do more of that!” This article is the second in a short series on Employee Recognition and Rewards. Today we focus on two ideas that bridge the gap between the old-school and the new.  In a workplace that consists of several generations simultaneously, it’s important that your program speaks to everyone!

First the old tried and true Employee of the Month.  The calendar naturally provides us with 12 smaller times frame during which to measure success.  Dedicate a few moments each month to recognize one outstanding team member and crown them your MVP.  This team member should be recognized in front of the entire team (at a meeting or morning stand-up).  Make sure to clearly outline why this person is such a vital part of what makes the company great and how their actions contributed to success during the month.  Complete the recognition with a certificate and reward (bonus, gift card, prize pack, etc.).  This adds a formality to the presentation and makes it feel “official.”  Consider a wall of fame to showcase the current month’s MVP as well as past superstars.

Formal monthly appreciation is great, however, while the month flies by, don’t forget to give out praise DAILY as opportunities arise!  The best leaders don’t make team members wait to let them know they’re doing a great job.  They recognize achievement as it happens.  So, while you may be keeping score internally for your monthly MVP, don’t forget to give frequent pats on the back when any team member exemplifies your brand ethos, hits a milestone, or goes above and beyond.  The best part about daily praise is it’s free!

While your younger team members will undoubtedly appreciate being recognized via the non-digital channels above, don’t forget to speak to them in their language as well and hit social media.  Your Facebook, Twitter, Instagram, and the company website is a great platform to broadcast “shout-outs” to a much broader audience.  Hit millennials with praise where they live!

Your company homepage and blog are prime real-estate.  Dedicate a portion of them to your hard-working employees.  Use these areas to highlight team members and provide their backstory (accenting their passions and unique life histories).  This not only allows for recognition but also showcases your valuable team to your clients and potential clients.  After all, for most fitness businesses, people are the number one differentiator! 

Don’t forget social media!  Nothing is better than watching a post on which you’re featured rack up likes and shares.  This will help supplement your in-person efforts and ensure everyone sees the contributions your team members are making.  This is especially important if your team works in multiple locations or you have remote staff. 

Next month we’ll conclude our employee recognition series with a curated list of non-traditional methods of recognition being successfully used by top companies.  Get ready to think outside of the suggestion box!

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Understanding the Family Medical Leave Act (FMLA)

If you’re like most employers, you’re aware that there is a Federal Medical Leave Act (FMLA), but since it’s not something that tends to come up a lot in the day-to-day running of your business, that is where your understanding ends. However, as with all employment law, ignorance offers neither bliss or a free pass from the consequences of getting it wrong.  This month, we’ve highlighted some of the key guidelines for the FMLA to keep you compliant.  If you’re a single small studio owner, it’s unlikely you’ll ever be required to comply with the FMLA.  However, if you own a large club or cluster of clubs or studios, this article will help prepare you to meet these requirements confidently. 

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FMLA refers to the Family and Medical Leave Act, which is a federal law that guarantees certain employees up to 12 workweeks of unpaid leave each year with no threat of job loss. FMLA also requires that employers covered by the law maintain the health benefits for eligible workers just as if they were working.

Covered employers must grant FMLA leave for one or more of the following situations:

  • The employee cannot work because of a serious medical condition.
  • The employee must care for an immediate family member that has a serious medical condition.
  • The birth and/or subsequent care of the employee's child.
  • The placement and/or subsequent care of an adopted or foster care child.
  • A "qualifying exigency" that arises out of the fact that the employee's spouse, child or parent is on active duty or has been called to active duty for the National Guard or Reserve in support of a contingency operation.

Eligibility

Employees are eligible for leave if:

  • They have worked for their employer at least 12 months (the 12 months don’t need to be consecutive but should not be separated by more than 7 years);
  • At least 1,250 hours over the past 12 months;
  • Work at a location where the company employs 50 or more employees within 75 miles.

Under some circumstances, employees may take FMLA leave on an intermittent or reduced schedule basis. That means an employee may take leave in separate blocks of time or by reducing the time he or she works each day or week for a single qualifying reason. When leave is needed for planned medical treatment, the employee must make a reasonable effort to schedule treatment so as not to unduly disrupt the employer's operations. If FMLA leave is for the birth, adoption, or foster placement of a child, use of intermittent or reduced schedule leave requires the employer’s approval.

Under certain conditions, employees may choose, or employers may require employees, to "substitute" (run concurrently) accrued paid leave, such as sick or vacation leave, to cover some or all of the FMLA leave period. An employee’s ability to substitute accrued paid leave is determined by the terms and conditions of the employer's normal leave policy.

Requesting Leave

Employees must comply with their employer’s usual and customary requirements for requesting leave and provide enough information for their employer to reasonably determine whether the FMLA may apply to the leave request. Employees generally must request leave 30 days in advance when the need for leave is foreseeable. When the need for leave is foreseeable less than 30 days in advance or is unforeseeable, employees must provide notice as soon as possible and practicable under the circumstances.

When an employee requests FMLA leave due to his or her own serious health condition or a covered family member’s serious health condition, the employer may require certification in support of the leave from a health care provider. An employer may also require second or third medical opinions (at the employer’s expense) and periodic recertification of a serious health condition.

Employee’s Return to Work

Upon return from FMLA leave, an employee must be restored to his or her original job or to an equivalent job with equivalent pay, benefits, and other terms and conditions of employment. An employee’s use of FMLA leave cannot be counted against the employee under a “no-fault” attendance policy. Employers are also required to continue group health insurance coverage for an employee on FMLA leave under the same terms and conditions as if the employee had not taken leave.

 Next steps for your business:

  • Develop a sound policy.  Include a written and current policy your handbook and be sure to clarify how the use of paid vacation, sick, or personal time when FMLA is requested.
  • Train manages.  Your management team will be the ones fielding questions regarding FMLA.  They’ll need to understand how to respond to FMLA requests without violating the employees’ rights or the law’s anti-retaliation provision. 
  • Carefully review all requests to prevent fraud and abuse.  Don’t merely accept vague medical information.  If things are unclear, ask for clarification from the medical provider.
  • Give termination decisions a thorough review.  Reasons for termination must be unrelated to illness or a request for FMLA leave, and these reasons must be clearly documented.  Otherwise, you set yourself up for a retaliation or discrimination claim. 
  • Be aware that some states (11 currently) have their own versions of the FMLA:  CA, MN, VT, CT, NJ, WA, HI, OR, WI, ME, RI.  If you operate in any of these states, make sure you research and integrate their specific laws.

As with most legal guidelines, if you have questions or are unsure about anything, get help.  Your lawyer or a certified HR professional can help clear up any doubts.

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Business Back-Office Trends for 2018

What a difference a year makes.

Last January I put together a list of the top 10 mistakes gym owners make to kick off the new year.  While the vast majority of the items on this list still ring very true (you should review all 10 here), we find ourselves heading into 2018 with several very new areas of focus to add to this list. Here is what’s trending for 2018.

Pay Equity

In 2017 more and more states adopted a ban on previous salary questions on applications and during job interviews.  This trend is likely to continue this year. The intent is to eliminate the influence of gender and race on the wage-setting practices of businesses.  According to the Institute for Women’s Policy Research, “Women are almost half of the workforce. They are the sole or co-breadwinners in half of American families with children. They receive more college and graduate degrees than men. Yet, on average, women continue to earn considerably less than men. In 2015, female full-time, year-round workers made only 80 cents for every dollar earned by men, a gender wage gap of 20 percent.

Women, on average, earn less than men in nearly every single occupation for which there is sufficient earnings data for both men and women to calculate an earnings ratio. In middle-skill occupations, workers in jobs mainly done by women earn only 66 percent of workers in jobs mainly done by men. IWPR’s report on sex and race discrimination in the workplace shows that outright discrimination in pay, hiring, or promotions continues to be a significant feature of working life.”  This disparity in pay is still very prevalent for minorities as well.  It will take the next 44 years for women to reach pay equality, but Hispanic women will have to wait another 215 years and black women another 106 years based on IWPR’s research.

Other trends emerging in this arena are blind hiring and pay transparency initiatives.  Many companies are employing techniques that anonymize or “blind” demographic information for a candidate during the initial screening process. Pay transparency policies are becoming increasingly popular and more businesses (e.g., Google, Whole Foods, and Buffer) have begun to display salary info next to job postings or even lifting the lid on what employees within the company earn. This practice pushes businesses to do a better job explaining how pay rates are set.

Paid Sick & Family Leave

 Several years ago only a few states had mandated paid leave specific to personal time for illness or family care.  This is changing.  Eight states and Washington D.C. currently require paid sick leave (AZ, CA, CT, MA, OR, RI, VT, WA, and DC).   Moreover, five states and DC have paid family leave (CA, NJ, WA, NY, RI, and DC).  2018 will likely bring additional states to the table, and there is growing pressure to refine and implement a national program.  

Employers should be mindful of changes in their state’s requirements and ensure, where required, proper accruals and tracking are in place for their employees.  Failure to comply can come with stiff penalties.

