Erisa Solutions

How To Prepare For The New Exemption Ruling

Part 2

3. Consider Options for Impacted Employees Raise income to meet new level — You may choose to raise an employee’s income to retain the exempt status, as long as they also meet the duties tests. This option is best for employees who have salaries close to the new salary level and who regularly work overtime. The salary minimum may include up to 10% in the form of non-discretionary payments. For example, employees earning a base pay of $42,728.40 plus at least 10% in commissions or bonuses paid on at least a quarterly base may qualify for exemption status under the new limits. If the non-discretionary payment in a given quarter does not add up to the required minimum, the employee must be paid overtime pay for any overtime hours worked throughout that quarter or receive a “catch-up” payment at the end of the quarter to make up the difference. Salaried non-exempt — You may choose to pay impacted employees as salaried, non-exempt. Employees would continue to earn an established salary, but be paid overtime pay for any hours worked over 40 in a week. This option is ideal for employees who work 40 hours or fewer in a typical workweek and rarely work overtime. Reclassify as hourly non-exempt — You may choose to re-classify employees below the salary limit to hourly non-exempt. Their converted rate of pay could be a division of their salary rate by 2,080 hours, or it could be lower to accommodate for overtime anticipated to be paid. Estimate average overtime to be earned and determine whether to reduce base pay to compensate for overtime to be paid. Determine whether you can limit or eliminate overtime hours. Evaluate workload, to determine whether some tasks can be re-assigned or eliminated to limit overtime. Determine whether hiring part-time employees to manage workload and limit overtime would be beneficial. Consider whether reclassifying employees as non-exempt might affect eligibility for certain employee benefits, such as paid time off accrual, holiday pay, etc. Also consider how reclassification may impact morale.

4. Review Policies and Processes Ensure you have systems in place to monitor and record non-exempt employees’ hours. There are no specific federal requirements for tracking and recording hours, as long as the method is complete and accurate. For example, employees who typically work a fixed schedule could be required to submit only exceptions to their regular schedule. Implement or update policies regarding unauthorized overtime work, meal and rest breaks, and travel time. Address working from home or otherwise away from the workplace, including checking emails and taking or making phone calls, as this is considered compensable time for non-exempt employees. If applicable, also consider travel policies for non-exempt employees, including how compensable time is defined and paid. Compliance & HR solutions providing what you need to know and do, when it’s needed. © 2016 HR Service, Inc.

5. Communicate the Changes Once all decisions have been made and policies and processes have been determined, notify employees of any changes that will impact them and when the changes will take effect. Be prepared to address employee concerns about the potential perceptions of demotion or loss of status, loss of flexibility or income potential, or other possible negative reactions. Communicate and have employees acknowledge any new policies or procedures associated with the changes.

6. Train Leaders and Supervisors Train leaders and supervisors on all policies and procedures associated with overtime rules, time tracking, and other associated issues. Address what constitutes compensable working time, disciplinary processes for unauthorized overtime, and ways to address complaints associated with these changes.

By Rhonda Hollier, HR Coach, HR Service, Inc.

Sources: U.S. Department of Labor Wage and Hour Division “New Overtime Rule Webinar Questions & Answers: May 26, 2016.” U.S. D.O.L. “Fact Sheet: Final Rule to Update the Regulations Defining and Delimiting the Exemption for Executive, Administrative, and Professional Employees”


Part 1

By now you have likely heard of the Department of Labor’s new Final Rule on the annual salary minimum for exemption from overtime. The December 1, 2016 effective date gives employers approximately six months to assess the impact of the new salary limits; make decisions about what changes to make to ensure compliance; implement new policies, procedures and systems to support the new changes; communicate the changes to those who will be impacted; and train leaders how to manage the changes.

1. Establish Who Will Not Be Impacted Employees who are being paid on an hourly basis and paid overtime for hours worked over 40 per week will not be impacted. Certain professionals including outside sales employees, physicians, lawyers, judges, teachers and certain academic administrative personnel in educational institutions are not subject to the new salary limits. Certain retail employees paid on a commissioned basis will also not be impacted. There is no change to the annual salary limit for computer professionals who qualify for the DOL’s exemption for computer professionals, but the weekly limit will be raised to $913 per week. (See DOL Computer-Related Exemptions Fact Sheet.)

