CBIA Hotline

Keep your firm off the hook

By Mark Soycher
CBIA HR counsel

Q: An employee who is often on the road for our company insists he is using his cell phone legally when driving by holding it below his chin and using the speaker function. We’re not buying it. Who is correct?

A: You are correct to reject his argument, and it’s likely that the police or a judge would do the same. State law says it’s OK to use a phone while driving only if it is done “hands-free,” except to activate or terminate a call. Using the speaker function and moving it away from physical contact with his ear does not give him a get-out-of-jail-free card. The precise placement of the phone is immaterial; your employee is still holding it in his hand—an illegal and dangerous practice.

Research tells us, however, that the real danger lies more in the brain distraction resulting from speaking on the phone while driving, whether hands-free or not. Most people can drive safely with one hand for at least a brief time (and it’s not illegal to do so), but driving with only half your brain is a different story.

Why risk the safety of your employee or others and expose your company to the growing inclination of courts to hold companies liable where an employee is permitted to talk on the phone while driving or even actively or passively encouraged to do so by supervisors?

The solution is easy: Adopt a policy that forbids employees from using any electronic communication devices while driving on company business, including hands-free devices. In addition, prohibit supervisors from conduct that might encourage workers to use their phones while driving. Managers who regularly demand that employees stay in touch while on the road or answer calls immediately—or who themselves use their phones while driving—expose the company and the employee to grave liability.

These issues are a concern regardless of whether an electronic device or the vehicle is company issued or owned, or personally owned and used for work purposes. To stress the point with employees even more strongly, you might consider including in your policy a statement such as, “Employees who are charged with traffic violations resulting from the improper or illegal use of their phone or other electronic device while driving will be solely responsible for all fines and liabilities that result from such actions.”

Such a statement may not completely insulate your company from liability, but it may make an employee think twice before grabbing that call while driving—which could end up costing the offender $125, $250, or $400 for a first, second, and subsequent offense respectively, independent of any other moving violations, criminal charges, and/or civil liability.

Q: When employees retire, are they eligible for unemployment benefits?

A: It depends. If a worker’s retirement reflects a truly voluntary withdrawal from the labor market, he or she may be denied unemployment benefits until returning to work and earning wages equaling 40 times their weekly benefit rate (approximately 20 weeks of work), and the subsequent separation from employment is under qualifying circumstances.

There are, however, situations where a worker’s “retirement” will most likely be judged as involuntary and therefore not disqualify him or her from eligibility for benefits. They include the following:

  • The retirement is induced by the employer in an effort to close a facility or eliminate the worker’s position, or the worker reasonably believes the employment would be severed if he or she rejected the employer’s inducement to retire.
  • The reason for the retirement is that the job has become unsuitable in light of the worker’s physical condition and the degree of risk to health and safety, and the worker has unsuccessfully requested other suitable work from the employer.

Where receipt of a retirement benefit does not disqualify a retired employee from eligibility for unemployment benefits, it may reduce weekly unemployment benefits in an amount equivalent to the prorated weekly amount of any part of a retirement benefit that was contributed by the employer.

For example, a claimant’s weekly unemployment benefit rate will be reduced or offset by 50% of the total amount of weekly Social Security benefits received by the claimant, based on the 50–50 sharing of Social Security taxes that fund this retirement benefit.

In any event, a claimant must still be able, available, and looking for full-time work to be eligible for unemployment compensation benefits.

Do you have a question related to employment law, wage and hour issues, human resources, or regulatory compliance involving state agencies such as DEEP or DRS? Members can get free information from CBIA’s experts by calling 860.244.1900.

Is a ‘Pink Slip’ Necessary?

By Mark Soycher
CBIA HR Counsel

Q: Since an employee who quits a job is not eligible for unemployment benefits, do I have to give him or her a pink slip?

A: Yes, for a number of reasons. First, a state regulation specifically requires that this notice be provided to all departing employees, regardless of the reason: “The unemployment notice shall be completed by the employer and issued to the employee, along with the employee information packet, immediately upon layoff or separation from employment, whatever the cause of such layoff or separation, including a voluntary leaving.”