Sexual Harassment Training

 Unless you’ve been under a rock for the last several months, you have undoubtedly already recognized that ensuring a safe and harassment-free work environment for ALL team members is more important than it has ever been.  From a risk management perspective, ensuring you have a comprehensive sexual harassment policy in place is imperative.  However, having a policy in your handbook is not enough.  Training of management and all staff on a consistent basis takes the necessary next step to ensure your team is well-versed in your policy, and your management team is capable of properly tackling issues as they arise.  Policy is all but useless without buy-in from your team and consistent application by your managers.  Not only is this the smart thing to do, any owner worth their salt should see the importance of their team feeling safe and comfortable while performing their job duties.

Privacy

The fitness industry has a somewhat spotty track record and a tendency to lag behind other sectores when it comes to the adoption of technology.   It is incredible to me how many clubs are still utilizing paper agreements!  However, the tide is turning, and even in our industry automation and paperless everything is becoming the norm.  With better tech solutions available, we find ourselves faced with a new dilemma, ensuring our members’ data remains private and safe.  Data security breaches are becoming more commonplace even at seemingly well-protected organizations (see the Equifax debacle), and legislation is rapidly being written to combat this issue and force companies to take additional protective measures.  A recent example of this type legislation is the EU’s General Data Protection Regulation (GDPR) which goes into effect May 2018.  Even if your business is 100% US-based, the GDPR may still affect you.  Say you sell a temporary pass or membership to an EU citizen; you may be held accountable for complying with the GDPR rules.  These include provisions on encryption of data, tighter definitions of consent, and a broader view of what constitutes personal data.  It even codifies a “right to be forgotten” so individuals can ask a business to delete their data. 

While there are still many questions surrounding this new law and its application for US businesses, it is certainly worth a place on this list and your radar for early this year.  As with most regulations, failure to comply carries massive penalties.

The most important thing to remember is that the climate is ever-changing when you own a business.  Having a solid back-office team in place and having access to expects is vitally important.  When the stakes are so high, there is no room for guessing.  Have a safe and prosperous 2018!

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Santa's Naughty List, Fitness Business Edition

Twas the night before Christmas, and all through the gym,

Memberships weren’t selling, and margins were thin.

Year-end deadlines were looming in the cold winter air,

In hopes that miracle revenue soon would appear.

You know the old poem.  And hopefully, the above scenario doesn’t apply to you.  Perhaps you are swimming in the black and 2017 has been a banner year.  Or maybe you’re hoping 2018 will be your year.  Whatever your scenario, we’d be remiss if we didn’t provide you with an annual list for contemplation.  After all, we’re fast approaching the month of months for lists, goals, and positive change.  While we can still hear sleigh bells, let’s close out 2017 with one final, holiday-themed, post.  Here are is our list of five things that will land you on Santa’s naughty list.

Not Paying Your Taxes or Paying Them Late

This one seems like a no-brainer, but you’d be surprised how often we’ve had to intervene to assist an owner in resolving taxes that haven’t been filed or paid.  Most of the time the misstep isn’t willful, but the state and federal governments aren’t very forgiving of even the most innocent of mistakes.  Late payment penalties and interest really rack up!  For example, say you file your federal business taxes three months after the April 15th deadline.  Your penalty would be five percent of the unpaid taxes for each month or part of a month your tax return is late.  If your gym owed taxes of $30,000, your fine would be $4,500!  Remember, each state also has their naughty list fines.

The worst idea for solving for a cash shortage is to delay paying the IRS the employees’ withholding amounts from payroll.  Unfortunately, we’ve seen this before after taking over the back-office for a business.  They were never able to get ahead of the sins of their past and ended up closing their business.  What’s worse than shutting your doors?  Dealing with the IRS for the foreseeable future.  This is a big no-no that can cost an owner their personal assets and often carries criminal sanctions. 

Employee Misclassification, Independent Contractors

We get it; the urge to pay out wages via the much loved and regularly abused 1099 is real.  After all, you save on employer taxes, and there are no pesky state and federal quarterly reports to file.  Heck, you don’t even need to use payroll software!  But 99% of the time this is a great way to find yourself on the wrong side of the IRS and state.  Very, very rarely are you ever legally justified in paying your team anything other than W2 wages.  See our previous article on this.  The fines are stiff and criminal charges can apply.

Employee Misclassification, Exempt vs. Non-Exempt

The guidelines on who may be compensated via salary and not track time are fairly ironclad.  Be careful here, or you’ll find yourself faced with the gift of a wage claim lawsuit.  It’s the gift that keeps on giving (hire a lawyer) and giving (rack up a healthy legal bill) and giving (pay out a huge settlement or judgment).  Read more on employee classification here.

Incurring a Ton of Debt with the Hope of Future Revenue

The tried and true advice to never to count your eggs before they hatch is timeless financial wisdom.

So is the exercise of prudence when it comes to credit cards and lines of credit. While using credit cards responsibly is a normal business practice, it also exposes you to the risk of deep debt if mismanaged.

Because credit cards are so convenient to use, many new business owners fail to see that they're compounding their expenses and incurring interest charges every time they leverage their credit line and don't pay off the full balance each month.  See more big money mistakes like this here.

Trying to Do It All

The greatest mistake business owners make is believing they can do it all by themselves. While you can do almost everything, you end up doing almost everything poorly. Just like any other person, you likely have one or two natural talents. As an entrepreneur, it is your job to identify those talents and focus on them to your fullest. Surround yourself with people who are strong where your talents are weakest. Great companies are built on the foundation of exploiting a few strengths, not on trying to be masters of everything. 

 

Need some help?  What’s on your help wish list this holiday season? Now is the time to make a change for 2018.  GYM HQ can take many necessary, but very time-consuming tasks off your hands next year.  Imagine having payroll, accounting (from all your financial reports to payables), business registrations, HR documentation and compliance, member issue resolution and late membership dues management all taken care of by your new back-office, GYM HQ!  We can be here for all of that and much more—like making sure you don’t make any of the mistakes on this list!  Visit our site today to learn more!

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ACA Reporting Requirements for 2018

If you’re like many business owners, your attention span and patience for understanding the current Affordable Care Act (ACA) requirements wore thin long ago.  Will it be repealed? Replaced? What changes will we see? What are you required to do under the current legislation?  The only thing that may seem clear at this point is that nothing is clear!  Meanwhile, the IRS has announced that it is still moving forward with ACA reporting on the 2017 tax year with the 2018 deadlines. During the first week of October 2017, they published final forms and instructions to help employers prepare for reporting on health coverage they offered to their employees in the 2017 year. While Congress hurls daggers back and forth across the aisles, we’re here to arm you with the latest guidelines and reporting requirements so you may prepare for year-end 2017. 

ACA Reporting Deadlines for 2018

FORM 1095-C and FORM 1095-B

Due to employees Wednesday, January 31, 2018

Employers are responsible for furnishing their employees with either Form 1095-C or Form 1095-B by Wednesday, January 31, 2018. Employers are still responsible for filing copies with the IRS by Wednesday, February 28, 2018, if filing by paper or Monday, April 2, 2018, if filing electronically (same as Form 1094-C or Form 1094-B). 

Which do you file?

Companies providing minimum essential coverage to an individual during 2017 must file an information return reporting the coverage. If an employer had at least 50 full-time employees, including full-time equivalent employees (FTEs) on average, the employer is considered an Applicable Large Employer (ALE), is subject to the Employer Shared Responsibility Provisions of the ACA, and is required to file Form 1095-C.  Employers with fewer than 50 FTEs are not subject to the shared responsibility provisions.  If no minimum essential coverage was provided to employees, no reporting is required.  If coverage was provided, Form 1095-B should be filed.

These forms help employees complete their individual tax returns by providing important information regarding their health coverage for the previous calendar year. On Line 61 of individual tax returns, employees must show whether they or their family members had minimum essential coverage.

Employers should report the following:

  • Proof of Minimum Essential Coverage (MEC)
  • Employee ID number
  • Social security numbers of the employee and his/her dependents (not spouse)

FORM 1094-C and FORM 1094-B

Due to the IRS via paper: Wednesday, February 28, 2018

Due to the IRS electronically: April 2, 2018

This form functions as “proof” that Applicable Large Employers (ALEs) provided the coverage they were required to under the Employer Shared Responsibility Mandate. It also functions as the cover sheet used to transmit forms 1095-C or 1095-B to the IRS.

ALEs with more than 250 full-time equivalent employees (FTEs) are required to file electronically.  Those with fewer than 250 may file on paper or electronically.

Employers with less than 50 FTEs who voluntarily provided minimum essential coverage and therefore filed Form 1095-B for all covered employees, should also file Form 1094-B.

FORM 8809 (Extension Request)

Employers who expect to miss the stated deadlines should file for an extension.  To apply for an extension, submit FORM 8809 on or before the due date. 

PENALTIES

Failure to file complete and accurate Form 1094-C or Form 1094-B by the form deadline will result in penalties equal to $250 per form, not to exceed $3 million per year. Failure to file and furnish correct information on Form 1095-C or Form 1095-B could result in a $500 per form penalty for employers.

Since the required reports are somewhat time-consuming to complete manually, consider outsourcing the process to a 3rd party.  GYM HQ utilizes Paychex as our preferred payroll platform for our clients.  They offer ACA reporting as an add-on service.  This is a great way to ensure that reports are accurate and timely.  If you’re preparing the filings in-house, start preparing now. 