2. Determine Who Will Be Impacted Identify all current salaried, exempt employees who make less than $47,476 per year. The $47,476 minimum can include no more than 10% from nondiscretionary bonuses, incentive payments, and commissions that are paid at least quarterly. If you have employees who are not paid the same salary amount throughout the year, identify any who make less than $913 per week. Identify any employees who are currently making less than $134,004 and do NOT meet the full criteria for executive, administrative, professional, outside sales or computer-related exemptions. (See DOL Highly-Compensated Workers Exemption Fact Sheet.) Also review the duties of all employees currently classified as exempt, regardless of income, to ensure they meet the “duties tests” of exemption eligibility. While the duties tests for exemption eligibility did not change, now is a good time to reclassify exempt employees whose duties have changed or who have been misclassified. (See DOL Exemption Fact Sheet.)

Delegation: Getting Results Through Other People

Leaders who master the art of delegation achieve greater results for the organization, better maximize their time, and develop more skilled employees. Delegation is a key responsibility of leaders, allowing them to achieve results through other people as opposed to doing everything themselves. This leaves them more time to focus on business strategy, planning, and guiding overall business execution, while transferring knowledge and skills throughout the organization. Leaders, who struggle with delegation work more hours, are always buried, are “professional firefighters”, and find themselves micro-managing the details of their employees.

Most employees are promoted into leadership roles, not because they are great trainers or seasoned leaders, but because they excelled in their technical skill. Many fail as leaders because organizations do not train them in how to get things done through others. We promote our top sales person to Sales Manager, not to grow sales, but to grow sales people. Sales Managers can make a greater overall impact through transferring knowledge and skills to other sales people than they do by selling. Delegation is not just about freeing up time, it’s about developing people so they can become self-sufficient.

Effective Delegation

Have you ever turned over a task to an employee, only to see them fall flat on their face? Perhaps their failure had more to do with your delegation method than their ability to do the task. You can’t just turn over a task expecting success unless you have clearly transferred knowledge, given effective coaching, and provided resources needed for the 1 person to get the job done. The following delegation steps and techniques will help ensure greater success.

Delegation Steps & Techniques:

  • Delegate the right task to the right person. Know your employees’ strengths, weaknesses and ambitions. Delegate tasks that utilize their strengths and allow them to grow in areas where they aspire to develop. Make sure the person selected understands why they were selected, how it helps the company or team, and how they will
  • Set clear goals and expectations. Clearly define the task or project expectations including: goals & outcomes, what the final projects will look like, how performance will be measured, and when it should be completed. Establish action plan miles stones and review dates for routine progress evaluation and feedback. Ask for their ideas and involve them throughout the process for stronger commitment and buy-in.
  • Empower people to find their own solutions. With goals and measures clear, let them own how it gets done. Avoid the tendency to describe exactly how you want everything done. Avoid micro-managing their every move, or you will derail their success and their trust in you and
  • Provide needed training & coaching. Delegating a task does not mean you give the assignment and walk away. Help the employee by giving them any needed training, resources and coaching. Be a resource they can openly come to with questions or challenges.  Providing intermittent coaching as needed helps ensure their success.

Remember to discuss current work load and identify any needed freeing up of their tasks or workload so they can accomplish their new assignments.

  • Define any resource needs. Discuss and agree on resources required to get the job done. All relevant resources should be taken into consideration, including staffing, physical space, equipment, materials, inventory, storage and other related activities and services.
  • Support and Communicate. As part of the communication and support process, alert the individual to any unusual matters of politics or protocol within the organization of which he or she should be cognizant. Inform your own manager and your own peers of the new assignment to a direct report, if the task assigned is one of high visibility and warrants this level of support and
  • Monitor progress. Build into the task or project assignment a process for on-going monitoring, meetings and accountability discussions. Don’t leave them to sink or swim; inspect what you expect. Have set times where you meet with the employee, allowing them the opportunity to report on progress, ask questions and receive any needed coaching. If you delegate to someone who lacks the skills to accomplish the job, even after the needed training and coaching occurs, you may have to make a change in the assignment. When you delegate, you’re still responsible.
  • Be patient and encouraging. There are always challenges in learning new skills and taking on something you’ve never done before. Expect some set-backs and mistakes without over- reacting. Remember, you didn’t learn the skill overnight either. Stay positive, showing confidence in the employee and their ability to get through the tough times. When they approach you with problems, ask what they suggest. This shows confidence in them and helps them to take more ownership.
  • Provide feedback and reinforcement.

