VANNOY:
Compliance requirements for businesses over 50 employees. Hi, I’m Mike Vannoy, with Asure and a really important topic today. Most businesses want to grow, and if you think about certain thresholds as you grow your business, sometimes there are certain plateaus to get to and difficulty to get over zero to a million, million to 5 million, 5 million to 20 million. These are really big important hurdles that sometimes can be so difficult just to get the growth model together and the business model together that sometimes we forget that as we cross these thresholds, there are also new compliance requirements. I think the 50 employee line is a good one for a few reasons. It certainly depends on your business, certainly depends on your industry. But if you just take a hundred thousand dollars in revenue per employee times 50 employees, that’s a $5 million business. And coincidentally, if you talk to entrepreneurs, that $5 million mark can be a hard threshold to cross.
There’s so many things that have to happen. You can’t get there through just your Rolodex alone. You can’t get through there through just a couple of key customers. You really have to have a bonafide business with grownup mature business processes in place to break that threshold. And that’s why I think we want to focus so much today because we know entrepreneurs are focused on how do they get over that threshold that we want them to also understand the compliance requirements that will come inevitably with that. So great, perfect guest to unpack this topic today. Brian Schenker. He’s an attorney with the Long Island New York office of Jackson Lewis. Brian’s practice focuses on representing employers in a wide range of workplace matters, as well as preventative advice and counseling. Brian has extensive experience defending class in the collective action lawsuits under federal and state wage and hour laws. He has successfully defended wage and hour audits conducted by the US and New York State Departments of Labor, and Brian regularly handles cases before courts and administrative agencies involving claims of discrimination, sexual harassment and retaliation. Brian, welcome back to the show. Hi,
SHENKER:
Thanks for having me.
VANNOY:
Okay, we got a lot to unpack here. I think maybe if you ask entrepreneurs, business owners, when you hit 50 employees, probably the biggie that people think about is the Affordable Care Act, the ACA, right? So let’s maybe start definition of ACA. I think everybody gets what the Affordable Care Act is in general, but what does it mean specifically for employers and what is magical about this 50 employee mark,
SHENKER:
Right, Mike? So, yeah, absolutely is, and I always say when you have that first employee, that’s a big mark is all of a sudden you have policies, requirements, things like that. And as you grow, 50 is one of those big ones. So under aca, most of the statutes, the legislation’s requirements for employers apply to those businesses with 50 or more full-time or full-time equivalents. Aca, that’s the 2010 legislation that essentially imposes penalties on employers. These over 50 employees, if they don’t offer health insurance or health coverage that meets certain standards, minimum value and affordability. So really we just want to touch on three things today for employers on aca, right? Number one, how to know if your business is subject to aca, right? Whether you have those 50 employees, what are the requirements if you are an applicable large employer? And then penalties for non-compliance.
VANNOY:
Let’s start on the how do we calculate 50? Because interestingly, there’s a handful of laws we’re going to unpack today that 50 is the magic number, but not 50 employees isn’t always 50 employees as the case may be, right? So what does it mean to have 50 qualifying employees for aca,
SHENKER:
Right? Right. Yeah. And ACA is certainly one of those that counts employees a little differently than most other statutes we deal with. So right, with aca, what we’re dealing with is counting full-time employees and full-time equivalents, and we’re looking at the previous year typically is how we’re calculating this. So it’s a pretty straightforward calculation. We count all our full-time employees. Those are employees working at least 30 hours a month, and we count ’em all up 30
VANNOY:
A month or per week?
SHENKER:
Per month, sorry, yeah, 30 hours per month. Then we next look at our full-time equivalents, so a full-time equivalent to calculate those. We total up all the hours worked by part-time employees, those working less than 30 hours a month, and we add those up for each employee and we divide that total by 120. Then what we do, we take the full-time employees plus the calculated full-time equivalents, and we determine the average number of employees and full-time equivalents per month over the prior year. And companies with an average of 50 or more are considered a applicable large employer. So it’s important to remember, for ACA purposes, you could have 20 or 30 full-time employees and a bunch of part-timers, and that could still get you over the threshold for having to comply with many of acas.
VANNOY:
Brian, let’s go through some use cases. I think. So just so everybody understands, and I asked the clarifying question on the front one, I think it can trip people up. So full time, at least 30, you think 30 a week, that’s a three quarter F T E, but you’re talking, so am I correct in saying I could have, let’s say I have a somewhat seasonal business that I have full-time employees, they work 40 hours a week, but in month number one I’m ramping up. Maybe it’s a golf course, so maybe it’s, I don’t know, March and I got a few of my full-timers going to start work, but maybe they’re less than 30 hours for that month of March or April. Then they’re up to all kinds of hours employees and come September, October, they start dipping back down the 30 hour threshold is whether you count the front or end of that seasonal worker. Is that the right way to think about that?