  • Ensure you understand how to complete all the required forms.  Instructions can be found on the IRS website.
  • Start determining the reporting you’ll need to pull from your payroll software and benefits website in order to complete the required forms.  Sometimes this involves building out custom reporting. 
  •  Determine if you qualify as an Applicable Large Employer (ALE). See our guide on this.

 

  • Start communications with your staff on what they should expect.  Three primary messages to convey are: what form they’ll receive (Form 1095-C or 1095-B), why they should care (information is needed to file their taxes), and when they should expect to receive this form (by January 31st).
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ACA Requirements: Are You Considered a Large Employer?

As you gear up for year-end and all the important reporting requirement hoops through which you’ll need to jump, now is the perfect time to start getting prepared for compliance in 2018!  Time spent preparing now will make year-end 2018 a breeze. In the meantime, we still have 2017 to consider. Over the next several weeks, we’ll post helpful articles to aid you in the process.  First up, the Affordable Care Act. One of the biggest reporting and compliance demands comes courtesy of the ACA.  As we head into year two of the full reporting requirements, one of the first items you’ll need to determine is if your business qualifies as an Applicable Large Employer (ALE).  Two of the ACA provisions apply only to ALEs:

  • The Employer Shared Responsibility Provisions; and
  • The employer information reporting provisions for offers of minimum essential coverage (MEC).

Your determination as an ALE happens yearly and depends on the average size of your workforce during the prior year.  If you had fewer than 50 full-time employees, including full-time equivalent employees (FTEs), on average, during 2016, you wouldn’t be considered a ALE for the 2017. If you had more than 50 full-time employees, including full-time equivalent employees (FTEs), on average, during 2016, you would be considered a ALE for 2017 and be subject to the Employer Shared Responsibility Provisions and the employer information reporting provision. 

To determine your workforce size for 2016, add your total number of full-time employees (30+ hours per week on average or at least 130 hours for the calendar month) for each month of 2016 to the total number of FTEs for each calendar month of 2016.  Divide this total by 12.  If you were only in business for part of 2016, use those months during the calculation and divide by the total number of months you were in business.

An FTE is a combination of part-time employees who, in combination, are equivalent to a full-time employee. To determine your number of FTEs for a month, combine the number of hours for all non-full-time employees for the month but do not include more than 120 hours per employee. Divide the total by 120.  The resulting number is your FTE count.  It should be noted that FTEs are only relevant in determining if you’re an ALE.  If you’re determined to be an ALE, you DO NOT need to offer MEC to part-time employees. 

Example 1 – Employer is Not an ALE

  • Company X has 40 full-time employees for each calendar month during 2016.
  • Company X also has 15 part-time employees for each calendar month during 2016 each of whom have 60 hours of service per month.
  • When combined, the hours of service of the part-time employees for a month totals 900 [15 x 60 = 900].
  • Dividing the combined hours of service of the part-time employees by 120 equals 7.5 [900 / 120 = 7.5]. This number, 7.5, represents the number of Company X’s full-time equivalent employees for each month during 2016.
  • Employer X adds up the total number of full-time employees for each calendar month of 2016, which is 480 [40 x 12 = 480].
  • Employer X adds up the total number of full-time equivalent employees for each calendar month of 2016, which is 90 [7.5 x 12 = 90].
  • Employer X adds those two numbers together and divides the total by 12, which equals 47.5 [(480 + 90 = 570)/12 = 47.5].
  • Because the result is not a whole number, it is rounded to the next lowest whole number, so 47 is the result.
  • So, although Company X has 55 employees in total [40 full-time and 15 part-time] for each month of 2016, it has 47 full-time employees (including full-time equivalent employees) for purposes of ALE determination.
  • Because 47 is less than 50, Company X is not an ALE for 2017.

Example 2 – Employer is an ALE

  • Company Y has 40 full-time employees for each calendar month during 2016.
  • Company Y also has 20 part-time employees for each calendar month during 2016, each of whom has 60 hours of service per month.
  • When combined, the hours of service of the part-time employees for a month totals 1,200 [20 x 60 = 1,200].
  • Dividing the combined hours of service of the part-time employees by 120 equals 10 [1,200 / 120 = 10]. This number, 10, represents the number of Company Y’s full-time equivalent employees for each month during 2016.
  • Employer Y adds up the total number of full-time employees for each calendar month of 2016, which is 480 [40 x 12 = 480].
  • Employer Y adds up the total number of full-time equivalent employees for each calendar month of 2016, which is 120 [10 x 12 = 120].
  • Employer Y adds those two numbers together and divides the total by 12, which equals 50 [(480 + 120 = 600)/12 = 50].
  • So, although Company Y only has 40 full-time employees, it is an ALE for 2017 due to the hours of service of its full-time equivalent employees.

Employer Aggregation Rules

You should also be mindful of the Employer Aggregation Rules.  If your company is part of a larger organization or a collective of companies with common ownership and/or functioning under the same management, then the combined number of full-time employees and FTEs for the group are considered when determining ALE status.

New Employers

If you’re a new employer and weren’t in business on any day in 2016, you should use the 2017 calendar year to determine if you’re an ALE.  Consider if you reasonably expect to employ or actually have employed at least 50 full-time employees or FTEs.

Failure to Provide Coverage

What if you qualify as an ALE but fail to offer any MEC to at least 95% of full-time employees? 

If you fail to offer MEC to at least 95% of your full-time employees (and their dependents) and at least one full-time employee receives the premium tax credit for purchasing coverage through the Health Insurance Marketplace, you will be required to pay a shared responsibility penalty.  This payment is equal to $2,000 for each full-time employee, with the first 30 employees excluded from the calculation.  This calculation is based on ALL full-time employees (minus 30), including full-time employees who have MEC under your offered plan.  Example: You employ 62 full-time employees.  One employee receives the premium tax credit when purchasing coverage.  Your fine would be 62 total employees- the first 30= 32 employees for which the penalty applies.  32 x  $2000= $64,000. 

If you do offer MEC to at least 95% of your full-time employees (and their dependents), you may still be liable for the second type of employer shared responsibility payment if at least one full-time employee receives the premium tax credit for purchasing coverage through the Marketplace.  This penalty is equal to $3,000 but only for each full-time employee who receives the premium tax credit.

Minimum Essential Coverage

A plan meets the standards for minimum value if it covers at least 60% of the total allowed cost of benefits that are expected to be incurred under the plan.  Since you likely do not know the household income of your employees, you can rely on affordability safe harbors. These are Form W-2 wages, an employee’s rate of pay, or the federal poverty line.  If you have questions concerning if the coverage you offer meets the MEC standards, consult your insurance broker.

Tax Credits for Small Employers

If you have fewer than 25 full-time employees, including FTEs, you may be eligible for a Small Business Health Care Tax Credit to cover the cost of providing non-mandatory coverage.  Learn more here

Reporting Requirements

All ALEs are required to file Forms 1095-C and 1094-C.  Employers who are not ALEs but chose to provide MEC to full-time employees are required to file Forms 1095-B and 1094-B.  Reporting requirements and deadlines will be discussed in detail in our next article.

 

Interest in learning more about how GYM HQ can help keep you compliant and take some work off of your plate?  Contact us today: info@gymhq.club or 404-921-2269.

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What is your company culture?

Culture is something we talk about quite frequently here at GYM HQ.  When we founded the company, it was very important to us that we always remain a place our employees looked forward to working — a place where they felt appreciated, supported and invested in.  We wanted them to see our vision and care about the mission we were on a much as we did.  Over the last several years, as our client portfolio has expanded, we’ve seen our team grow from 5 to 40 (with new team members being added monthly)!  The growth has been exciting and challenging.  It’s brought with it all the standard pain points growing businesses face: thinking through systems, upgrading tech, and honing in strategy.  But one that caught us a bit off-guard, was the need to actively focus on our culture.   When you have a small team, it’s easy to ensure everyone is on the same page, understands where you’re headed, and feels like an integral part of the mission. When you grow, that message can get muffle, diluted, or lost completely!  It takes a clear and ongoing effort to shape your culture.  In the absence of any meaningful or focused discussion on culture, mission, or core values, an unintended culture will install itself. 

So how does a company go about working on its culture?  First, you must truly believe that working on culture is an important endeavor. It must come from a place of authenticity and an understanding that change can happen and is important.  Once you’ve cleared the thought hurdle, get to work!  Sometimes the hardest part is just getting started.  Below are a few key steps to help you through the process.

Who are we right now?  Start with an audit of where your organization currently stands.  What culture has devolved organically?  An easy way to do this is to simply ask your staff!  Take time to ask them leading questions about who they are, what their career objectives they have, and how they’re fitting into their role with your company.  Starting the conversation with them as the focus makes it much easier to transition into questions about their perceptions of the company’s mission, work environment and vision.  Ask about the business’s current strengths and weaknesses.  What are you as a leadership team doing well and where do you need work?  You’ll walk away from this exercise with plenty of insights for not only your culture project but several process improvement projects!