The purpose of the unemployment notice is to advise the separating employee of his or her rights under state employment law and assist unemployment officials in making a determination of eligibility for unemployment benefits. In addition, the Connecticut Department of Labor has increased pressure on employers to submit required information in an effort to increase administrative efficiency and improve the accuracy of eligibility determinations, which in turn will improve the financial solvency of the state’s unemployment trust fund.

Here is one scenario where providing the notice would be particularly important: An employee resigns from your firm and immediately starts another job, making unemployment benefits irrelevant at that time. After a brief period at the new job, however, your former employee is terminated under qualifying circumstances and files for and is awarded jobless benefits.

Because the unemployment system allocates the tax impact of benefit payments to employers in the first four of the last five completed calendar quarters of a claimant’s past work history, your business is notified of a potential charge. If you can establish that the claimant left your job under disqualifying circumstances, i.e., voluntary quit, you can avoid the charge against your unemployment experience rating. A copy of the unemployment notice, which you issued at the time of the quit (noting it was a voluntary quit) and wisely retained in the employee’s personnel file, will be valuable documentary evidence to aid in avoiding the charge to your tax rate.

Another situation to illustrate the importance of issuing the notice: Ordinarily, an employee ruled eligible for benefits begins receiving benefits the week in which he or she files an initiating claim. An employee who delayed filing for several weeks after separating from a job would not get benefits for the intervening weeks between separating and filing. A claimant who was not given the required unemployment notice, however, may be awarded benefits dating back to the week of separation, on the basis that the failure of the employer to provide the required notice left the employee in the dark about the right to file.

Incidentally, people often wonder why an unemployment notice is called a pink slip. Although the conventional wisdom is that the notice had traditionally been printed on pink paper (hence the term), no verifiable evidence of an actual pink slip has emerged, and the origin of the term remains a mystery.

Today’s unemployment notice is neither pink nor a single “slip.” The required notice actually consists of a set of eight full-size pages. The first page—the proverbial pink slip—is filled out by the employer. The remaining seven pages are informational documents for the employee, intended to facilitate processing a claim and assist in an accurate determination of eligibility.

Q: We are trying to complete the Connecticut Department of Labor annual filing, due April 1 each year, reporting our company’s Family and Medical Leave activity under the state’s FMLA, but we can’t find the form on DOL’s website. What’s up?

You can stop looking. The law was changed last year, and the report is no longer required. Adopted last June, Public Act 13-140 eliminates the annual report employers used to catalog Connecticut FMLA activity from the prior year. Apparently the data were not being used for any particular purpose and so, as part of state government’s effort to eliminate unnecessary mandates, the General Assembly took this one off the books.

Do you have a question related to employment law, wage and hour issues, human resources, or regulatory compliance involving state agencies such as DEEP or DRS? Members can get free information from CBIA’s experts by calling the CBIA Hotline at 860.244.1900.

CBIA Hotline: Can You Ask an Employee for Proof of Same-Sex Marriage?

By Mark Soycher
CBIA HR Counsel

Q: An employee has asked that we enroll his same-sex spouse as his dependent for group medical insurance. Can I ask for a copy of their marriage certificate to verify that they are legally married?

A: You may but should do so only if you ask for similar documentation verifying the legal dependent status of all employees’ spouses upon enrollment. Otherwise you might be accused of differing treatment based on sexual orientation, which has been a form of illegal discrimination in Connecticut for many years.

Same-sex marriage has been legal in Connecticut by court decision since 2008, and by a change in state law in 2009. Unless there is some outward conduct to suspect an employee’s assertion of being married is false, most employers accept an employee’s statement of marital status without challenge.

A more suitable approach to prevent enrolling ineligible individuals for coverage would be to advise all employees seeking to enroll dependents that upon enrollment they will be signing documents attesting to the eligibility of their dependents and that any misrepresentation would result in a denial of coverage—and possibly legal action to recover benefits previously paid to an ineligible individual.