As you monitor employees’ on-going task completion efforts, provide feedback anytime you are surprised with results. Give praise and recognition when you are pleasantly surprised, and constructive feedback and coaching whenever performance is subpar. Like any performance situation, there should be no surprises at the end. Make sure the employee knows how you feel and how he or she is doing along the way.

  • Assess lessons learned at the end of a given project. Ask the employee to review what went well, what could have gone better and how things should be done differently the next time. This helps with the development of the employee while ensuring continued organizational improvement.  Make sure to let the employee receive credit and recognition for the project results. Nothing will undermine future delegation efforts faster than a leader who delegates, then claims all the glory for the task being done. Each time a project is completed, the manager should attempt to engage the employee in a task that is incrementally more challenging than the previous

 About HR Service, Inc.

HR Service provides broker and client solutions for benefit ERISA compliance and HR, insuring organizations meet ERISA and Department of Labor (DOL) requirements for:  Summary Plan Description Wraps (SPD Wraps), Employee Notifications, 125 Premium Only Plans (125 POP), Summaries of Material Modification (SMM), Health Insurance Portability & Accountability Act (HIPAA), ACA Reporting, and Employment Laws.  Our web-based SPD Wraps, Employee Notices, 125 POPs, and ACA Reporting tools make it easy to comply with ERISA.  Visit us online at or call (855) 447-3375 for SPD Wraps, 125 POPs, HR Support, ACA Reporting, HIPAA Solutions, HR Support, and more.

Internet at Work: Tool or Productivity Waster

The use of internet at work has increased significantly over the years for business communications, transactions, and research. It has also become one of the biggest time wasters to employers, because of the increased non-work related use by employees. For example, according to a recent report by SurfControl (Snoddy), a web filtering and security software provider, office workers who spend one hour a day at work on various non-work activities (e.g., trading stock shares, booking vacations, shopping online) could be costing businesses as much as $35 million a year. The survey found that 59% of internet use at the office was not work related and employees who traded in stock shares, played online games, shopped, and booked vacations cost companies the most. It is clear from this type of research that internet abuse is a serious cause for concern.

Not only are there concerns for productivity, but also for addiction related to things like pornography, gambling, social networks, and video gaming activities. It has been argued behavioral addictions are no different from chemical addictions (e.g., alcoholism, heroin, or tobacco addiction) regarding the core components of addiction such as salience, tolerance, withdrawal, mood modification, conflict, time waste, and relapse. Most excessive internet users spend vast amounts of time online for social contact (mostly for chat room services). Young (1999) claimed internet addiction was a broad term that covered a wide variety of behaviors and impulse control problems that have been classified by five specific subtypes (i.e., cyber sexual addiction, cyber- relationship addiction, net compulsions, information overload, and computer addiction).

Each of these addictions translates into lost productivity and time wasters for employees with

these problems. There are many factors that make internet abuse in the workplace seductive.

Research in the area of computer-mediated communication has shown virtual environments have the potential to provide short-term comfort, excitement, and/or distraction (Griffiths, 2000c). They also give anonymity allowing the users to privately engage in their behavior, believing the chance of being caught is minimal.

Fixing the Problem

Finding ways to eliminate internet misuse and addictive behaviors while still allowing the positive benefits to remain in the work environment is possible.

