Most interns must be paid, but federal law allows certain exceptions

Note: This article was updated with new laws and rules in 2019. Read the post here

The summer internship season is upon us and if you’re considering bringing an intern onboard you may be asking yourself whether or not you must pay him or her.

Generally speaking, internships in the for-profit business sector are most often viewed by the U.S. Department of Labor and the Internal Revenue Service as employment, and therefore, the intern must receive at least minimum wage and overtime for hours worked over 40 in a workweek.

There are some exceptions to this general rule.  The Department of Labor has set forth a test with six criteria that should be considered when determining whether or not an intern should be paid:

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training given in an educational environment;

2. The internship experience is for the benefit of the intern;

3. The intern does not displace regular employees, but works under the close supervision of existing staff;

4. The employer that provides the training derives no immediate advantage from the activities of the intern and, on occasion, its operations may actually be impeded;

5. The intern is not necessarily entitled to a job at the conclusion of the internship; and

6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship. (Source: DOL Fact Sheet #71)

If all of the above rules are met, under the Fair Labor Standards Act there would be no employment relationship and minimum wage and overtime regulations would not apply.

Because this exclusion does not apply in all circumstances, we encourage you to contact BCN Services at 1-800-891-9911 for help in determining whether or not your summer intern should receive regular wages.

 

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Alicia Jester, Manager Benefits and Payroll

Though employees generally don’t understand labor law, many assume that they do

Frequently we hear employees claim that the “Labor Board” requires the employer to pay for lunches, provide paid vacations, sick days or other benefits. They also may claim that you cannot require them to work overtime hours.

Federal requirements for employers are regulated by the Fair Labor Standards Act (FLSA). These federal requirements are actually quite limited. As an employer, the FLSA requires employers to pay their employees minimum wage and overtime at the rate of time and a half the employee’s regular rate of pay.

Under federal law employers are NOT required to provide:

  • Vacations
  • Holidays
  • Sick Pay
  • Premium pay for weekend, holiday or shift work (beyond the required time and one-half for hours worked over 40 in one week)
  • Pay raises (unless to comply with minimum wage requirements under the law)
  • Other fringe benefits, except as required under the Affordable Care Act
  • Discharge notices, reason for discharge or immediate payment of wages upon termination.
  • Lunches (paid or unpaid)
  • Breaks  (however, if you provide breaks of 20 minutes or less that time is compensable)

Additionally the FLSA does not limit the number of hours you can schedule or require an employee to work (either daily or weekly, including overtime) as long as you pay time and one-half for time worked in excess of 40 hours. Note: this only applies to employees 16 years of age or older.

Some cities and states are more restrictive

That said, many states, and some cities have passed or are considering legislation that will add requirements for employers. For example, many states and cities have higher minimum wage rates than the federal government.

Most states have youth labor laws that limit the number of hours that minors may work. Some states require payment of final wages immediately upon termination. A few states require paid breaks and/or lunches and some states require overtime (time and one-half) for hours worked in excess of 8 hours per day rather than 40 hours per week.

Several cities and a few states have passed paid sick leave requirements.

Additionally, for those working under federal contracts, an Executive Order from the President has raised minimum wage for employees covered under those contracts. In cases where there is a difference between federal and state laws, the law that benefits the employee will always take precedence.

There continue to be changes that may impact employers on national and state and local levels. BCN Services monitors the ever-changing scope of legal requirements for our clients and will keep you apprised of anything that impacts your business.

If you have specific questions regarding employer’s requirements under federal, state or local government regulations, please contact your Partnership Manager. If you are an employer that does not currently work with us, please contact us for assistance or more information.

 

 

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Jeff Walsh, Partnership Manager

Be prepared for new overtime rule affecting Direct Care Workers

On September 17, 2013, the U.S. Department of Labor issued its final rule regarding direct care workers. The change effectivy extends overtime protections to this group.

These workers, who provide essential in-home care for people who are elderly, injured, disabled, or suffering from illness, are currently exempt from the overtime rule of time-and-one-half of regular hourly wages for any hours worked over 40 in a standard, 7 day work week.  The new ruling will take effect Jan. 1, 2015.