Keep in mind that paying the premium does not guarantee the insurance carrier will provide coverage. Paying benefits hinges on truthful application of individuals for coverage, a representation by the insured that all covered individuals meet the eligibility standards. The last thing anyone wants is to have a claim denied after an expensive medical treatment.

Q: An employee who has worked for us for many years informed me that she changed her name to her unmarried surname last year when she got divorced. Do I need to change the Immigration Form I-9 that has her married last name on it? Also, when checking her Form I-9, I found several other employees’ I-9s that are incomplete because the company’s former HR manager neglected to sign Section 2, the employer certification statement. Do I need to update these I-9s? If so, how?

A: You are not required to update Form I-9 when your employee has a legal change of name. However, it is recommended that you maintain correct information on your I-9s and note any name changes in Section 3, generally used for “reverification and rehires.”

Form I-9 regulations do not require that employees present documentation to show that they have changed their name, but you should take steps to be reasonably assured of your employee’s identity and the accuracy of your employee’s legal name change so that your actions will be properly documented and supported if the government asks to inspect your I-9s.

The issue of not having the employer certification part of Form I-9 (Section 2) properly completed requires careful attention.

You cannot simply sign Section 2 as the current HR manager or on behalf of the former HR manager, since it is an attestation of having reviewed the employee identity and work authorization documents and determined that they “reasonably appear genuine.” Unless you examine the documents yourself, you cannot make that assertion based on the former HR manager’s document review.

Immigration law requires that the person signing Section 2 attesting to the authenticity of the documents must have examined the original documents. You may make copies for your files, but copies are not acceptable when initially completing the I-9.

You should ask the affected employee(s) to complete a new Form I-9 Section 1 and provide you with proper documents for identification and work authorization—either the same or other acceptable documents. After you review them, and assuming you conclude they “reasonably appear genuine,” complete and sign Section 2 on the new I-9 and attach the new Form I-9 to the original incomplete Form I-9 with a note indicating that upon discovery of the incomplete old form, you updated your records with a corrected form. That explanation and documentation should be acceptable in the event your records are audited.

Do you have a question related to employment law, wage and hour issues, human resources, or regulatory compliance involving state agencies such as DEEP or DRS? Members can get free information from CBIA’s experts by calling the CBIA Hotline at 860.244.1900.

CBIA Hotlline: When It Snows and You Close

By Mark Soycher
CBIA HR Counsel

Q: Do we have to pay our employees if inclement weather forces us to close our shop for the day?

A: If you are forced to close for all or part of a workday, hourly and salaried nonexempt employees, i.e., those eligible for overtime pay, need only be paid for time actually worked. Some employers permit nonexempt employees to draw from accrued paid time off benefits, such as personal or vacation time, to maintain their regular wages for such days.

It’s a different story with exempt employees–those not entitled to overtime. To be classified as exempt, an employee’s job responsibilities must meet the executive, administrative or professional duties test, their weekly salary must be at least $475 per week, and their fixed weekly salary must not be subject to reduction because of variations in the quality or quantity of the work performed during any week in which at least some work is performed.

Where an exempt employee is absent from work because the business does not open at all for at least a full day but less than a full week, the employee’s regular weekly salary still must be paid in full. However, the portion of salary attributable to the weather-related closing day or days can be charged against the employee’s accrued paid time off (PTO) benefits. From the labor department’s perspective, that constitutes payment of full salary for the week. If the employee has no accrued PTO benefits, full salary still must be paid, and the weather-closing day’s pay can either be treated as regular wages and simply paid, or it can be recorded as an advance of PTO benefits, and charged against future accruals of PTO.

On the other hand, where the company remains open and the employee chooses not to report for work, such absence is considered an absence for a “personal” reason, and the employee may elect to draw from accrued PTO if permitted under the company’s benefit policies, or the absent employee may have his or her fixed weekly salary reduced in full- day increments without jeopardizing exempt status.

Keep in mind that state and federal law prohibit salary reductions for partial day absences although, as explained above, an employee’s PTO bank can be charged for the salary attributable to a partial day absence.