  1. Create Internet Use Policy – Clearly define company policy on all computer, internet, and email use. This should include the following information:
    1. Computer, internet, and email are all company property and the company reserves the right to monitor use and access
    2. Definition of misuse items that would result in corrective action (e.g., gambling, pornography, and other non- job related uses).
    3. A provision prohibiting communications that is contrary to the company’s harassment and discrimination
    4. A statement that the use of internet and email are for business purposes
  2. Train Employees – Train employees in the policy defining expectations, proper use, and abuse that will result in corrective actions. Ask employees to be vigilant in using their work time, internet, and computer resources wisely. Give employees a diagnostic checklist to help them see if they might have an internet problem.
  1. Internet Filter – There are good internet filters available that block or restrict access to undesired websites. Work closely with your IT personnel to develop restrictions to various categories and sites. In addition to restricting sites like pornography and gambling, some organizations even restrict YouTube and Facebook. Consider restricting any site that does not serve a business purpose. Balance restrictions by not being too mistrusting. Allow those who do not abuse the system to do some personal things on the internet during breaks and
  2. Monitor Internet Use – In addition to informing employees your organization monitors internet use, monitor access to restricted sites, especially for those who have shown a problem in this area. If you suspect an employee may have a problem with internet abuse, request that the company’s information technology specialist look at the history of the employee’s internet surfing because the computer’s hard disk will have information about everything the employee has ever accessed. One of the simplest checks is to look at an employee’s list of bookmarked
  3. Give Support – For lesser violations, give support to identified computer/internet abusers, helping them understand the problems associated with their misuse. In some instances, creating a performance improvement plan defining the problem, needed changes, and getting the employee’s signature can be an effective tool to bring about needed changes. Others may need assistance with counseling services or addiction recovery
  4. Supervisor Reinforcement –Supervisors must ensure adherence to all company policies and procedures, including the internet, computer, and email policy. Train leaders to remain aware of employees’ computer activities and other indicators that show there may be a problem. For example, decreased productivity, missing deadlines, spending excessive amounts of time on the internet, and shifting to another site when someone walks by, can each indicate there is a potential problem. Raise awareness, set expectations, monitor, give feedback and reinforce the need to use the internet appropriately.
  1. Corrective Action – Employees who violate your internet, computer, and email policy should be held accountable. The level of the violation drives the corrective action response. For lesser violations, you may give them support and coaching to help them improve. For more serious violations and repeat offenders, discharge may be the best recourse. Keep in mind other employees know when abuse is taking place. If they see someone getting away with wasting time and misusing the internet, it causes resentment, negativity, and may lead to them adopting poor internet habits as well. Be consistent and take needed actions to enforce your policy.

Internet abuse can be a hidden activity that requires clear policies, training, monitoring, blocking, leader reinforcement, and corrective action to keep the internet a productive tool–not a time waster.

About HR Service, Inc.

HR Service provides broker and client solutions for benefit ERISA compliance and HR, insuring organizations meet ERISA and Department of Labor (DOL) requirements for:  Summary Plan Description Wraps (SPD Wraps), Employee Notifications, 125 Premium Only Plans (125 POP), Summaries of Material Modification (SMM), Health Insurance Portability & Accountability Act (HIPAA), ACA Reporting, and Employment Laws.  Our web-based SPD Wraps, Employee Notices, 125 POPs, and ACA Reporting tools make it easy to comply with ERISA.  Visit us online at or call (855) 447-3375 for SPD Wraps, 125 POPs, HR Support, ACA Reporting, HIPAA Solutions, HR Support, and more.

Measuring HR & People Practices

You’ve heard the saying “what gets measured gets done, and what gets reinforced gets repeated”.

The same is true for your human resource management & people practices. Organizations have a greater impact with their people and HR efforts by monitoring key HR/people measures and applying reinforcement steps to drive desired results. By identifying key measures, tracking results, and making needed adjustments, improvement can be tracked and identified.

HR Measures

Most measures of employee results, behaviors and attitudes are a reflection of your people/HR practices. Document key baseline measures before implementation and track after implementation for a reasonable period of time to assess the impact of your training, new initiatives, policies, changes, techniques and other HR efforts.

Consider the following measures when evaluating the effectiveness of your HR/people management practices: Employee performance, turnover, engagement/morale, leader effectiveness, attendance, tardiness, accidents, staff efficiency and organizational effectiveness. Certainly overall business results such as sales, profitability, cost control, quality and productivity are a reflection of your people management practices. Soft measures such as communications, conflict, stress level and work environment also show HR impacts to the organization.