Ruling expected to affect 1.9 million workers

This ruling is widespread, affecting an estimated 1.9 million U.S. workers who provide custodial care to those people dependent on their services.  “Direct care workers play a critical role in ensuring access to high-quality home care that many people need in order to remain healthy and independent in their communities, and they should be compensated fairly for this important work.” said U.S. Secretary of Health and Human Services Kathleen Sebelius in a news release announcing the change.  “We will continue to engage with consumers, states, advocates and home care providers in the implementation of this rule to help people with disabilities, older adults and their families receive quality, person-centered services,”

The DOL set the effective date for this ruling well in advance to allow third-party home care agencies enough time to adjust their staffing levels where needed and implement new policies regarding overtime scheduling.  Not only will home care agencies and their employees be affected by the ruling, consideration must also be given to those people who make use of this very important service which, in many cases, allows them to lead independent lives.

In order for agencies to remain profitable (or for non-profit agencies, be able to continue with the services they provide), they may need to limit total hours worked per week for many employees who are currently providing custodial care to one or more persons more than 40 hours per week.

Change affects continuity of care

Agencies may have to employ multiple staff members to serve each consumer to be able to provide continuity of care.  Many agencies rely on public funding to supplement payment for services.  No ruling has been given on public funding being increased to account for the increased hourly rate for overtime hours.  At this time, the same rate of payment that applies to regular hours will apply to any overtime hours worked, thus creating a shortage of funds for in home care agencies.

It is important to clarify that this ruling is directed towards those employees who work for home care agencies and other third-party employers to provide custodial care to consumers.  The ruling does not apply to in-home care workers who are employed directly by either the person requiring services, or that person’s family.  Overtime pay exemption will still apply to these workers after the Jan. 1, 2015 ruling takes effect.

The Department of Labor has created a new web portal with interactive web tools, fact sheets and other materials to help families, employers and workers understand the new requirements. These, along with information about upcoming webinars on the rule, are available at www.dol.gov/whd/homecare.

BCN Services partners with multiple in-home care agencies to provide their PEO services.  We are prepared to guide our clients, or other who would benefit from our direction, through these changes that will strongly impact a business’s operation and profit.  If your company needs help with this or other initiatives affecting your operation, contact us for assistance.  We’re here to help.

 

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Frank Lewandowski, Partnership Manager

Employers must know the rules for different kinds of work breaks

The Fair Labor Standards Act (FLSA) does not require employees (other than minors) receive any breaks, either paid or unpaid.  FLSA regulations outline only when breaks must be paid if they are offered at the employer’s discretion.

There is one exception with the implementation of the new federal Patient Protection & Affordable Care Act.  Under the FLSA, employers must now must provide nonexempt mothers with the time and space to express breast milk for one year after the birth of a child.  Few employers limit this right to nonexempt employees only, and many states have laws that that are stricter than the federal law.

The regulations divide breaks into two categories:  rest breaks and meal breaks.  In terms of payment, different rules apply depending on the type of break.

Rest breaks:  Regulations stipulate that an employer must pay workers if the period is 20 minutes or less. Breaks lasting five to 20 minutes are common and promote efficiency.

Meal breaks:  Regulations stipulate that ordinarily an employer must pay workers if the break is less than 30 minutes.  The regulations leave open the possibility that shorter meal periods may be noncompensable in special circumstances.  However, the burden is on the employer to prove that special circumstances apply for justifying the shorter break.

Keep in mind the regulations do not always fit today’s work place.  Sometimes it is hard to tell whether a break is to rest or to consume a meal.

For this reason it is not surprising that some U.S. Department of Labor (DOL) investigators, as a matter of enforcement, have taken the position that an employer must pay workers for all breaks that are less than 30 minutes.  By doing this, they don’t have to engage in a break-by-break analysis.

In such cases, the DOL’s position is inconsistent with its own regulations and case law.  But a 30-minute rule does avoid litigation over that issue.

Even if a meal break is 30 minutes it does not mean it automatically occurs without pay.  The employer must consider the length of the break and whether the employee is free from work.  If the employer requires the employee to stay in his or her work area, they may have to pay the employee, even if the break is 30 minutes or more.  Similarly, if the employer asks an employee to do any work during the break, the employee may have to be compensated for the entire break.