What do we want to be?  If you could snap your fingers and have the perfect culture, what would it be?  Culture is like a personality.  It is made up of the values, beliefs, underlying assumptions, attitudes, and behaviors shared by a group of people.  If you take the pure dictionary definition, culture is “the manifestation of human intellectual achievement regarded collectively”. It’s the culmination of all your team’s effort boiled down to its essence. 

Take the time to list out your core values.  Here are a few from GYM HQ to help you brainstorm.

RESPECT: We treat our customers and each other with respect.  We keep the golden rule front and center.

COMPETENCE: We are the professionals who know back-office work.  We built trust in our clients by demonstrating competence every day.

CONSISTENCY: Once we decide on a process, we follow it every time.

PASSIONATE: Love what you do, otherwise do something else. 

ONE TEAM: Everyone has an important role.  Understand your role and how you fit into the larger picture.

CREATE YOUR HAPPINESS: Personally, and professionally, you control your own destiny.  No victims.  Your thoughts create your reality.     

Find the disconnect.  If there a big gap between who you want to be and who you currently are, what needs to change to fill the void?  What tools are you missing?  Are there systems in place that nurture you core values?  For example, if one of your core values is consistency (as it is here at GYM HQ) and you don’t have clearly documented policies which guide your daily operations, you’re not going to be very successful in getting that value to take root.  It’s okay for core values to be somewhat aspirational, but moving from dream to goal takes action!  It’s one thing to proclaim you care about your member experience and value your team, it’s another to roll up your sleeves and make it happen if you aren’t quite hitting the mark. As the old adage says, actions speak loader than words.

Work at it daily.  A great culture isn’t magic.  Realizing this is empowering in and of itself.  Each day you and your team have a new chance to define what the “culture of the day” will be.  String enough great days together and a cultural pattern starts to take shape.   Have a stressful few weeks and take your eye off the ball you need only hop back in and get back on track.  Nothing in business is ever perfect, what matters is planning and effort. 

Make sure that all team members realize their impact.  A change starts with one person in one department and it spreads.  While your leadership team may be at the helm of the ship, it’s the crew members who provide the momentum.  Get buy in and acknowledge good examples of team members who exhibit the culture you want for your entire team!

Make it authentic.  There are some great examples of companies who do culture very well.  A quick Google search will yield, well, Google!  While taking inspirations from companies like Google, Zappos or Southwest Airlines is smart, your culture should be yours.  Maybe free lunches, pajama Friday and open work spaces work for you, but probably not!  Culture can’t be copy and paste.

Finally, it’s important to remember that just because a business is big and successful doesn’t mean it isn’t struggling with a crisis of culture.  Uber, the top riding sharing service in the US, enjoyed a valuation of nearly $70 billion as recently as February of this year.  However, issues with bad press and struggles with identity and culture have diminished their value over the last several months (with some putting them down $20 billion).  On June 5th, Uber brought on Frances Frei, Senior Associate Dean for Executive Education at Harvard Business School, as senior vice president of leadership and strategy. Her entire role focuses on shifting their company culture (including a perception of sexism) and working with the leadership team on strategy and management training.  The takeaway is that you’re never too big to have to start over on culture or put in a concerted effort.  Luckily, it should be much easier to shift the culture within the four walls of our fitness clubs vs. across a remote network of thousands of independent contractors. 

Happy strategizing!  Feel free to shoot me your ideas.  I’m eager to hear about the values that your brand holds near and dear.

Don’t Go There: What NOT to Ask During a Job Interview

Recruiting and interviewing are among some of the toughest skills for many new hiring managers to acquire.  Analyzing a candidate’s ability to perform, the likelihood of them committing to the team for the long-term, and their fit within the company culture, all within the span of a 45 minute interview, is a challenge.  A hiring manager should focus on developing a carefully curated list of questions for each position.    These questions should seek to gather as much information as possible about the candidate.  However, regardless of the position, there are some questions that are legally off limits.  Below are some areas in which an interviewer should tread very carefully, or not at all.

AGE

DON'T ASK:

How old are you?  When were you born?  What year did you graduate?  How long have you been in the work force?

INSTEAD ASK:

What are your long-term career goals?  Are you over the age of 18?

Age is a protected class under the Older Workers Benefit Act and discriminating based upon it will land you in hot water.

MARITAL & FAMILY STATUS

DON’T ASK:

Are you married?  Do you have children? Who will take care of your children while you’re at work?  Do you plan on having more children?

INSTEAD ASK:

Would you be able to work a 9:00 AM to 6:00 PM schedule?  Would you be willing to relocate if necessary?  Would you be willing to travel as needed by the job?  Would you be able and willing to work overtime if necessary?

A candidate’s familial status should not be considered when making a hiring decision.  There are federal laws that relate specifically to women including the Pregnancy Discrimination Act (PDA) -- prohibiting discrimination on the basis of pregnancy, childbirth, or related medical conditions, and the Family and Medical Leave Act (FMLA) -- prohibiting discrimination against pregnant women and parents who take leave from their employment responsibilities to care for a newborn baby, sick child, or aging parent.  Many states also have anti-discrimination laws geared toward protecting a woman's right to fair employment.  What may be considered is their ability to work a specific schedule and meet the demands of the position.  These alternate questions are okay to ask, as long as they’re asked to all applicants.

DISABILITIES & QUESTIONS RELATED TO HEALTH

DON’T ASK:

Do you have any pre-existing health conditions?  Are you on any medication?  What are the nature and/or severity of any disabilities that you have?  How’s your health?

INSTEAD ASK:

Can you perform the essential functions of the job, with or without reasonable accommodation?  Are you able to lift 50 lbs (as long as the job requires this)?

A candidate’s health and disabled status are protected under the Americans with Disabilities Act (ADA) which prohibits discrimination in the workplace based on a person's physical disabilities, including a prohibition against pre-employment questioning about the disability.

CRIMINAL RECORD

DON’T ASK: 

Have you ever been arrested?  Have you ever spent time in jail?  Have you ever been caught drunk driving?

INSTEAD ASK:

Have you ever been convicted of a crime?  Be careful with this one.  The answer should only be considered when a conviction is for a crime which will have a potentially negative impact on the business.  An example would be a fraud conviction when the position involves handling funds or sensitive personal information. 

There is a growing movement toward “banning the box,” which prohibits employers from including a check box on their applications which asks if applicants have a criminal record.  At this point, nine states, DC, and fourteen cities and counties have adopted this stance.  It does not prevent employers from asking about criminal convictions during an interview.

CREDIT RECORD

DON’T ASK:

Do you own your own home?  Have your wages ever been garnished?  Have you ever declared bankruptcy?

INSTEAD ASK:

None.

Credit references may only be used if in compliance with the Fair Credit Reporting Act and Consumer Credit Reporting Act.  The candidate must be provided with the necessary notices and disclosures and give their written permission to procure the consumer report.  If, after reviewing the report, the employer decides to take adverse action, they must notify the candidate prior to taking such action. It’s important to note that ten states have passed laws prohibiting employers from pulling credit reports at all.  The latest recommendations advise limiting this assessment step to only positions where the the candidate will be involved in accounting or money management or where there is potential for fraud and embezzlement.

RELIGION

DON’T ASK:

What is your religious affiliation?  What religious holidays do you celebrate?  Do you attend church every week?

INSTEAD ASK:

Weekend and holiday work is required.  Will this pose any difficulties for you?

Federal law (Title VII of the Civil Rights Act) and the laws of most states prohibit an employer from engaging in religious discrimination.

NATIONALITY

DON’T ASK:

How long has your family been in the U.S.?  That’s an unusual name—what does it mean?  How did you learn to speak Chinese? 

INSTEAD ASK:

Are you eligible to work in the U.S.?  What languages do you read, speak or write fluently?  This question should only be asked if it’s relevant to the performance of the job.

Federal law prohibits discrimination against national origin.

USE OF LEGAL & ILLEGAL DRUGS

DON’T ASK:

Do you drink socially?  Do you smoke? Have you ever been addicted to illegal drugs?  What illegal drugs have you taken?

INSTEAD ASK:

Have you ever been disciplined for violating company policies about the use of alcohol and tobacco products?  Are you currently using any illegal drugs?

Concerns about drug, alcohol or nicotine addictions are valid as they can impact an employee's quality of work and the rates of a company's health insurance coverage. However, an employer should be mindful to frame questions about these potential problems in a careful manner.  Also, under the Americans with Disabilities Act (ADA), recovering alcoholics don’t have to reveal any information that might hint at their status.  It's also illegal to question job applicants about when they last used illegal drugs, although asking if they’re currently using illegal drugs is permissible.

MILITARY SERVICE

DON’T ASK:

Was your military discharge honorable or dishonorable?  Why were you discharged?  Will you be deployed anytime soon? 

INSTEAD ASK:

What type of training or education did you receive in the military?  What did you do in the military?  If the applicant is currently serving in the National Guard or Reserves, an employer is not permitted to ask them if they are going to be deployed. 

State and Federal Equal Employment Opportunity (EEO) laws do not prohibit an employer from asking about the type of discharge.  However, asking a veteran to reveal the nature (“characterization of service” in military parlance) of their discharge is considered private information, similar to asking someone “what kind of a disability do you have?”   Therefore, it’s advised to avoid any questions regarding discharge.  Law also prevents and employer from discriminating based on current military service in the National Guard or Reserves.