Employee Performance

Measures of employee performance include, but are not limited to:

  • Sales: Growth in sales numbers measured per sales person or sales per employee.
  • Productivity: Output or results per employee work hour or other measures and utilization of labor and
  • Quality: Number of internal errors, external returns or
  • Speed or Quantity: The rate or quantity of output per employee work
  • Accuracy: Ability to perform a given function or service exactly as trained or
  • Key Performance Indicators (KPIs): Ability to achieve certain essential job indicators or functions that, when accomplished, satisfy the purpose of a given
  • Goal Attainment: Ability to set and attain specific goals that have meaning to the organization, team, customer or
  • Competency: Any number of knowledge, skills, abilities (KSAs) and behaviors which lead to impactful results and accomplishments. For example, you know a good customer service person does her job through demonstrated service skills, product knowledge, and interpersonal communication
  • Performance Appraisals: There are multiple appraisal systems, all which reflect measures of

Turn Over

Employee turnover is the average number of employees who leave the organization divided by the average total number of employees. Tracking not only the turnover ratios, but also the reasons why someone leaves is a good indicator of your HR effectiveness. Conduct exit interviews to get the real reason someone has left the organization.

Generally employees leave for one of the following reasons:

  • Poor fit with the job, hence ineffective hiring practices
  • Dislike for managers or management practices, a measure of leader training & development
  • Pay or benefits
  • Work environment
  • Better opportunity, which usually means poor fit assessment, lacking competitive pay or ineffective training or career path planning

Employee Engagement & Morale

Measures of employee engagement and morale are usually obtained through an “employee opinion survey” that captures these among other important employee perceptions. Conducting surveys annually provides employers with good indications of these important factors. An employee’s engagement level impacts their performance, attitude, and overall impact to the organization. Engagement and morale can also be measured through one-on-one employee discussions, task force meetings and through such measures as performance and turnover.

Leader Effectiveness

Leaders truly are the real HR managers as they coach and oversee employees and their work results. Effective HR programs and practices will provide leaders with needed training, resources, tools and techniques to best do their job. Although challenging to measure, leader effectiveness can be obtained through leader surveys collecting feedback from their employees, manager, customers and others with whom they interact. A 360 degree assessment that focuses on core leader measures is one method to obtain good HR indicators. Other measures of leader effectiveness are looking at the results of their overall department and employee performance measures under their direction.

Attendance, Tardiness, Sick Leave & Accidents:

Monitoring these important employee measures identify symptoms that help you understand overall effectiveness of your policies, training, practices, performance management and leader skills. Not only are these key expected employee performance measures, they can also be very costly to your organization if not addressed with creative HR solutions.

Staffing Efficiency

Staffing efficiency is measured by ensuring the right staffing levels and having the right person in place when needed. Measures might include over- or understaffing, resulting in reductions or downtime. Some organizations track their recruiting efforts through recruitment or new hire cost and number of days to hire.

Organization Effectiveness

People are the heart and soul of an organization, and determine its overall effectiveness. Therefore, overall business results are another indicator of HR effectiveness. Most organizations measure their effectiveness looking at key business measures such as income statements, stock price, business growth, strategy achievement, objective attainment, budget achievement and so on.

Monitor and communicate these key measures often to see greater results from your people management practices.

About HR Service, Inc.

HR Service provides broker and client solutions for benefit ERISA compliance and HR, insuring organizations meet ERISA and Department of Labor (DOL) requirements for:  Summary Plan Description Wraps (SPD Wraps), Employee Notifications, 125 Premium Only Plans (125 POP), Summaries of Material Modification (SMM), Health Insurance Portability & Accountability Act (HIPAA), ACA Reporting, and Employment Laws.  Our web-based SPD Wraps, Employee Notices, 125 POPs, and ACA Reporting tools make it easy to comply with ERISA.  Visit us online at or call (855) 447-3375 for SPD Wraps, 125 POPs, HR Support, ACA Reporting, HIPAA Solutions, HR Support, and more.






Work Distractions: The Productivity Thief

George, your Customer Service Representative, sits at his desk actively sending out personal E- mails, and text messaging, all on your dime. To make matters worse, he occasionally sends off- colored jokes and sexually explicit material. Jane, the Receptionist, plays cards and shops on the internet for up to three hours per day.