A word of caution: Given the relative ease of electronically accessing work-related data, records, and processes from remote locations via email, voicemail, and the Web, an exempt employee who chooses to remain at home on a day of inclement weather may not really be absent if some work tasks are performed from home. In such a case, that employee’s weekly salary should be paid in full as regular wages and only charged in part against an accrued PTO benefit to the extent you are able to quantify how much work was performed, and how much time taken off.

CBIA Hotline: ADA vs. OSHA: Which Prevails?

By Mark Soycher
CBIA HR Counsel

Q: A job applicant has experience in a manufacturing environment similar to ours but informed me in the interview that he can no longer wear the steel-toed boots we require for OSHA compliance because of a prior burn to one of his feet. Does the Americans with Disabilities Act (ADA) require an accommodation, waiving the use of steel-toed boots? What about a possible OSHA violation for failure to use necessary personal protective equipment? Could we ask him to sign an agreement stating that if he’s injured because of not wearing protective footwear, the company is not liable?

A: Where a possible disability accommodation interferes with a safety compliance standard, it is likely, but not certain, that the safety standard will take precedence. Inability to use personal protective equipment (PPE) may render the worker “unqualified” for the position and thus outside the protections of the ADA.

But before concluding that the employee is not qualified due to his inability to wear required protective footwear, consider the following: Are steel-toed shoes truly needed, or are you being overprotective in mandating them? Even if you conclude they are needed, does the need extend to all tasks, performed frequently, or is the hazard limited to certain infrequently performed tasks, in which case a qualified worker with a disability could be excused from performing those limited tasks requiring use of PPE? Assuming the use of PPE is required and the job cannot be divided to eliminate the hazard, are there alternate forms of PPE that might provide a suitable level of protection? The employee’s doctor and a safety-shoe vendor may have some suggestions.

Only after that type of analysis can you securely conclude the employee is not qualified because of his inability to wear required protective footwear. Do not ask him to sign any type of document purporting to waive company liability in the event he is injured as a result of not wearing required PPE. It would not be worth the paper it’s written on and would not insulate your company against an OSHA citation or a workers’ comp claim.

Q: We have a non-calendar year Section 125 premium-only plan that renews on July 1, 2014. An employee who declined coverage last year now is asking if he can enroll as of February 1, even though open enrollment is not until June 1, 2014. We’d like to accommodate her request, but we’re concerned that doing so would violate the Section 125 restrictions on changes outside of open enrollment and jeopardize the tax advantaged status of the plan?

A: Timing is everything, and you may be in luck. As part of the ACA rollout and startup of the public exchanges, or marketplaces, the IRS has taken steps to allow greater flexibility for individuals to make changes in salary reduction elections for medical plans provided through Section 125 plans for non-calendar plan years beginning in 2013.

To take advantage of this “transition relief,” described in IRS Notices 2013-42 and 2013-71, you will need to amend your written plan. This will allow employees to make certain changes in salary reduction elections previously prohibited, even if they do not experience any of the enumerated changes in status that trigger the right to change an election in the middle of a plan year under current IRS Section 125 regulations.

Generally, Section 125 cafeteria plan elections must be made before the start of the plan year and are irrevocable during the plan year, with limited exceptions, including certain changes in status. Under existing regulations, the availability of health plan coverage through an ACA insurance exchange beginning with calendar year 2014 does not constitute such a change in status.

Under the IRS transition relief that sidesteps this restriction and would seem to offer the desired option to your employee, an employee who failed to make a salary reduction Section 125 cafeteria plan election during the 2013 open enrollment period is allowed to make a one-time election change after the first of the year starting in 2014. This offers employees the opportunity to enroll in their employer’s non-calendar year plan outside of open enrollment in order to comply with the ACA’s calendar year individual mandate and avoid the penalty for failing to obtain coverage. This should be sufficient to accommodate your employee’s situation and request.

The second transition relief circumstance in which a previously prohibited election change is permitted occurs when an employee who elected coverage under his employer’s Section 125 cafeteria plan is allowed to prospectively revoke or change his or her election once during that plan year. This option reflects the IRS’s concern that an employee’s preferences may change due to the implementation of the ACA, and he or she may wish to explore coverage through a state exchange.