One final point, when it’s all said and done, a hiring manager really only needs to know if the candidate can perform the necessary duties required for the position.  If they can’t, there is no need to know the why.  Why can lead to discrimination, which leads to legal issues.

5 HR Slipups to Avoid

You're now several weeks into your New Year’s business resolutions as you're reading this post.  Much like the start of a new year presents a good time to set new goals and work toward your best you, it also offers the opportunity to review your business, look for the gaps, and work toward bridging them.  Due to its complexity and direct impact on legal risk, a review of your HR and pay practices is a great place to begin.  We’ve gathered the top five areas in which we receive the most questions or have spent the most time coaching. 

Issue #1: Employee misclassification

We start with an issue that should be relatively fresh in most owners’ minds.  Preparing for the salary base increase that was set to go into effect on December 1, 2016 led most businesses to take a hard look at the team members being paid salary and being treated as exempt.  While the proposed changes only impacted the minimum salary requirements, many owners noted that they may also need to make some changes based on the existing duties requirements.  Below are the three categories for exemption based on duties:

EXECUTIVE EXEMPTION:

·         Regularly supervises two or more other employees, and also,

·         Has management as the primary duty of the position, and also,

·         Has some genuine input into the job status of other employees (such        as hiring, firing, promotions, or assignments).

Supervision means what it implies. The supervision must be a regular part of the employee's job, and must be of other employees. Supervision of non-employees does not meet the standard. The "two employees" requirement may be met by supervising two full-time employees or the equivalent number of part-time employees. (Two half-time employees equal one full-time employee.)

"Mere supervision" is not sufficient. In addition, the supervisory employee must have "management" as the "primary duty" of the job. The FLSA Regulations contain a list of typical management duties. These include (in addition to supervision):

·         Interviewing, selecting, and training employees;

·         Setting rates of pay and hours of work;

·         Maintaining production or sales records (beyond the merely clerical);

·         Appraising productivity; handling employee grievances or complaints, or disciplining employees;

·         Determining work techniques;

·         Planning the work;

·         Apportioning work among employees;

·         Determining the types of equipment to be used in performing work,          or materials needed;

·         Planning budgets for work;

·         Monitoring work for legal or regulatory compliance;

·         Providing for safety and security of the workplace.

PROFESSIONAL EXEMPTION:

Staff within the fitness industry typically doesn’t fall into this set (ie. lawyers, doctors, dentists, teachers, architects, nurses, accountants, etc.)

ADMINISTRATIVE EXEMPTION:

The most elusive and imprecise of the definitions of exempt job duties is for exempt "administrative" job duties.

The administrative exemption is designed for relatively high-level employees whose main job is to "keep the business running." A useful rule of thumb is to distinguish administrative employees from "operational" or "production" employees. Employees who make what the business sells are not administrative employees. Administrative employees provide "support" to the operational or production employees. They are "staff" rather than "line" employees. Examples of administrative functions include labor relations and personnel (human resources employees), payroll and finance (including budgeting and benefits management), records maintenance, accounting and tax, marketing and advertising (as differentiated from direct sales), quality control, public relations (including shareholder or investment relations, and government relations), legal and regulatory compliance, and some computer-related jobs (such as network, internet and database administration).

Issue #2: Lack of Documentation

A general lack of documentation seems to plague many fitness businesses even outside of the realm of HR (customer relations, contracts, etc.).  When it comes to employees, the two biggies are a failure to outline policies in writing and a failure to document issues.  Think of your Policy and Procedures Manual and/or your Employee Handbook like the playbook for your business.  They lay out expectations for team members, explain the business objectives behind those expectations, and provide the framework for how to carry them out.   Without a playbook, you and your staff are essentially flying blind!  This is not a good place to be, especially when issues arise. And issues always arise!  It’s recommended that a business employ a policy which provides for a method of documenting all employee dealings relating to performance (both positive and negative) and requires signatures where appropriate.  Clear and consistent documentation ensures the employee understands the reasons for your actions and what your expectations are of them moving forward.  If the time comes when employment must end, it also provides a history should a claim arise (unemployment benefits, discrimination, wrongful termination, etc.). 

Many managers equate the word discipline with punishment versus thinking of it as the process of helping an employee understand their role and how to perform more effectively or efficiently.    If meetings with a supervisor involving documentation are always viewed as negative and seen as a threat, that’s exactly what they end up being and the policy loses any potential positive impact.  You end up with a too little, too late situation because even you avoid discussing employee issues!

Issue #3: Lack of Time Keeping

This issue generally falls into one of three categories:

·         Connected to a misclassification issue where an employer is treating an employee as exempt when they shouldn’t be.  All nonexempt employees should be keeping time records.

·         Time records are being kept in an inaccurate or haphazard manner.  This typically comes in the form of written time sheets that don’t capture time in/out to the minute or assumed time clocks that simply plug in the employee’s standard schedule and ignore actual reporting times.  While this is better than nothing, it won’t hold up to scrutiny should questions of proper payment of wages occur.

·         Failure to keep time records for piece rate employees.  The previously advised method of paying trainers by the session or group instructors by the class is shifting.  Current best practice advises tracking actual time worked (including prep and wrap time), paying to the clock, and then adding in a bonus based on total classes taught or sessions completed (if desired).

Issue #4: Use of Independent Contractors

I’ve written and spoken so extensively on this topic that it seems redundant to include it again here.  However, rarely does a week go by that I don’t get a call from an owner attempting to find a way to “1099” someone.  Here’s the bottom line, in 99% of cases the person you’re dealing with is an employee.  Sure you can manufacture a creative reasoning for paying them as a contractor, but it’s generally not worth the risk given the severe penalties associated with misclassification. You can see moredetailed information on the topic on our website under past blogs, but it all boils down to this:   if the position requires the person to be directed as to how, when, where and with what to do the job, he’s an employee.

Issue #5: Lack of Knowledge of and Adherence to State Labor Laws

Every state comes with its own unique challenges for business owners.  Minimum wage changes, special break requirements, mandatory check information, employee notices, rules governing final wages, workers compensation requirements…the list goes on.  HR and payroll practices are certainly not one size fits all and it’s imperative that a business owner investigates the rules in his or her home state.  These should be reviewed frequently to plan for and implement any changes.  It’s the owner’s responsibility to be informed.

 

Feeling overwhelmed by all of the HR laws and guidelines?  Wish you could focus only on increasing your revenues, managing your team, and growing your business?  GYM HQ may be your perfect solution.  Let us take a look at your pain points and come up with a solution tailored to you.  We’re your one-stop-shop for:  HR best practices & guidance, payroll, accounting, customer service, past due communications, and operations best practices & guidance.  

Contact us today:

info@gymhq.club

404-921-2269

 

Top 10 Mistakes Gym Owners Make

It’s that time of year again!  Time to look back on 2016, find opportunities for improvement and plan for a bigger, better 2017!   We work with many operators who are doing some really exciting things.  Some have gotten it nearly right from the get- go and others have learned from a few bumps along the way.  Getting to be at the helm of the behind the scenes team here at Gym HQ as these businesses grow and prosper is a fun, fulfilling, and exciting experience.  I’d like to pass along some of the big no-nos we’ve seen and areas we’ve noted many owners have questions.  I’ve included notes on what we’ve uncovered in businesses throughout the years as examples or steps to take on each item.  While space won’t allow for a full workup of each topic, hopefully these will give you a few items on which to focus in the coming year.  You work hard to drive revenues at for business; we want to make sure you hang on to them!  Here are our Top 10 Mistakes Gym Owners Make.

#1:  LACK OF CONSISTENT AND ACCURATE FINANCIALS

Timely P&Ls ensure that you’re keeping an eye on your margins each month so that adjustments can be made accordingly. 

What we’ve seen:

With no clear understanding of the business’s performance, it’s fairly common for an owner to overestimate performance (revenue) and underestimate liabilities (expenses).

 #2:  NO BUSINESS REPORT ANALYSIS(MISSING KPI REPORTS)

Without knowing your numbers, business analysis and action planning is impossible.

In one instance, after a single month of analysis for one business, we found:

  • High instance of client “no-shows”.  Cost to business $2100/month.
  • Average price per session was too low.  $5 below targeted margin. $28,000/month. 
  • Average trainer rate was too high.  $1 above target margin.  $3,000/month.

#3:  PAYING STAFF AS 1099 INDEPENDENT CONTRACTORS

There is no such thing as a “1099 employee”.

What we’ve seen:

Multiple employees being paid as 1099 Independent Contractors.

It’s important to do an analysis of each position from a behavioral, financial and relationship stand point.

#4:  EMPLOYEE MISCLASSIFICATION

Exempt vs. Non-Exempt Status

What we’ve seen:

Multiple employees misclassified and exempt staff being underpaid.

All job descriptions and pay should be reviewed regularly for compliance.

#5:  LACK OF HOURS TRACKING AND OVERTIME PAY

Coaches, trainers and fitness instructors are an especially touchy area.

What we’ve seen:

Trainers being paid by the session and not utilizing a time clock.

