Compliance

I’m sorry, though, I’m not talking about the Golden State’s weather. The upcoming changes to the Fair Labor Standards Act (FLSA) are about to make it feel like it’s as hard  to engage employees nationwide as it is in California. January’s federal ruling–which goes into effect in a matter of days (March 11th!) has significant implications–especially for Human Resources (HR) departments. These changes center around the updated criteria for classifying workers as either employees or independent contractors. It’s crucial to ensure compliance, manage risks, and adapt to the evolving labor landscape. 

8 Key Implications of FLSA Updates on HR departments

Worker Classification Practices: HR departments are now tasked with conducting a thorough assessment of current workforce classifications to determine if individuals categorized as independent contractors meet the new criteria under the FLSA or if they should be reclassified as employees. This involves a detailed analysis based on the economic reality test, which considers factors such as the opportunity for profit or loss, investment by the worker, permanence of the relationship, degree of control by the employer, integration of the work into the business, and the skill and initiative of the worker.

Increased Compliance and Legal Risks: With the new guidelines, there is a heightened risk for organizations that incorrectly classify workers. This can lead to legal challenges, penalties, back wages, and damages. HR departments must ensure their classification processes are rigorous and reflect the updated regulations to mitigate these risks.

Administrative and Operational Adjustments: Reclassifying workers from independent contractors to employees entails significant administrative and operational changes. HR will need to manage aspects such as payroll, taxes, employee benefits, workers’ compensation, and adherence to various employment laws (e.g., minimum wage, overtime pay, etc.). This requires updating HR systems and processes to accommodate the increased administrative load.

Financial Implications: Reclassifying workers impacts the financial planning of organizations since employees are entitled to benefits and protections that independent contractors are not. These include health insurance, retirement benefits, and unemployment insurance. This will likely increase labor costs for organizations that need to reclassify a significant portion of their workforce. HR departments will need to work closely with finance to adjust budgets and forecasts accordingly.

Training and Development: HR departments must also consider the implications for training and development. Reclassified employees may require orientation, onboarding, and ongoing training that was not previously provided to them as independent contractors. This not only involves logistical planning but also budgeting for training programs.

Cultural and Engagement Considerations: Shifting workers from independent contractor to employee status may also impact organizational culture and employee engagement. HR will need to integrate these workers into the company culture and engage them in ways that reflect their new status, which might include inclusion in decision-making processes, team-building activities, and career development opportunities.

Policy and Documentation Updates: HR departments will need to update policies, contracts, and employment documentation to reflect the changes in worker classification. This includes revising contracts, updating employee handbooks, and ensuring that all documentation complies with the new FLSA guidelines.

Strategic Workforce Planning: These changes require HR departments to rethink their workforce strategies, particularly in industries heavily reliant on independent contractors. Organizations may need to consider alternative staffing models, such as increased use of temporary workers or revisiting the mix of full-time versus part-time employees, to maintain flexibility while complying with labor laws.

The Bottom Line

The recent changes to the FLSA present a comprehensive challenge for companies and  require a multifaceted approach to compliance, workforce management, and strategic planning. Proactively addressing these implications can help organizations navigate the transition smoothly, minimize risks, and leverage their workforce effectively under the new legal framework. Need some help navigating the changes? We’re here for you. 

Whether it’s a restaurant denying employees overtime pay or a staffing firm misclassifying workers, companies make headlines every day for various compliance missteps. Labor laws vary from state to state and also change over time as new decisions get passed and old laws get revised. This makes staying in line with compliance laws an “up-at-dawn, pride-swallowing siege.” Or if a Jerry Maguire quote is a little dramatic for your taste, let’s just say it’s an active process–not a set-it-and-forget-it situation. Missteps can cost many millions not to mention the other resources companies end up throwing at preventable mistakes. That makes compliance more than a legal necessity: it’s a strategic imperative. While navigating changing laws and regulations can be daunting, there are effective strategies that businesses can employ to avoid compliance woes as well as the negative headlines that come with mistakes.