Do you have a question related to employment law, wage and hour issues, human resources, or regulatory compliance involving state agencies such as DEEP or DRS? Members can get free information from CBIA’s experts by calling the CBIA Hotline at 860.244.1900.

CBIA Hotline: Pepper Spray in the Workplace

By Mark Soycher
CBIA HR Counsel

Q: Employees were discussing recent news reports about workplace violence, personal protection, and the pros and cons of gun ownership. Several remarked that they carry pocket-sized pepper spray containers all the time, including at work. We already have a policy banning weapons at work. Can that be expanded to ban pepper spray as well?

A: You are certainly within your rights to ban such substances at your workplace as part of a ban on weapons, even though sale and possession of pepper spray is legal in Connecticut. Pepper spray is a powerful inflammatory agent that can cause almost instantaneous, nonpermanent incapacity due to temporary blindness, difficulty breathing, excessive coughing, and skin irritation. Generally sold to consumers as a defensive nonlethal weapon, it also can be used by an attacker.

In a 2006 SHRM nationwide survey on weapons in the workplace, 86% of HR professionals responding reported they had policies banning all weapons. Less than 10% indicated their policies singled out particular weapons, and only 1% banned pepper spray specifically in their policies.

One explanation is that employers may consider a weapons ban to be all-encompassing, covering guns, knives, stun guns/tasers, and pepper spray—or it may be that pepper spray is not viewed to be as objectionable as other weapons. Of course, geography may also be a factor, as well as the age of the SHRM data.

Local police may be a helpful resource on safe practices concerning pepper spray. Pepper spray vendors recommend that consumers purchase training materials as well as nonactive spray units to permit practicing their aim and discharging spray without causing harm.

Considering that pepper spray devices are legal and readily available in a form intended to be easily carried and/or concealed in one’s pocket, purse, or on a key chain, it may be impractical to enforce a workplace ban. Additionally, it’s likely that many employees see such devices as comforting from a personal safety perspective while commuting and elsewhere outside of work.

As an alternative to a ban, you might consider a permissive policy, which places responsibility on employees to keep pepper spray out of sight and available only in the event of an emergency outside of work.

Here’s a suggested policy statement: Any incidents of workplace violence or threats shall be addressed through the reporting and management intervention procedures specified elsewhere in our policies. Employees who choose to carry mace/pepper spray for personal protection while coming to and going from work may bring such items on-site. It is a violation of company policy, however, to openly display or inappropriately refer to possession in a threatening or disruptive manner while performing work responsibilities or interacting with coworkers or customers in the course of work.

Any employee choosing to carry spray canisters for his or her personal protection while coming to and going from work shall be liable for the cost of property damage, cleanup, or injury to others should the canister discharge at work.

Q: Our first biweekly payroll for 2014 will be issued on Friday, Jan. 10. With the minimum wage increasing as of Jan. 1 from $8.25 to $8.70, must we use the higher minimum rate for all hours paid in 2014, even though our first pay period of the year will include several days worked at the end of December 2013?

A: You may voluntarily choose to pay those hours worked in 2013 at the higher minimum rate of $8.70 per hour, but your legal obligation is to use the minimum rate applicable at the time the work was performed. That means hours worked in 2013 must be paid no less than $8.25 per hour, and hours worked in 2014 paid no less than $8.70 per hour. This is no different from a situation where a worker might perform various tasks that pay different rates, based on complexity, customer pricing, or time of day, resulting in a week of total hours reflecting several hourly rates.

In the event the weekly total hours worked exceed 40, and overtime pay is owed, you have to calculate an average hourly rate for the week. To do that, tally up total straight-time wages for all hours worked at each applicable hourly rate; divide that total by the total hours worked, giving you an average hourly rate for the week. Then divide that average hourly rate by two and multiply that half-time rate by the number of overtime hours worked. That will yield a gross pay amount that includes overtime pay at time-and-a-half of a blended or average hourly rate.