Source:   SHRM.org

 

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Debbie Strahle, Partnership Manager

Case study: Fair Labor Standards Act violation proves costly for business owner

It is important to train supervisors and managers so they know the minimum wage and overtime requirements under the Fair Labor Standards Act (FLSA) and when to report employee concerns and complaints.  This is the key to avoiding costly fines for the company AND its executives.

Nearly all employers are subject to the requirements of the FLSA, and the potential penalties for violations can be costly.

Case study against NY supermarket chain

Case in point is a wage-and-hour lawsuit against Gristede’s Foods, Inc. in which the company’s owner has been held personally liable for payments to employees in the case.

The New York supermarket conglomerate employed approximately 1,700 employees.  In 2004, a group of Gristede’s employees filed a class/collective action lawsuit alleging that the company failed to pay overtime under the FLSA.  The employees prevailed, and the parties entered into a multi-million-dollar settlement.

When Gristede defaulted on its payment obligations under the settlement agreement, the employees asked the U.S. District Court for the Southern District of New York to hold John Catsimatidis, the long-time owner, chairman and CEO of the company, personally liable for the payments.  The district court granted the employees’ request.

Catsimatidis appealed to the 2nd U.S. Circuit Court of Appeals, but the appellate court upheld the lower court’s decision, ruling that Catsimatidis was an employer under the FLSA and could be held personally liable for violations of the Act.

Owning company was active in running day-to-day

The 2nd Circuit Court made this decision regardless of the fact that Catsimatidis managed employees at a very high level.  For example, he wasn’t typically involved in the day-to-day operations of individual supermarkets.  He didn’t hire or fire most employees or set specific wages or schedules, and he had only limited interaction with the managers who handled those types of decisions.  It also didn’t matter that Catsmatidis wasn’t accused of making decisions that violated the FLSA.

Rather, the court concluded that Catsimatidis was an employer and he was active in running the company.  This included having contact with individual stores, employees, vendors, and customers and supervision of certain managerial personnel such as the chief financial officer and the chief operating officer.  The ruling concluded that this gave him ultimate responsibility for employees’ wages and signed paychecks.

In early December 2013, Catsimatidis petitioned the U.S. Supreme Court to hear the case and overturn this ruling of personal liability.  At this time, it is not known if the high court will hear the case.

With court decisions like these, corporate officers should be more motivated than ever to ensure that their companies and agencies are in compliance with the FLSA’s requirements.  Now is a good time to review and update your policies to ensure that employees understand their obligation to accurately report all time worked.  Contact BCN Services if you need to consult on any FLSA matters.

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Sue Kester, HR Manager

New OSHA system takes a global approach to classifying chemical hazards

When was the last time you saw the words “OSHA” and “harmonized” in the same sentence?  That’s what we thought too.

But as of Dec. 1, 2013, we all need to be aware of some upcoming changes about chemical hazards and OSHA’s new Globally Harmonized System, or GHS.  The changes are definitely for the better and the Dec. 1 date will not require much time or energy beyond some basic employee training.

That said, BCN Services’ clients should be aware of the following:

  • The Globally Harmonized System takes an international approach to hazard communication and provides world-wide agreement on classifying chemical hazards with a standardized approach to labeling safety data sheets.  (Material Safety Data Sheets will now be referred to as Safety Data Sheets).  The new system will provide a harmonized classification criteria for the health, physical and environmental hazards of chemicals.
  • One of the major drivers of this change has been the globalization of the world economy.  GHS establishes a standard “language” to understand the hazards of chemicals no matter where you are in the world or where the chemicals are shipped to or shipped from, which is a vast improvement towards safety.
  • You will gradually start to see new labeling.  Chemical distributors will no longer be able to ship containers that do not comply with new labeling as of Dec. 1, 2015 and chemical manufacturers, importers, distributors and employers must start using new labels and safety data sheets by June 1, 2015.  (BCN Services will provide more information as those dates approach).