Recent surveys indicate that almost 30% of on- the-job computer usage is unrelated to work. Non- job related computer use such as internet surfing, personal E-mails, text messaging, and computer games are major distractions to employee productivity, costing you thousands of dollars.

To help address these distractions, some companies monitor their employees’ computer usage at work. Employees, on the other hand, expect some level of privacy sending emails and instant messages, especially when discussing private matters unrelated to work like medical information.

Computer Usage & Privacy Policy

Charles H. Wilson, attorney for Epstein Becker Green Wickliff & Hall, P.C., provides the following advice on monitoring and creating a computer usage policy:

How far an employer can go in monitoring, and disciplining, employees for inappropriate personal emails and instant messaging largely depends on whether the employer has a clearly defined and well-worded computer usage privacy policy.

Employers mistakenly believe that mere ownership and control of a computer or laptop entitles the employer to unchecked surveillance or monitoring of an employee’s emails and instant messages says Charles. This is not necessarily the case, especially if the employer does not have an appropriate computer usage policy or has one that eliminates any expectation of privacy.

Several recent court decisions have rejected an employer’s right to inspect an employee’s computer in the absence of clear policies and practices informing the employee that no expectation of privacy exists and that the employer retains the right to review emails and instant messages.

What to do: 

To avoid potential liability for monitoring or reviewing private employee emails, employers should create and implement policies that eliminate any expectation of privacy.

Employers should also train their employees on the policy. More importantly, employers must practice what they preach and must not utilize a strategy that gives rise to the expectation of privacy or allow too many work distractions.

At a minimum, a workplace computer usage policy and strategy should include the following:

An introductory statement that an employer’s email and instant messaging system belongs to the company at all times and is a company resource provided as a business tool. Make sure the employees understand the emails and instant messages they send belong to the company not the employee.

A statement that the use of company email and instant messaging for inappropriate personal use may result in discipline including termination. Although, realistically, there will be some personal use allowed, ensure that employees are aware that any and all personal use may result in discipline.

A statement that emails and instant messages sent or received may be monitored by the employer. In this regard, the employer must only review emails or instant messages already sent and saved to the network. It is illegal to intercept emails as they are being transmitted.

A statement informing the employees that their emails and instant messages are not considered private and that by using the employer-provided email and instant message service, they consent to being monitored by the employer.

A statement that all passwords belong to the company and that they must be provided to their supervisors. Avoid giving employees unchecked power to password-protect their computers, which can contribute to an expectation of privacy.

A warning prohibiting the employee from using a code, accessing a file or retrieving any stored information unless authorized. Be careful to explain, however, that such provision does not preclude the employer from accessing the employee’s own stored emails.

A provision prohibiting the communication of messages prohibited by the employer’s harassment and discrimination policies.

Mr. Wilson concludes his recommendations stating that “Implementing and practicing a carefully worded email and instant messaging policy will eliminate any expectation of email privacy and provide the express or implied consent the employer needs to monitor and review emails sent or received by the employee in the workplace”.

Eliminating Distractions

Establishing an effective policy is only half the battle in eliminating work distractions. The following steps will help you get employees focused on their work at hand:

  1. Set the expectation that personal use of computers, cell phones and other distractions during company time is unacceptable. Where possible, allow personal use of these devices during scheduled breaks and lunch periods. Establish the policy and discuss it in group meetings or one-on-one.
  1. The supervisor is the key in implementing and addressing misuse of the policy. Leaders should be in daily contact with employees, monitor performance and address issues as they arise. Anytime the leader is surprised by a misuse of policy or performance, he/she should address the issue with the employee. Look for patterns in dropped performance and investigate to get to the root case, which may or may not be
  2. Catch employees doing things right! Notice and reward those who continually set the type of examples desired and who perform at higher than expected performance levels. Notice achievements and positively recognize when
  3. Those who continue to abuse distraction policies or do not meet performance requirements should be addressed with your corrective action

Managed effectively, organizations can create a positive workforce and have fun at work, while at the same time eliminating costly work distractions of personal E-mails, text messaging, computer games, excessive talking and cell phones.

About HR Service, Inc.