Do you have a question related to employment law, wage and hour issues, human resources, or regulatory compliance involving state agencies such as DEEP or DRS? Members can get free information from CBIA’s experts by calling the CBIA Hotline at 860.244.1900.

CBIA Hotline: Can We Ban Sports Betting Pools in Our Workplace?

Q: Now that football season is in full swing, employees have begun talking about organizing a betting pool for the Super Bowl. Can we ban such pools?

A: Yes, you can prohibit nonwork-related activities, although it may be difficult to enforce such a ban.

Instead, many businesses have policies that disclaim any official company involvement, prohibit employees from using company equipment or resources in setting up pools, or from doing this during work time. They also often require that any money raised from a betting pool voluntarily organized by employees must be paid to the winners, with no “profits” going to the organizers.

As an alternative, some companies themselves organize a pool that doesn’t involve employees paying or winning money. Instead, the pools offer modest prizes such as gift certificates to a local store or restaurant, paid for by the company.

With such a strategy, employees’ participation should be voluntary. If a lot of employees want to participate, the event might even be turned into a morale booster, prompting more interaction among groups of workers who might otherwise not have a common-interest topic of conversation. Team building concepts can often be found on strange playing fields, possibly leading to some work-related discussions and new business opportunities.

Do you have a question related to employment law, wage and hour issues, or human resources? Members can get free information from CBIA’s experts by calling 860.244.1900.

CBIA Hotline: Rules for Midyear Health Plan Election Changes

By Mark Soycher
CBIA HR Counsel

Q: An employee says he no longer wants to participate in our health plan and has insisted that we immediately stop deducting premium contributions from his paycheck because he needs extra cash to buy a new car. Can an employee drop his or her coverage under our group health plan in the middle of our plan year? Our plan is on a calendar year cycle, and contributions are made on a pretax basis under a Section 125 Premium Only Plan (POP).

A: In situations like this, I often suggest offering to examine any documentary support an employee can present to back up a demand. In this particular case, however, you can confidently advise your employee that you cannot suspend his wage deductions at this time for the reason he is giving you.

Generally, it’s important to communicate to employees that Section 125 elections are irrevocable for the duration of the plan year, with very limited opportunities to make midyear changes, including revoking a benefit election.

An employee’s pressing personal financial matter is not one of the permissible circumstances for making a midyear election change, including dropping coverage. Allowing election changes not permissible under IRS provisions could result in your plan losing its tax-favored status, in which case all employees might be taxed on deductions made with pretax dollars during the year.

Internal Revenue Code Section 125 permits employees to pay for group health insurance coverage from an employer-sponsored plan using pretax wages, thereby maximizing the value of their money when used for this purpose. To preserve this tax-favored arrangement, commonly referred to as a cafeteria plan, employers must limit election changes to specified periods: a designated enrollment opportunity after employment starts; an annual open enrollment period; and midyear, but only under limited circumstances, as set forth in a written plan document.

Circumstances in which midyear election changes are permitted under IRS regulations fall into two general categories: a “change in the covered employee’s family status” or a “significant change to his or her dependents’ insurance coverage.” Specific circumstances that typically trigger a permissible midyear election change include:

  • Marriage or divorce of the employee
  • Death of the employee’s spouse or dependent
  • Birth or adoption of a child of the employee
  • Termination of employment or commencement of employment of the employee’s spouse
  • A switch by the employee or spouse from part-time to full-time employment or vice versa
  • The taking of an unpaid leave by the employee or dependent spouse, causing a loss of eligibility (e.g., FMLA)
  • Significant change in the cost of the employee or spouse’s health coverage
  • Cessation or significant curtailment of coverage under the plan originally elected

Previously, an IRS rule had permitted an employee to terminate coverage due to a “cessation of required premiums,” but that rule was deleted in 2007 and is no longer recognized under applicable IRS Section 125 regulations.

Q: I heard the unemployment benefit rate dropped. Will my unemployment taxes go down too?

A: The maximum unemployment weekly benefit rate is adjusted annually on the first Sunday in October. This year, for the first time in many years, the rate decreased—from $591 to $590, applicable to all new claims initiated on or after Oct. 6, 2013.