Here’s what you need to do at this point

  1. OSHA requires employers to have their employees who handle hazardous chemicals and substances trained on the new label elements and safety data sheet formats by Dec. 1, 2013.  Examples of hazardous chemical and substances are:  asbestos, carcinogens, vinyl arsenic, inorganic arsenic,  lead, cadmium, benzene, formaldehyde, ethylene oxide, spray finishing using flammable and combustible materials, oxidizing gases,  gases under pressure, pyrophoric liquids/solids/gases.  If you do not work with such substances, this new standard may not apply.
  2. If this new standard does apply to any of your employees, call BCN Services at 800.891-9911, ext. 108 and we can set-up a 17 minute on-line safety course entitled “Globalize Your Communication” that will take care of your training compliance.  Upon receipt of a user name and password from BCN Services, visit www.www.bcnservices.com. Just click here for the steps to get to the course once you’re at our website.
  3. BCN Services will handle all record keeping for this OSHA-compliant training.
  4. Training can be accomplished individually or in a group setting with several employee’s taking the online course  together.  It’s your choice.
  5. To receive your user name and password, contact Danielle Knuth via email at dknuth@www.bcnservices.com.
  6. To discuss any questions you may have regarding the Globally Harmonized System, please contact Patrick Boeheim at 800.897-9911, ext. 108.

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Patrick Boeheim, Risk Manager

Federal tax ruling changes tax advantages and benefits for same-sex couples

On Aug. 29, 2013, The Department of Treasury and the Internal Revenue Service ruled on treatment of taxation for same-sex married couples, regardless of the couple’s state of residence.

The June 2013 U.S. Supreme Court ruling in United States v. Windsor overturned the Defense of Marriage Act (DOMA) requiring the federal government to recognize same-sex marriages equally to opposite-sex marriages for all federal laws and benefits, including tax advantages never before offered to same-sex couples.

The Supreme Court ruling does not require all states to recognize same-sex marriage.  States retain the authority of whether to recognize same-sex marriages, even if the couple is legally married in a state that recognizes them.  However, for federal tax purposes, all legally married same-sex couples, regardless of whether they live in a state that recognizes these marriages, will benefit from the federal ruling.

These tax advantages include treatment of benefit premium deductions for same-sex married couples under Section 125 of the IRS Code.  Prior to DOMA being overturned, same-sex married couples who participated in an employer sponsored health plan could not have their total premium contribution taken on a pre-tax basis.  The employee could contribute his or her portion on a pre-tax basis, but the difference between a “single” employee contribution, and the “two-person” contribution was required to be deducted after tax.  From 2013 forward, the premium contribution amount for a same-sex spouse from an employee’s paycheck must be taken on a pre-tax basis.  The same advantages apply to medical flexible spending accounts (FSAs), and Health Savings Accounts (HSAs).  Same-sex married couples now receive the same tax advantages including the ability to claim each other’s medical expenses against FSA and HSA accounts.

Employees who were in a same-sex marriage prior to 2013 and did not receive the same tax advantages as opposite-sex married couples may amend their previous tax filings within the IRS period of limitations.  (Generally, the period of limitations is three years from the date the return was filed, or two years from the date the tax was paid, whichever is later.)

The State of Michigan does not currently recognize same-sex marriage.  Employers may opt to offer “domestic partner” coverage for same-sex married couples, but it is not required.  If a BCN Services client opts to offer such coverage, we are prepared to follow the federal tax guidelines accordingly. We will also administer reimbursements from employees’ FSA accounts per federal guidelines.

Please contact your BCN Partnership Manager if you have questions and, as always, employees should feel free to call our Human Resources call center if they have questions about their coverage or benefit deductions.  Contact us at 1-800-891-9911 or visit us atwww.www.bcnservices.com or email hr@www.bcnservices.com.

 

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Frank Lewandowski, Partnership Manager

BCN Services stays on top of compliance issues for employers

Compliance can be a headache for business owners and managers. BCN Services is here to help.

But we need a partnership with you to get the necessary “i”s dotted and “t”s crossed when changes are made or considered.   Call us whenever you encounter these compliance matters so that we can assist you in the following areas:

  • Opening a new location:  Some local municipalities require city, county or school taxes to be withheld.  It is important for BCN to have each work locations properly geo-coded to ensure that taxes are withheld at the proper rate.
  • Hiring employee(s) in a new state:  BCN has experience operating in many different states, however, a minimum 10-day notice from clients is necessary when they begin work in a new state.  Registration and licensing fees are required along with many types of paperwork.  Additionally, each state has different workers’ compensation and employment requirements that must be taken into consideration.
  • Creating a new position:  When adding a new position to your staff, the screening process, physical requirements, job duties, and pay classification are all things to be considered.  Our HR professionals are always available to assist in this important decision-making step.
  • Changing an employee’s pay classification (hourly to salary):  It is generally not an issue to change a salaried employee to an hourly pay status.  However, the law is very specific about who can be changed from an hourly to a salaried position.  Job responsibilities, number of hours and amount of pay are all matters that are federally regulated.