Three Key Practices to Prevent Compliance Errors

1. Avoid the “Wait and See” Approach

A proactive stance is vital in the compliance domain. “Wait and see” often leads to last-minute scrambles to align with new regulations, resulting in inadequate implementation and potential legal issues. Regular internal audits and proactive policy development are key.

2. Create and Modify Systems on an Ongoing Basis

Create systems in alignment with local, state, and federal guidelines and be ready to modify them in accordance with changes (such as this month’s groundbreaking federal labor law decision). It’s not enough to simply be aware of the rules; businesses must integrate compliance into their everyday operations. This involves creating and continually updating systems, processes, and training programs to ensure they stay in line with local, state, and federal guidelines.s.

3. Engage Partners in Areas Outside Your Expertise

No company is an expert in everything and engaging expert partners is a crucial business practice. Companies with a strong compliance track record often leverage external expertise. Such partners allows businesses to outsource the aspects of their operations that take up too many internal resources. If you don’t have compliance and classification experts on your team, it’s okay! A qualified partner can help. Reach out for a free risk assessment and consultation.

The Bottom Line

Staying ahead of compliance issues is not just about avoiding legal troubles; it’s about building a sustainable, trustworthy, and competitive business. Engaging expert partners, adopting a proactive approach, and integrating compliance into your operational framework can help you keep your head above water and navigate the complexities of regulations confidently and effectively.

For many companies, the traditional business model–centered around full-time W-2 employees–is gradually being upended by a shift toward contract workers. This transition is changing how companies approach their workforce strategies, particularly in terms of culture and engagement. To make matters more complicated, companies must walk the fine line between including contract workers in company culture and maintaining their independent status, especially in light of recent changes to U.S. labor laws. Here, we explore the key aspects of this transition and what companies can do to adapt.

Key Challenges of A Transitioning Workforce

Legally, businesses must carefully navigate a complex array of labor laws and regulations that draw clear distinctions between employees and contractors. This includes compliance with tax obligations, benefits, and employment law protections to avoid costly penalties and disputes. Practically, this shift demands a reconfiguration of management practices and company culture to suit a more fluid and diverse workforce. Companies need to realign their communication, project management, and resource allocation strategies, while also maintaining a cohesive organizational identity. They also need to accomplish all of this in a landscape where workers may feel less connected due to the lack of a figurative water cooler to gather around.

Understanding and Meeting Contract Workers’ Expectations

Contract workers, unlike traditional employees, often prioritize flexibility, autonomy, and the opportunity to engage in diverse projects with multiple clients. Still, like anyone, they like to know their contributions are valued. Recognizing these expectations is crucial for companies in tailoring their engagement strategies. Moving away from a one-size-fits-all approach to employees, businesses that engage contract workers have an opportunity to create a culture that includes them while also respecting the legal parameters of engaging contract workers.

Balancing Inclusion and Independence

In light of recent changes to U.S. labor laws under the Fair Labor Standards Act (FLSA), the balancing act has become even more tenuous. Companies are seeking ways to engage contract workers without compromising their status as independent contractors. The FLSA uses the Economic Reality Test to distinguish between employees and contract workers. Any efforts to include contractors in cultural and engagement activities must be balanced with efforts to maintain their autonomy. This nuanced approach is essential to ensure that such initiatives do not inadvertently lead to workers’ classification status being at odds with state and federal labor laws. Violations of that kind entail significant legal and financial implications.

The Bottom Line

As contract work continues to become more prevalent, companies must adapt their strategies. Understanding the unique expectations of contract workers, fostering an inclusive culture, and providing robust support systems are key to creating an environment that attracts top talent and maximizes their contributions. It represents a historic shift from an employee-centric to a contractor-focused approach. If you could use a little help navigating the balancing act, we’re here to help.