While this benefit rate decrease may result in a slight drop in your tax rate, you won’t feel it until 2015, because the new benefit rate will only apply to claims filed after Oct. 6, 2013, and your annual/calendar year unemployment tax rate is based on benefits paid to former employees during the three-year period ending June 30.

By state law, the maximum weekly benefit rate is designated to be not more than 60% of the average wage of production and related workers statewide, with any year-to-year increase capped at $18. The rate has risen the maximum $18 each year for the last five years, so the $1 drop this year is indicative of flattening statewide wages.

The actual weekly benefit amount unemployed workers receive is determined by a complicated calculation contained within state law, but the short version is that it is approximately 50% of their weekly earnings. Unemployment claimants filing a claim on or after Oct. 6, 2013, would receive the maximum weekly benefit of $590 only if their historical weekly wages were $1,180 ($590 x 2— $61,360 annualized) or higher.

Do you have a question related to employment law, wage and hour issues, human resources, or regulatory compliance involving state agencies such as DEEP or DRS? Members can get free information from CBIA’s experts by calling 860.244.1900.

HR Hotline: Exempt or Nonexempt?

By Mark Soycher
CBIA human resources expert

Q: We pay a supervisor $18 per hour. He works 40 hours per week fairly consistently, supervising five production employees. He provides a lot of input on personnel issues related to his staff, including staffing needs, hiring, firing, and discipline. Because of new production orders, we anticipate a longer work schedule for the foreseeable future, likely 45 to 50 hours per week. Must we pay him overtime, or is he exempt as a supervisor? If we have to pay him an additional amount, can we simply agree upon a mutually acceptable figure for the additional hours?

A: You may have an overtime compliance problem, unless you change this supervisor’s compensation terms. Whether an employee is exempt from overtime under state and federal law depends on job duties and salary.

To fulfill the “duties” test for exempt status, the employee’s primary duty must be to perform tasks of an exempt nature, based on actual job responsibilities. The Connecticut Department of Labor (DOL) provides detailed descriptions of the exempt categories—Executive, Administrative, and Professional— but suffice it to say that job descriptions and job titles alone are not enough to determine exempt or nonexempt status, particularly because they often do not accurately reflect the employee’s actual duties.

If your description of your supervisor’s job duties is accurate, it appears he meets the duties test under the Executive Exemption category. However, exempt status also requires meeting the “salary test.” The employee must receive a consistent, guaranteed weekly salary—a predetermined amount of compensation each pay period that is not reduced because of variations in the quality or quantity of the employee’s work. (For more detailson the DOL’s salary test , click here.)

In your case, determining your supervisor’s weekly pay based on an hourly rate of $18 fails to meet this test. As a result, you must pay him at a time-and-a-half rate of $27 per hour ($18 x 1.5) for all hours worked above 40 hours per week.

To overcome this problem, you might change his compensation terms from hourly to a guaranteed fixed weekly salary of $720 per week ($18 per hour x 40 hours), which would not be reduced if he worked fewer than 40 hours. That way, he would fulfill both the salary test and the duties test for exempt status. His position could then be classified as exempt from overtime. In that case, it would be permissible for you to require him to work any additional hours necessary to complete his job responsibilities without having to provide him additional pay for the extra hours.

If you still wanted to provide some additional pay to reward his extra availability and effort, you could do so without having to use the overtime calculation. You could calculate the additional pay based on any formula you wish, for example, a flat amount or some production-related figure, or even an hourly amount, but only for the additional hours, leaving the basic weekly guaranteed salary in place.

Q: Now that football season is in full swing, employees have begun talking about organizing a betting pool for the Super Bowl. Can we ban such pools?

Yes, you can prohibit nonwork-related activities, although it may be difficult to enforce such a ban.

Instead, many businesses have policies that disclaim any official company involvement, prohibit employees from using company equipment or resources in setting up pools, or from doing this during work time. They also often require that any money raised from a betting pool voluntarily organized by employees must be paid to the winners, with no “profits” going to the organizers.