Working together, we can expertly and efficiently manage the compliance burden. If you have questions or need assistance, contact BCN Services for guidance.

 

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Sue Kester, HR Manager

Landmark decisions affect social media in the workplace

Because use of social media in the workplace is not going away anytime soon, it is an employer’s responsibility to ensure distribution of an up-to-date Social Networking Policy in an employee handbook.

Clients of BCN Services have access to the most up-to-date policies based on recent litigation involving discipline for social media postings that are affecting this ever-changing landscape. Below are two of the most recent landmark decisions that are shaping what is an appropriate employer response.

NLRB decisions address personal social media

The National Labor Relations Board (NLRB), an independent federal agency that enforces the Act, first began receiving complaints in its regional offices related to employer social media policies and specific instances of discipline for Facebook postings in 2010.  More recently, in the fall of 2012, the board began to issue decisions in cases involving discipline for social media postings. Board decisions are significant because they establish precedent in novel cases such as these.

In the first such decision, issued on Sept. 28, 2012, the NLRB found that the firing of a BMW salesman for photos and comments posted to his Facebook page did not violate federal labor law. The question involved whether the salesman was fired exclusively for posting photos of an embarrassing accident at an adjacent Land Rover dealership (which did not involve fellow employees), or for posting mocking comments and photos with co-workers about serving hot dogs at a luxury BMW car event. Both sets of photos were posted to Facebook on the same day; one week later, the salesman was fired.

The board agreed with the administrative law judge hearing the case that the salesman was fired solely for the photos he posted of the Land Rover incident, which was not a planned (concerted) activity and so was not protected.

In the second decision, issued on Dec. 14, 2012,  the board found that it was unlawful for a non-profit organization to fire five employees who participated in Facebook postings about a co-worker who intended to complain to management about their work performance. In its analysis, the board majority applied settled law to the social media case and found that the Facebook conversation was concerted activity and was protected by the National Labor Relations Act.

Be cautious not to use social media websites in hiring

BCN cautions managers responsible for hiring to not use social networking web sites to assist you in making any employment decisions, specifically in hiring.

Employers viewing their employees’ or job candidates’ social-networking web sites may open the Company to claims under the employment-discrimination statutes or your state. This is the case especially if a decision not to hire is made immediately following such viewings that the employee or job candidate claims was because of a legally protected status or activity.

If you have a current employee handbook without an updated Social Networking Policy, please notify BCN’s Human Resources Department to include that in your next handbook order. If you do not have an employee handbook, contact us to develop one for you. Lastly, please contact BCN’s Human Resources Department with any inquiries regarding social media use in the workplace.

 

 

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Kate Douglass, Senior HR Generalist

Employee complaints relating to wage-and-hour claims rise 126% over 10 years

Employee-initiated Wage and Hour claims are on the rise in the U.S. In the past year the number of claims for wages has increased by 700 and over the past 10 years the number of cases has grown by 126 percent.

The U.S. Department of Labor Wage and Hour Division enforces Federal minimum wage, overtime pay, recordkeeping, and child labor requirements of the Fair Labor Standards Act (FLSA). WHD also enforces the Migrant and Seasonal Agricultural Worker Protection Act, the Employee Polygraph Protection Act, the Family and Medical Leave Act, wage garnishment provisions of the Consumer Credit Protection Act, and a number of employment standards and worker protections as provided in several immigration related statutes.

There are three major categories of investigations falling under the FLSA that have been increasing:

  • Employees classified as exempt who believe they should be entitled to overtime pay.
  • Non-exempt or “hourly” workers who believe they are not being paid for all of the hours they worked.
  • Restaurant and hospitality workers who receive tips and feel that they are not making the state or federal minimum wage when their tip income is factored in.

Do you have questions about business practices relating to exempt employee status?  BCN Services can help you determine whether or not an employee should be classified as exempt as well as what time is compensable to employees.  If you have questions, please contact us at 1-800-891-9911 or click here to be directed to our contact us page.

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Alicia Jester, Manager-Benefits and Payroll