If you engage a contingent workforce and would rather not be haunted by fines, jail time, and damage to your reputation, this post is for you. When the Biden Administration rolled out a proposal that would make it harder for companies to classify workers as independent contractors, he solidified his commitment to making accurate worker classification a top priority. Take a cue and make worker classification a top focus. Violators can expect to be subject to strict penalties, fines, and negative press.

A Haunted Future For Worker Classification Violators

Big companies make headlines for their classification missteps. Smaller companies should see those big fines as a warning to take a look at their own practices. It can be a costly mistake to think you’re exempt from the consequences. The Biden administration has made worker classification a priority and made it easier for workers to argue for minimum wage and overtime protections/compensation. In addition to having to pay back 100% of the matching FICA taxes they would have paid had they classified the worker correctly up front, employers can end up subject to additional penalties for each W-2 form they fail to file, a percentage of the employee’s wages, and penalties between $5,000 and $25,000 for each worker classification violation.

In addition, class-action lawsuits, failed audits, and negative headlines can damage a company’s reputation to the point where both workers and consumers are hesitant to engage with the company. It’s just not worth it! Perhaps scarier than the possibility of monetary damages, misclassification has landed some business leaders under house arrest. Let’s get to the punch line: misclassifying workers is not good business in the long run.

The Bottom Line

Whatever the structure, every business needs to protect itself by making compliance a major priority. This reduces the risk for fines and unpleasant attention from the IRS. Any company without the capacity to accomplish this in-house should consider working with a partner. In our world, accurate worker classification and top-notch risk management are always top priority. We are the first to be aware when change is in the air. We track rules in every state as well as on a federal level and offer services to help clients stay compliant. Contact us if you have any questions about your own status. 

Anyone with employees needs workers’ compensation insurance. Yep, everyone. Workers’ compensation provides wage replacement and medical benefits to employees injured in the course of employment. Just like any other insurance, you hope you’ll never need to cash in on it. But if you do end up needing it, it’ll save your butt a million ways. That said, the costs associated with workers’ compensation claims can be a significant burden on a business, so it’s best to take proactive measures to create a safe work environment and manage potential liabilities effectively.

5 Steps to Safeguard Against Workers’ Compensation Risk

Step One: Be Proactive

Employers that ensure worker safety and implement best practices before they need them are in the best position to protect employees, keep claims manageable, and maybe even keep premiums down. That’s a good reason to pursue prevention like you would pursue a crisis. If you do, you might end up preventing said crisis all together.

Proactive measures include making regular safety meetings, ongoing education, and performance metrics standard procedure. Encourage open communication about safety concerns. Identify potential safety hazards in your workplace and provide written safety policies and procedures to address them. Regularly update them to reflect changes in regulations or emerging risks.

Keep your workplace clean and organized to reduce slip and trip hazards. Ensure that safety equipment, such as fire extinguishers, first aid kits, and eyewash stations, are easily accessible and regularly inspected.

You know that weird thing that happens when you are so close to a situation that you lose objectivity about it? That’s a good reason to have a third party conduct regular safety audits and inspections whenever it makes sense for your business.

Step Two: Create Airtight Internal Processes to Handle Claims

After you’ve taken measures to prevent workplace accidents, it’s still good business to prepare for the worst. Create a process for employees to report safety concerns, near misses, and accidents promptly. Investigate incidents thoroughly to identify root causes and implement corrective actions to prevent similar incidents in the future.

Implement a plan for how you’ll handle a claim if one does still come up after you’ve put all your preventive measures in place. Make sure reserves are accurate. Have a standard operating procedure. Decide who will talk to the adjuster and within what time frame. Taking the time to lay out your processes while your brain isn’t in crisis mode results in sounder decisions. The added benefit is that it will reassure your adjuster that you’re engaged and motivated to reach a speedy resolution.

Have a “Return-to-Work” Program established to  help injured employees transition back into the workforce as soon as they are medically able. This can reduce the duration of workers’ compensation claims and associated costs. These measures demonstrate a level of professionalism and reassure insurance companies and employees alike.