What you should know:

We’ve been very attentive to the recent case law in our industry.  There have been multiple class action law suits concerning trainer pay in the last several months:

In March, a class of more than 80 personal trainers seeking a jury trial in federal court against a Gold's Gym franchisee group over alleged unpaid overtime wages scored a legal victory in the case. The judge ruled that the defendant, Gold's Texas Holdings Group Inc., cannot use an exemption in the Fair Labor Standards Act (FLSA) to defend itself against allegations of employee misclassification should the case go to trial.

In February, Equinox Holdings Inc. settled a class action lawsuit for a maximum of $4 million brought by former employees who alleged the company failed to pay them fully or provide breaks.

In January, a federal judge in Illinois denied a group of four former Life Time Fitness personal trainers' motion for conditional class certification in a lawsuit alleging unpaid minimum wages. That case is currently stayed pending the outcome of private mediation, according to court records.

SUGGESTED METHOD: 

  • Pay hourly and required clock in/out.
  • Provisional bonus pay is okay.

#6:  LACK OF WRITTEN POLICIES AND PROCEDURES

Does your staff have a playbook?

What we’ve seen:

No existing Employee Handbook and incomplete New Hire Packet materials.

Steps to take:

Think of your Policy and Procedures Manual and/or your Employee Handbook like the playbook for your business.  They lay out expectations for team members, explain the business objectives behind those expectations, and provide the framework for how to carry them out.   Sitting down and committing your business essentials to writing is important for several reasons:

  • It causes you to really “think through” how you’re carrying out the   day-to-day. 
  • It memorializes when a policy was put in place.
  • It gets everyone on the same page, literally.

#7:  IMPROPER OR MISSING STATE REGISTRATIONS AND BONDING

Do you know the rules of engagement for your state?

What you should know:

  • Each state has different requirements for business                           registration.
  • Some states hold fitness businesses to special requirements underHealth Spa Statutes.  These states require specific language for membership and service agreements and sometimes require businesses to hold a bond (especially for presale).
  • The application of sales tax to products, memberships, and services varies by state. 

#8:  MISSING PROCEDURES FOR CUSTOMER SERVICE

Issues are inevitable.

What we’ve seen:

  • Open permissions allowing staff members to cancel agreements and invoices.  In one example we found an auto-renewal percentage s at 6% vs targeted 20% for the sales model due to sales people cancelling draft and creating new agreements.  $13,000 in draft impact + overpayment of commissions
  • Not adhering to cancellation procedures outlined in member agreement.

#9:  FAILURE TO TRACK, ANALYZE, AND ACT UPON CUSTOMER ISSUES

Where? When? Why? What’s the fix?

Steps to take:

  •  CS volume through all channels should be measured and root causes for complaints tracked:
  • Reason for complaint (staff, facility, contract)
  • Staff involved
  • ClubReady notated
  • Cancellations are categorized by type.
  •  Data is analyzed on a regular basis (calibration calls) and action plans deployed.

 

#10:  FORGETTING ABOUT PAST DUE MEMBERS

Getting members up-to-date is vital for a healthy draft. 

What we’ve seen: 

  •  Lack of system or schedule for follow-up.
  • No process for mandating contact information capture at POS

While this list may seem a bit daunting at first, you'd be surprised how much traction you can gain but simply starting with one area. Happy 2017--may your business thrive this year!

 

 

 

Guide to Preparing for the FLSA Exempt Pay Changes: Month Two, Analyze Your Pay Plans

Last month we began the process of preparing for the FLSA Exempt Pay changes, announced by the DOL in May, by looking at your workforce and their duties.  You can find that article and additional articles on the change on our website:  www.gymhq.club.  This month, we continue our preparation for the upcoming December 1st due date for compliance with a look at employee compensation.

The single biggest change for which owners need to prepare is the new salary minimum.  The salary threshold increases from $455/week ($23,660 per year) to $913/week ($47,476 per year).  If left alone with no changes to the current compensation plans beyond the required salary increase, an owner’s exempt payroll will double!  With payroll constituting one of the biggest expense categories for a business, this could have a major effect on the bottom line.  Here are several considerations to make and examples to use while analyzing a business’s current pay rates and retrofitting them to comply with the new DOL guidelines:

Calculate each exempt employee’s total yearly earnings.  You’ll need to include all compensation including salary, commissions, and bonuses.  Example:

GM Johnny has a salary of $36,000 per year.  He has a commission plan in place that pays him on any memberships sold by him directly as well as a bonus structure based on the achieving 100 new memberships per month.  Looking at the six months he’s been employed, it’s established that his average monthly commission is $300 and his average bonus is $500.  That gives him an estimated annual commission and bonuses payout of $9,600.  So Johnny’s estimated annual income is $45,600. 

If an employee’s current base salary meets or exceeds $47,476, no changes need to be made.

If the employee is close to the earning base stipulated by the new law ($47,476), consider making adjustments to their current compensation plan to bring it into compliance.  Continuing with our GM Johnny example:

The new FLSA pay criteria stipulate that up to 10% of the first $47,476 of the employee’s income can come from non-discretionary commissions or bonuses.  These are bonuses based on clear and measurable goals or a company’s profitability.  That means if we want to cap Johnny at $47,476 for his annual compensation, $4,747.60 of it may come from commissions and bonus.  We can bring his salary up to $42,729 and adjust our commission and bonus structure accordingly.  Where he may have been earning $300 in commission on 30 memberships, now his plan pays him $150.  His monthly bonus is adjusted to $250.  This brings his yearly earnings from these two categories to $4,800.  When combined with his new salary, Johnny’s yearly income is $47,529.  This is only a $1,929 increase to the business for the year. 

If the employee’s current earnings are much lower than $47,476 per year, consider moving them to hourly pay.  Example:

AM Adam has a salary of $24,000 per year.  He earns another $10,000 annually from commissions and bonuses.  That puts his annual earnings at $34,000.  While a review of his job duties indicated that his role does qualify him to be an exempt employee, the business owners have not budgeted $47,476+ each year for his position.   In order to comply with the new FLSA pay rates, Adam’s pay is changed to $11.50 per hour (his salary divided by 40 hour weeks x 52).  He’s required to clock-in and out and his commission and bonus structure remain the same.  GM Johnny carefully monitors Adam’s time clock reports to ensure he’s not exceeding 40 hours per week.

*Luckily our example gym isn’t in California, so Adam is not limited to less than 8 hours per day to stay out of overtime status.

If you’re moving a currently salaried employee to hourly, make sure you factor in the need for and frequency of overtime hours.  Example:

After reviewing the hours Adam typically works, Johnny realizes that he’s averaging 50 hours each week.  He reviews this with the club owners and all agree that Adam is needed for the extra 10 hours each week.  Therefore, Adam will be earning overtime pay.  Johnny will need to be careful to take Adam’s commissions and bonuses into consideration.  For the pay period of August 1st to August 15th, Adam worked 108 hours.  20 of these hours these were overtime.  He also earned another $350 in commissions and bonuses.  Here’s a breakdown of Adam’s pay:

 108 hours x $11.50 + $350 (commissions & bonuses) = $1592 (straight time pay)

$1592 divided by 108 hours worked= $14.74 (regular rate)

$14.74 x ½ = $7.37 (overtime premium)

20 hours of overtime x $7.37 = $147.40 (overtime pay)

Total payout = $1,739.40

If the owner had failed to consider the tendency of Adam’s position to require overtime and had set his hourly rate to $11.50 (and made no changes to his commission and bonus plan), Adam would be set to earn $41,745 per year, which is a lot higher than $34,000.  The cost to the business would be $7,746 annually.  By understanding the implications of overtime pay, the owner could adjust Adam’s hourly rate lower than $11.50 and/or modify his commission and bonus structure.  Considering the need for and frequency of overtime, as well as its cost, is a must when considering a future pay plan for a position.

Consider the cost of admin when deciding to move a salaried employee to hourly.  Who will track the employees’ hours, make adjustments when need, and police overtime?  Who will ensure calculations for overtime pay are properly made?  Does your pay cycle for hours align with your commission and bonus structure?  Example:

Gordon pays his team for hours and salary on a semi-monthly basis, but his commission and bonus structures are based on his club’s monthly sales and performance quotas.  His sales rep Samantha consistently works overtime and Gordon knows he needs to calculate pay based on her regular rate.  However, when he pays her for her hours from the first half of the month, commissions and bonuses are not available.  How does he ensure Samantha is paid out properly?

For August 1st to 15th, Samantha worked 92 hours.  4 of these hours were overtime.  Her hourly rate is $8.  Gordon should pay her the following on her check:

92 hours x $8 = $736

$8 x ½ = $4 (overtime premium)

$4 x 4 hours of overtime = $16

Total pay for this check= $752

At the end of the month, Samantha has $400 in commissions and a $100 bonus.  Gordon is able to attribute $150 of the commissions to August 1st to 15th and splits the bonus in half as it was earned over the entire month.  He then calculates the additional overtime pay due to Samantha for August 1st to 15th.

$200 (commission and bonus) divided by 92= $2.17 (additional income to add into hourly for regular rate)

$2.17 x 4 hours x 1.5 (time and a half) = $13.02 to be added to Samantha’s next check.