HR Service provides broker and client solutions for benefit ERISA compliance and HR, insuring organizations meet ERISA and Department of Labor (DOL) requirements for:  Summary Plan Description Wraps (SPD Wraps), Employee Notifications, 125 Premium Only Plans (125 POP), Summaries of Material Modification (SMM), Health Insurance Portability & Accountability Act (HIPAA), ACA Reporting, and Employment Laws.  Our web-based SPD Wraps, Employee Notices, 125 POPs, and ACA Reporting tools make it easy to comply with ERISA.  Visit us online at or call (855) 447-3375 for SPD Wraps, 125 POPs, HR Support, ACA Reporting, HIPAA Solutions, HR Support, and more.


Top 10 Employer Mistakes- How to Get Sued

In this article, we expand on the items that apply in all states, add in common employer mistakes we frequently see, and show the right things to do to avoid being sued or fined.

Mistake #1: Incorrectly classifying employees as exempt or salaried who are not.

Some employers classify employees as exempt from the Fair Labor Standards Act (FLSA) to save money and eliminate hassle. Exempt employees don’t get paid breaks, don’t have to track work hours and are not entitled to overtime pay (time-and-a-half) when they work more than 40 hours in a defined work week. The problem, paying them a set salary each week with a puffed up job title, does not make them exempt in the eyes of the law.

Solution: Make sure all positions classified as exempt meet the salary and job responsibilities/duties test before classifying them as such. Federal law requires employees to be paid a set salary of at least $455 per week and to pass one of the allowed job exemptions: Executives, Professionals, Administrative, Computer Related/IT, and Outside Sales.

Keep in mind, when the Department of Labor (DOL) reviews your position classifications, they look at what the person does most of the time on the job, not their job title. If an Executive Assistant is to pass the Administrative test, for example, they must be able to show that they regularly exercise discretion and independent judgment with respect to matters of significance.

Mistake #2: Classifying employees as independent contractors.

Some companies feel that having employees is too much hassle, and they make them independent contractors so they don’t have the worries of Social Security taxes, unemployment, workers compensation, benefits and so on. If you use this approach, you’ll find yourself paying back taxes, unemployment, workers compensation fees and fines. Solution: Follow the rules that allow for independent contractor status. The IRS provides very strict guidelines for this classification, depending on the amount of behavioral control, financial control, and type of relationship. See Employed/Independent-Contractor-Self-Employed-or- Employee for details.

Mistake #3: Allowing non-exempt employees to perform work off the clock.

What do you do when highly motivated employees arrive early, work late, or take work home without reporting the work-time? It is tempting to allow them to go above and beyond without pay. The problem is — as employers — we are required to track and pay for all work time, whether it is approved or not.

Solution: Establish clear policy guidelines requiring non- exempt employees to track and report all work time, then communicate and reinforce this expectation.

Mistake #4: Terminating employees who are out on medical or sick leave.

We have all had situations where an employee is out for a surgery, injury, or sickness that extends way past what seems reasonable, and we just want to cut our losses and move on to someone who can come to work.  The challenge is there are numerous laws protecting employees’ rights that may apply, depending on the facts. For example, Family Medical Leave Act allows up to 12 weeks of protected job leave for employers with 50+ employees within a 75 mile radius for employees who have been with the company at least one year and worked a minimum of 1,250 hours in the previous year.  The definition of disability has been expanded under the American Disabilities Act, making it much easier for someone to qualify for reasonable accommodation.  Employees have rights against retaliation in workers compensation claims and many other situations where they exercise a given right for which employers cannot take negative corrective action.

Solution: Evaluate all medically-related leave situations, carefully looking at employee’s rights and laws (state and federal) separately, before making decisions to terminate. Even employment-at-will does not allow employers to terminate if an employee has protections and rights under the law. Have set policies and practices which instruct employees and supervisors how to handle all leave situations, especially medical-related leave.

Mistake #5: Taking corrective actions without following set practices or policy guidelines.

Many organizations take corrective actions somewhat haphazardly when resolving employee problems, without following consistent best practice techniques. After all, they are the boss and they should be able to fire anyone for any reason, right?  Taking corrective actions in this fashion can lead to inconsistent practices, and claims of wrongful termination and/or discrimination.