Step Four: Invest in Accurate Worker Classification

This may not seem related, but an independent contractor filing a workers’ comp claim can easily land a well-intentioned company on the DOL’s radar. This happens with surprising frequency despite the logical assumption that an independent contractor should understand the implications of a business-to-business relationship. One key aspect of a true B2B relationship is that a worker’s business activity exists independent of the employer. Preventing misclassification and communicating clearly with workers is a worthwhile preventative investment.

Step Five: Engage The Right Partners

Review and evaluate your insurance coverage to ensure it adequately meets your business needs. Consider working with an insurance expert to identify potential cost-saving opportunities. Seek professional guidance from partners (such as an Employer of Record, like PayReel) that is in position to help you manage the risks associated with having employees. They can provide valuable advice on risk mitigation strategies and legal compliance.

The Bottom Line

If you don’t have the budget to implement every possible safety measure for a project, you don’t have the budget for the project. Protecting your business against workers’ compensation risks is not only a legal requirement but also a smart business practice. By creating a safe work environment, implementing comprehensive safety measures, and actively managing workers’ compensation claims, you can reduce the financial and reputational risks associated with workplace injuries. Remember that investing in safety is an investment in the long-term success and sustainability of your business. The best workers’ comp claim is the one that never happens.

If you’ve worked in an office environment and also watched “The Office,” you can probably recall a Todd Packer type. They speak in innuendos, find themselves incredibly entertaining, and generally make people around them wish they could disappear.

In “The Office,” there’s one exception: Michael seems to find Todd Packer’s behavior aspirational rather than offensive. Still, coming from the guy who can’t resist an opportunity to drop his, “That’s what she said,” line, this doesn’t bode well for ol’ Todd.

In my experience, most of the problematic people are a little more subtle than Todd Packer, but any level of sexual harassment can negatively impact employees’ well-being and even bring down productivity.

California’s sexual harassment training requirements are meant to prevent the Todd Packers of the world from having a captive, highly-uncomfortable audience in the workplace. Whether there are similar laws in your location or not, sexual harassment prevention really is an important subject. Preventing sexual harassment promotes respect, dignity, and equality.

Key Aspects of California’s Sexual Harassment Training Requirements

1. Mandatory Training Requirements: California law mandates employers with five or more employees provide sexual harassment prevention training. All staff, including supervisory and non-supervisory staff, employees and contractors, and even unpaid interns and volunteers. This training is required within the first six months of employment and should be provided every two years after that. The training must consist of at least two hours for supervisors and at least one hour for non-supervisory employees.
2. Content/Method of Training: Employers have some liberty in how they choose to conduct the training (using videos, webinars, etc.), but the curriculum must ensure that employees understand what constitutes harassment, how to prevent it, appropriate ways to report an incident, the potential legal consequences for violations, and what role bystanders can play in preventing harassment.
3. Purpose: Proper sexual harassment training is designed to equip employees with the knowledge and confidence to identify, address, and report any inappropriate behavior. The idea is to empower individuals to contribute to a healthy work environment and ensure a level of accountability at all levels of the organization. When it works as designed, this ensures workplaces remain free from harassment, discrimination, and toxicity and also promotes a more equitable and productive working environment.

Bottom Line For Employers

Complying with California’s sexual harassment training laws is not just a legal obligation, but also a way to create a respectful and inclusive workplace culture. While we do want to bring a little bit of levity with GIFs from “The Office,” we do know that nothing about sexual harassment is funny.

When you partner with PayReel as the Employer of Record (EOR) on your project, you can be assured we’re on top of sexual harassment training requirements on your behalf. When we hire employees in states with these requirements, workers must take the state’s training, download the certificate, and upload it into PayReel Online so we ensure compliance.

Whether it’s a part of your state’s regulations or not, fostering an environment where employees feel safe and valued reduces a business’s risk of legal disputes, negative publicity, and loss of productivity. In short: just do your part to send the Todds of the world packing.