Finally, a great place to start when building a compensation plan is to determine how much the position should pay when an employee performs well (if commission/bonus based) and work backwards.

As you can see, there are a lot of points to consider as you work toward December 1st.  Starting now ensures you have the time necessary to put a thoughtful plan together.

Month-By-Month Guide to Preparing for the FLSA Exempt Pay Changes: Analyze Your Workforce

Over two months have passed since the Department of Labor announced the changes to the salary level for employees classified as exempt and we’re still getting a ton of questions on what the changes mean for fitness business owners. Read about the change here.

 Over the next several months, we’ll give you a few tasks on which to focus each month so you’ll be prepared for the December 1, 2016 launch.

August:  Analyze your current workforce. 

·         Review all employees and positions currently classified as exempt or those which you’re paying a salary and not requiring time records to be kept.

·         Review their job descriptions and duties to determine if these employees are currently properly classified (outside of the amount they’re paid).  If you can check off the majority of the following bullet points under the supervisory exemption (or make a case for an administrative exemption), your employee is properly classified as exempt.  If not, the position should be reclassified as non-exempt and be required to keep track of time.

·         Create a list of the positions which will need to be reclassified based on duties and those which will remain exempt. 

Supervisory:

  1.  Regularly supervises two or more other employees, and also
  2.  Has management as the primary duty of the position, and also,
  3.   Has some genuine input into the job status of other employees (such as hiring, firing, promotions, or assignments).

When considering a supervisory exemption, the DOL is very clear that the employee must have management as the primary duty of their job.  Below are typical tasks that would be included in management duties:

  • Interviewing, selecting, and training employees.
  • Setting rates of pay and hours of work.
  • Maintaining production or sales records (beyond the merely clerical).
  • Appraising productivity; handling employee grievances or complaints, or disciplining employees.
  • Determining work techniques.
  • Planning the work.
  • Apportioning work among employees.
  • Determining the types of equipment to be used in performing work, or materials needed.
  • Planning budgets for work.
  • Monitoring work for legal or regulatory compliance.
  • Providing for safety and security of the workplace.

A good rule of thumb is that if the person is deemed “the boss” or “in charge”, they are cleanly classified as management.  In the fitness space, the general manager, fitness director, operations manager, and (sometimes) assistant manager roles may be considered exempt.  The most frequent misclassification made in the fitness industry is for the sales role.  If an employee’s job duties are primarily inside sales, regardless of their title, they are not exempt. 

Administrative:

This classification includes employees who job duties are:

·         Office or non-manual work, which is

·         directly related to management or general business operations of the employer or the employer's customers, and

·         a primary component of which involves the exercise of independent judgment and discretion about

·         matters of significance.

It is not enough for the employee to perform office work.  They must regularly exercise discretion and judgement, with the authority to make independent decisions on matters which affect the business as a whole or a significant part of it.  In a fitness business, there are very few roles which would fall under this exemption.

There is also a professional exemption which carves out lawyers, teachers, accountants, and other roles not typical of a fitness business. 

While the change to exempt pay is a challenging one for employers, it presents a great opportunity to review the entire business for duties based compliance.  The new DOL guidelines will likely lead to closer scrutiny of employee misclassification in the future.  We’ll also likely see a rise in the number of plaintiffs’ lawyers focused on bringing suit against employers under wage and hour law violations due to misclassification.  These cases are some of the most costly to defend for business owners. Being proactive now can save you majorly in the future.

Next month:  Assessing salaries.

How the Fair Labor Standards Act (FLSA) Affects Health Clubs

On May 18, 2016, the U.S. Department of Labor (U.S. DOL) issued its “Final Rule,” which expands the number of people eligible to receive overtime pay under the Fair Labor Standards Act (FLSA). The change will take effect on December 1, 2017. As a result, club owners should begin to assess now how this new law could affect their business

ClubReady and Gym HQ General Counsel, Jonathan Hill recently sat down with Club Solutions magazine to comment on the recent changes to the FLSA and it's likely impact on the fitness industry.  Check of the full article here.

Document! Document! Document!

If I have one phrase I utter more often than any other while navigating our wonderful business of fitness, it may well be some variation of:  “Is it documented?”    I get it; no one wants to take the time to write it all out.  It's time consuming and you could actually be 'doing' it rather than writing it down.  But here’s the thing, it’s absolutely key to your long-term growth and success that anything essential to your business’ operations or health be in writing.   To get you started on your adventure into the world of proper record keeping, here are three areas in your fitness business where I consider proper documentation to be of paramount importance:

1.       Policies and Procedures.  Think of your Policy and Procedures Manual and/or your Employee Handbook like the playbook for your business.  They lay out expectations for team members, explain the business objectives behind those expectations, and provide the framework for how to carry them out.   Sitting down and committing your business essentials to writing is important for several reasons:

·         It causes you to really “think through” how you’re carrying out the day-to-day.  Do your policies make sense?  Are they easy to adhere to, manage, and, in some instances, measure?  Are they legally compliant at both the federal and state level? 

·         It memorializes when a policy was put in place.  As yours manuals are updated, the latest versions should be time stamped.  This ensures that should you need to follow-up on when a new initiative went live, you can do so easily.  Example:  Knowing when a PTO policy went into effect and having it clearly detailed in writing, makes it easy to explain when a team member questions their balance.

·         It gets everyone on the same page, literally.  A written policy eliminates mistakes and misunderstandings.  It creates consistency among different supervisors and as the members of your team change.

2.       Employee Issues.  Inevitably issues with team members will arise.  Hopefully,  you have a solid Employee Handbook in place which addresses how to deal with these issues.  Most businesses strive for a system of progressive discipline.  This involves a series of procedures for dealing with shortcomings in a team member’s performance.  A good policy should provide for a method of documenting all employee dealings relating to performance (both positive and negative) and require signatures where appropriate.  Clear and consistent documentation ensures the employee understands the reasons for your actions and what your expectations are of them moving forward.  If the time comes when employment must end, it also provides a history should a claim arise (unemployment benefits, discrimination, wrongful termination, etc.).  Side note:   Many managers equate the word discipline with punishment versus thinking of it as the process of helping an employee understand their role and how to perform more effectively or efficiently.    If meetings with a supervisor involving documentation are always viewed as negative and seen as a threat, that’s exactly what they end up being and the policy loses any potential positive impact.  You end up with a too little, too late situation because even you avoid discussing employee issues!

3.       Member Relations.  Did your front desk person have a conversation with a member about freezing their account?  Where is that conversation notated so other team members can see it?  Hopefully your club management software offers basic CRM (customer relationship management) functionality.  Use it!  It’s extremely important that you’re tracking member interactions through clear notes on accounts.  This helps to provide the member with consistency in experience and prevents them from having to relay the same information multiple times.  It also eliminates the “he said, she said” trap in which we sometimes find ourselves by making it easy to look back on what was discussed during previous member interactions.  Bonus:  If your software allows for follow-up or ticketing, it makes it much easier to schedule any necessary tasks concerning members’ needs with your management team.   A system of proper notation and follow-up ensures nothing falls through the cracks.

 

So roll up your sleeves and grab your pen!  With some upfront effort to create clear policies, the discipline to adhere to those policies, and the dedication to follow through with consistent documentation, you set your business up for success.  

Are You Staying Compliant With the New 'Ban the Box' Laws?

There has been a lot of chatter recently around the subject of inquiring about a candidate's criminal history during the interview process.  Several states have passed legislation mandating that employer's "ban the box" and reserve inquires concerning criminal history to further on in the hiring process; generally after a conditional offer for employment (subject to the return of a background check).  We'll be publishing some new HR best practices centered around helping you navigate this new legal landscape, but in the meantime, here's an article SHRM recently published:

"For more than two decades, civil rights groups across the country, in an effort to improve the job prospects for ex-offenders, have lobbied local and state governments to “ban the box”—a reference to the removal from employment applications of the box to be checked if the applicant has a criminal record. To this end, New York’s three largest cities—Buffalo, New York City and Rochester—have all enacted legislation prohibiting employers from asking applicants about their past criminal record on an employment application. Generally, employers subject to such laws are only permitted to ask about an applicant’s criminal record further on in the hiring process such as, for the New York City law, after a conditional offer of employment has been made.

If your company operates in any of these three cities and your application still seeks information about an applicant’s prior criminal record, you may want to sit up and take notice. The “ban the box” movement recently made headlines by virtue of two public settlements orchestrated by Eric T. Schneiderman, Esq., the New York state attorney general, and two national retail chains, Big Lots Stores and Marshalls, regarding those companies’ employment applications.

Despite the well-publicized implementation of such laws, an investigation by the Civil Rights Bureau of the Office of the Attorney General found that both Big Lots Stores and Marshalls distributed employment applications that made inquiries into the criminal history of prospective applicants seeking employment at their Buffalo stores. “Obtaining meaningful employment is often the most crucial step toward reducing the chances of recidivism among formerly incarcerated persons,” said Schneiderman. “That is why my office is committed to breaking down barriers that impede rehabilitation, especially those that prevent fair access to employment.”