Solution: Establish consistent practices for handling most performance challenges and corrective actions. It is a good idea to use a positive discipline approach where there is less punishment and more coaching, feedback, and planning. In most cases this will look something like a verbal discussion, written improvement plan, and then termination. Retaining the flexibility to go directly to the most appropriate step, depending on the situation, requires consistent and fair application of performance steps.

Mistake #6: Not taking responsibility for all employee notice requirements.

Why should I worry about providing the below notices? My broker and insurance company take care of them, don’t they?

Notice Requirements:

  • COBRA – Initial and Qualifying Event
  • CHIP (Child Health Insurance Plan)
  • MHPA (Mental Health Parity & Addition Equity Act)
  • NMHPA (Newborns & Mothers Health Protection Act)
  • WHCRA (Women’s Health & Cancer Rights Act)
  • HIPAA (Health Insurance Portability & Accountability Act)
  • Wellness Program Disclosure, if applicable
  • Grandfathered Plan, if applicable
  • Medicare Part D
  • Health Exchange Notice
  • Summary Plan Descriptions (SPDs or SPD Wraps)
  • SMM (Summary of Material Modifications)
  • SBC (Summary Benefits & Coverage)

It is great when you have excellent brokers and providers who assist with notices, but it is you who will be fined if something is not complete.

Solution: Know all employee notice requirements, make sure ownership is assigned to get them out, and use good tools and resources to get them done on time. Have systems in place to be able to show what was sent to whom, how, and when.

Mistake #7: Not training supervisors.

Supervisors need training in responding to complaints, handling requests for medical leave or disabilities, interviewing, selection, managing performance, handling corrective actions, giving feedback, team building, keeping documentation, and handling terminations. What supervisors say and do can create risk to your company, as they are representatives of your organization. Their decisions, actions and inactions not only impact your potential for a law suit, but drive morale, engagement, turnover, motivation, and your overall work environment.

Solution: Make sure supervisors are trained and skilled in all employment and people management practices.

Mistake #8: Not collecting accurate records for time worked by non-exempt employees.

Some organizations are unclear on what constitutes work time, especially in areas of breaks, arriving early, working late, meeting attendance, and travel time.

Solution: Create clear work time definitions and practices to obtain accurate time worked records. Establish policies for handling non-exempt travel, breaks, and meeting attendance.

Mistake #9: Not having a clearly defined process for how rate of pay is determined.

Some apply no logic as to how pay is set other than it felt right or it was what employees were willing to work for. The problem is this leads to potential pay discrimination against women and minorities.  In addition, employers may be paying too much or too little with no connection to the market or internal equity. Your pay system may not be driving your desired results and behavior or allowing you to attract and retain the best talent.

Solution: Establish a pay system with pay range minimum, midpoint, and maximum guidelines for each position based on market survey data and correlation with a job evaluation process that factors in internal equity. Have a process for assigning new hire offers, equity adjustments, pay reviews, and promotions.

Mistake #10: Not keeping employee handbooks up-to- date with good policies and practices.

Many employers don’t have a handbook at all, don’t keep them updated or pull some copy off the internet and call it their handbook. A good handbook communicates expectations, establishes consistent practices and allows for set decisions on important things like vacations, holidays, and handling of time off. Having employees sign an acknowledgement of receipt furthers protects the organization with evidence that employees know the policies, requirements, and resolution process.

Solution: Create a good employee handbook and have it reviewed by a specialist to make sure you have strong polices to govern your employment practices. Evaluate your handbook at least annually and establish a relationship with professionals to keep you aware of needed changes.

About HR Service, Inc.

HR Service provides broker and client solutions for benefit ERISA compliance and HR, insuring organizations meet ERISA and Department of Labor (DOL) requirements for:  Summary Plan Description Wraps (SPD Wraps), Employee Notifications, 125 Premium Only Plans (125 POP), Summaries of Material Modification (SMM), Health Insurance Portability & Accountability Act (HIPAA), ACA Reporting, and Employment Laws.  Our web-based SPD Wraps, Employee Notices, 125 POPs, and ACA Reporting tools make it easy to comply with ERISA.  Visit us online at or call (855) 447-3375 for SPD Wraps, 125 POPs, HR Support, ACA Reporting, HIPAA Solutions, HR Support, and more.