As an alternative, some companies themselves organize a pool that doesn’t involve employees paying or winning money. Instead, the pools offer modest prizes such as gift certificates to a local store or restaurant, paid for by the company.

With such a strategy, employees’ participation should be voluntary. If a lot of employees want to participate, the event might even be turned into a morale booster, prompting more interaction among groups of workers who might otherwise not have a common-interest topic of conversation. Team building concepts can often be found on strange playing fields, possibly leading to some work-related discussions and new business opportunities.

Do you have a question related to employment law, wage and hour issues, or human resources? Members can get free information from CBIA’s experts by calling 860.244.1900.

HR Hotline: Tax Implications of BYOD

By Mark Soycher
CBIA human resources expert

Q: Our employees in the field stay in touch with our main office via smart phone, telephone, text, and email. Some are still using company-issued phones and are allowed to use them for personal business. We are thinking of requiring field staff to use their own equipment for work purposes, the bring-your-own-device-to-work (BYOD) arrangement. If we pay employees a monthly amount as an estimate of the monthly pro rata portion of business vs. personal use, must that amount be reported on their W-2 as taxable income? And what about our past practice of issuing “tax-free” company phones?

A: The value of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee’s income as a working condition fringe benefit. Personal use of an employer-provided cell phone, provided primarily for noncompensatory business reasons, is excludable from an employee’s income as a de minimis fringe benefit.

To meet the IRS’s criteria that the company phone is for a noncompensatory business purpose, you must be able to show that there are substantial business reasons behind the arrangement. Such reasons include:

  • A business need to contact the employee at all times for work-related emergencies
  • A requirement that the employee be available to speak with customers or clients at times when the employee is away from the office
  • A need to speak with clients located in other time zones at times outside the employee’s normal workday

If the phone is provided to promote goodwill, boost morale, or attract prospective employees, however, its value must be reported as a form of taxable income, as it is actually provided as a means of providing additional compensation to an employee.

The IRS applies similar criteria to the BYOD arrangement where an employer gives the employee a cash allowance or reimbursement for business use of the employee’s personal cell phone. There must be a substantial business reason, other than providing compensation to the employee, for requiring the employee’s use of a personal cell phone in connection with the employer’s trade or business. However, the employee must maintain the type of cell phone coverage that is reasonably related to the needs of the employer’s business, and the reimbursement must be reasonably calculated so as not to exceed expenses the employee actually incurs in maintaining the cell phone.

Additionally, the reimbursement for business use of the employee’s personal cell phone must not be a substitute for a portion of the employee’s regular wages. Arrangements that replace a portion of an employee’s previous wages with a reimbursement for business use of the employee’s personal cell phone—and arrangements that allow for the reimbursement of unusual or excessive expenses—would result in taxable income to the employee.

Q: An employee has had his husband covered as a dependent under our group health plan since same-sex marriage was legalized in Connecticut. However, we have had to prepare differing W-2 statements under state and federal law. Since state law recognizes his husband as a legal dependent, the value of his dependent/husband’s insurance coverage was not deemed taxable income to him under state law, though it was under federal law. With the U.S. Supreme Court striking down the Defense of Marriage Act (DOMA), can we now deduct his group health insurance premium contribution for his husband’s dependent coverage via our Section 125 Plan? If so, will we have to revise our payroll tax records for past practices?

A: Officially, the IRS is preparing updated guidance on this and other tax issues related to the June 26 court decision on DOMA. Considering that President Obama has directed all federal agencies, including the Department of the Treasury and the IRS, to revise their regulations to reflect the decision as soon as possible, it is highly likely that employee contributions toward same-sex spouses’ medical coverage will be permissible under Section 125 plans—particularly in states, like Connecticut, that recognize same-sex marriages.

As for past tax practices, hopefully the IRS will provide an opinion on retroactivity of the DOMA decision. If same-sex couples are entitled to seek refunds of past taxes paid, that would likely be achieved via filing amended personal income tax returns rather than placing the burden of such adjustments to tax liability on employers.

Do you have a question related to employment law, wage and hour issues, or human resources? Members can get free information from CBIA’s experts by calling 860.244.1900.