The negotiated conditions of the settlements with these companies are significant. For example, Big Lots Stores agreed to pay a monetary penalty of $100,000 and Marshalls agreed to pay $95,000. In addition, both companies agreed to take steps to ensure that their non-compliant employment application will not be made available to prospective applicants. Finally, the retailers agreed to make affirmative efforts to recruit applicants with a criminal background through an organization which specializes in training formerly incarcerated individuals. Significantly, while only prohibited in certain locations, both companies have further agreed to remove criminal record inquiries from employment applications used in all of their New York state stores.

Given these stiff penalties, employers operating in Buffalo, New York City and Rochester should learn from the examples being made of such companies and ensure that they do not wind up on the wrong side of an enforcement proceeding or lawsuit. Accordingly, companies subject to such laws should take this opportunity to review their employment applications, as well as their interviewing and hiring policies, practices and procedures, to ensure compliance with these local laws that 'ban the box'."

Content written by:  Christopher G. Gegwich and Alexander Gallin and republished by SHRM

Christopher G. Gegwich and Alexander Gallin are attorneys in the Long Island, N.Y., office of Nixon Peabody. Republished with permission. © 2016 Nixon Peabody. All rights reserved. 


Catch Up on New State Labor Laws

SHRM just published a nice brief on some of the major state labor law changes hitting in 2016 (so far):

Paid Sick Leave

Several state and local paid sick leave laws passed in 2015, and more are likely in 2016.

In California, a state law mandating paid sick leave went into effect on July 1, 2015. Employees, including part-time and temporary employees, will earn at least one hour of paid leave for every 30 hours worked. An employer may limit the amount of paid sick leave an employee can use in one year to 24 hours or three days.

The city of Emeryville, Calif., also passed an ordinance in 2015 that requires employers to provide paid sick leave to workers.

Effective July 15, 2015, Massachusetts employers with more than 10 employees must provide one hour of guaranteed sick leave for every 30 hours worked, not to exceed 40 hours per year. Employees can use this time if they are ill, injured, or need to attend to a medical condition for themselves, a spouse, a child, or a parent. Employers with 10 or fewer employees are not required to provide paid sick leave, but they must provide unpaid sick leave under the same circumstances.

In Oregon, a state law mandating paid sick leave will go into effect on Jan. 1, 2016. This new law will require most employers with 10 employees or more to provide employees with one hour of paid sick leave for every 30 hours worked up to 40 hours a year. It will also require employers with fewer than 10 employees to provide up to 40 hours a year of unpaid sick leave.

In 2015, city councils adopted paid-sick-day laws in Tacoma, Wash.; Philadelphia, Pa.; and Bloomfield, N.J.  In July, Montgomery County, Md., became the first county to establish a paid-sick-day standard.

Accommodation of Pregnant Workers

Although pregnant workers are protected by federal law, some states have provided their own rules for the accommodation of pregnancy and pregnancy related-conditions. This too can be expected to continue into 2016.

Effective March 3, 2015, in the District of Columbia, pregnant workers, workers recovering from childbirth, and workers with related medical conditions (including lactation), must receive reasonable accommodations unless the accommodations impose an undue hardship on the business.

Nebraska’s law went into effect in September 2015, and requires employers with 15 or more employees to provide reasonable accommodations to workers who are pregnant, have given birth or who have a related medical condition unless the accommodations would impose an undue hardship on the employer.

In North Dakota, effective Aug. 1, 2015, employers must make reasonable accommodations for a pregnant worker who is otherwise qualified for the job, unless the accommodations would disrupt or interfere with the employer’s normal business operations, threaten an individual’s health or safety, contradict a business necessity of the employer or impose an undue hardship on the employer.

And, in Rhode Island, effective June 25, 2015,  employers with four or more employees must provide reasonable accommodations to pregnant workers, workers who have given birth and workers with related medical conditions (including the need to express breast milk) if they request them, unless the accommodations would impose an undue hardship on the business. The statute lists possible reasonable accommodations such as breaks, seating and a non-bathroom location to express breast milk.

Social Media Privacy

Another topic to watch in 2016 is the growing number of social media laws.

In 2015, Connecticut, Delaware, Maine, Montana, Tennessee and Virginia became the latest states to enact legislation banning employer access to workers’ social media accounts. These laws prohibit an employer from requiring an employee or applicant to provide it with a username and password or to access a personal online account. At least 17 states passed similar laws in previous years (Arkansas, California, Colorado, Illinois, Louisiana, Maryland, Michigan, Nevada, New Hampshire, New Jersey, New Mexico, Oklahoma, Oregon, Rhode Island, Utah, Washington and Wisconsin).

Wage Transparency

Connecticut is the most recent state to pass an anti-wage secrecy measure. On July 2, 2015, Gov. Dannel P. Malloy signed into law Public Act No. 15-196, entitled An Act Concerning Pay Equity and Fairness. The act went into effect upon its signing, and limits an employer’s ability to discourage employees from having open discussions about their wages.

On March 11, 2015, the District of Columbia's Wage Transparency Act of 2014 took effect. This act makes it unlawful for employers to prohibit employees from discussing their wages, and also prohibits employer retaliation against those who do. The act requires the mayor to assess civil fines against offending employers in progressively higher amounts for repeated violations. Other states with anti-pay secrecy laws include California, Colorado, Illinois, Louisiana, Maine, Michigan, Minnesota, New Hampshire, New Jersey, Oregon and Vermont.

More laws of this kind can be expected in 2016.

Ban the Box Laws

In 2015, New Jersey and Oregon passed “ban-the-box” legislation, which requires private employers to remove the conviction history question on the job application and delay the background check inquiry until later in the hiring.

The two states join Hawaii, Illinois, Massachusetts, Minnesota and Rhode Island and Washington, D.C, which had previously passed such provisions. Expect more legislation on this topic in the coming year.

ACA Reporting Requirements for 2016

If you’re panicking over the reports the Affordable Care Act (ACA) requires your business to produce this month, you’re not alone.  We’ve received numerous questions over the past few months from clients and blog readers.  In an effort to make the process easier, we’ve prepared the handy guide below.

How do I know what size employer I fall under?

For some, it’s very clear that you’re a small business.  You have a handful of team members (both full and part-time) at any given point in the year.  For others, it can get a bit cloudy.  Here’s what the ACA says about your business size: 

Small employers are those with fewer than 50 FTEs.

Applicable large employers are those with at least 50 FTEs.

First, you’ll need to determine how many full-time equivalent (FTE) employees you have.  Start by counting all full-time (30+ hours per week for at least 120 days) employees you had at the height of your employee count for the year (if your number of staff members/payroll has fluctuated).  Next, calculate your FTE employees; employees who worked less than 30 hours per week for at least 120 days of the year.  Take the payroll data from several payrolls throughout the year and do the following:   Add up all part-time employee hours (for those working or expected to work 120 or more days).  Divide it by 30.  Add that number to your full-time count, and you have your FTE number.  Look at several payrolls and go with the highest.  The IRS has a calculator to help with this:  https://www.healthcare.gov/shop-calculators-fte/

Which reports do I need to send?

Take your FTE count and your knowledge of the medical coverage your business currently offers and determine which reporting group you fall into:

Small employers (those with fewer than 50 FTEs) with a self-insured health plan must complete and file Forms 1095-B (Health Coverage) and 1094-B (accompanying transmittal form) with the IRS, as well as provide employees—specifically, those who are taxpayers responsible for showing they had health coverage during the year—with a copy of Form 1095-B.

Form 1095-B is used to report certain information to the IRS and to taxpayers about individuals who are covered by minimal essential coverage and therefore not liable for the individual shared responsibility payment.

The 1095-Bs will be provided by insurance companies for fully insured plans.

Applicable large employers (ALEs) with at least 50 FTEs must complete and file Forms 1095-C (Employer-Provided Health Insurance Offer and Coverage) and 1094-C (accompanying transmittal form), and provide each full-time employee with a copy of Form 1095-C.

Small employers with fewer than 50 FTEs also will be required to file Forms 1095-C and 1094-C if they are members of a controlled or affiliated service group that collectively has at least 50 FTEs.  This means if you have several different legal entities all operating under one brand and one management umbrella, you’ll need to count all of these legal entities’ FTEs together for reporting and coverage requirement purposes.

When are the reports due?

Reports due to the employees must be provided by January 31st.  Reports to the IRS are due by February 29th.

While the coverage requirements and penalties for 2015 only applied to applicable large employers (ALEs) with at least 100 FTEs, reporting is required for those with at least 50.  And in 2016, employers with 50 or more FTEs are subject to the employer shared responsibility provisions. 

*The employer shared responsibility provisions—also known as the employer coverage mandate—are the employer penalty provisions under the ACA. Penalties apply if an employer fails to offer minimum essential coverage that is affordable and provides minimum value to full-time employees working at least 30 hours per week

What else do I need to do to prepare?

Before you start working on your required forms, here’s one last recommendation, get your employees prepared.  Since this is the first year they’ll be required to report coverage with their tax filings, chances are they’re not prepared.  A little communication can go a long way. 

Three primary messages to convey to your employees:

1. Here’s what to expect. You will receive Form 1095-C for the first time in January 2016.

2. Why you should care. You will need information on the form to prepare your 2015 taxes.

3. Be on the lookout. Watch for the form in your mailbox in January or for it to be delivered by hand at the worksite.