SHENKER:
Right. So you’re looking at, right, whether they’re working at least 30 hours in a month, and if they do, they’ll be considered a full-time employee for that month. If they’re working less than that, then you would calculate them under the part-time, the full-time equivalent scenario. There is one thing to mention, Mike, because you of course bring up good use cases that there is a special rule for seasonal workers. There’s an exemption. So employers may not be a large employer under ACA if they employ more than 50 full-time employees for only 120 days or fewer during the calendar year. So seasonal businesses, you might be able to avoid act as requirements if you only employ those certain full-timers for those 120 days or less. And then
VANNOY:
If
SHENKER:
You do, then you’re looking at it as a full-time equivalent.
VANNOY:
And so maybe I shouldn’t have used seasonal employment special exemptions for seasonal. In that case, the golf course would probably not qualify. It’ll big long season, but if you’re running a spirit Halloween popup store open for 45, 60 days a year might be a different scenario.
SHENKER:
Exactly.
VANNOY:
So where does that 30 hours a month rule generally get people? It probably has to do with more, like let’s say you’re in growth mode, your business is growing, you’re adding employees, which month of the year are you adding to the calculation? Is that right?
SHENKER:
Yeah, exactly. So it’s really a month by month look back. And so right, typically you hire exempt salaried employees, they’re going to be full-time employees, they’re working more than 30 hours, and a lot of hourly employees too. We’ll meet that 30 hour threshold as well per week. So again, it’s a little bit of math. The good thing is it’s backward looking. So you look back, can look back at a previous year, and if you’re close, then obviously you might need to get some legal advice on whether it applies or not, because there are some financial burdens in complying with acas. So if you’re close, you definitely want to figure that out. But oftentimes it’s quite clear whether an employer is falling well below or well above that 50.
VANNOY:
And so just a couple more clarifications I want to draw then. This is really important, the part-time, the full-time equivalency test. So you add up the number of hours they worked per month divided by 120 because 120 would be, call it three quarters of it’s 75% of four 40 hour work weeks. Right,
SHENKER:
Exactly.
VANNOY:
Okay. And so if they fall below, above, how does the exact calculation work? Because what I want people to get here is just because they are perhaps below the 120 hours per month test, could you have a thousand of them and then you still don’t have to comply with ACA or how does all that work?
SHENKER:
So yeah, for your non full-time employees, what you basically do, you lump them together and you just add up all the part-time hours worked for each month in the prior calendar year. So you add all those hours of service up for the non full-time employees up to a maximum of 120 per employee then, so you’re not including potential overtime hours that may have been worked in a certain week or month, so capped at 120, and then you divide the total number of hours by 120 and whatever figure that is, that is your full-time equivalence and those get added to your full-time employees. And that total, if it’s less than 50, you’re not subject to many of ACAs requirements. If it’s over that, then you’d be an applicable large employer.
VANNOY:
So I won’t attempt the math in my head, but basically you might have say 51 employees some full-time, some part-time, but doing that math on your part-time, the equivalency is probably going to work out to a little bit less than 50. You’re not going to be required to comply, but if you have a lot of part-timers, it’s not true that you get to simply exclude those people who work less than 30 hours a week. The more of them there are, you’re still adding up the number of hours worked in a year divided by the number of people there were, and you’re going to get a number, and if that number is north of 50, you must comply with all of it.
SHENKER:
Exactly. And I think probably the employers that need to look at this the most, and it could be a close call, are those with 50, 60, 70, 80 employees where a good number of those are going to be full-time, but if a lot of them are part-time, then depending on the hours they work, the calculation will tell us whether you have 50 full-time, 50 full-time equivalents.
VANNOY:
And that answer is your answer answered. My next question, which was going to be, doesn’t matter what time of the year, so it’s not the case that if I have 49 full-time employees all year and in December I hire the 50th employee, that’s not going to trigger because it’s averaged across the entire year, right?
SHENKER:
Right. You’re looking across each month the prior year, and then you’re taking the monthly average. Right.
VANNOY:
Yeah. Okay. Alright, very good. To me, that’s the most important thing that employers got to understand is the calculation of full-time equivalency to calculate whether you must or must comply or whether you don’t have to or you’re exempt. Once you understand that you must comply. What do employers need to understand? There are some very specific
SHENKER:
Requirements
VANNOY:
For compliance with this law and then we’ll want everybody to understand that before we talk about the consequence of not doing it right.
SHENKER:
And we’ll hit on this very generally. This could obviously be a deep dive, but so the mandate, the employer mandate applies if you’re an applicable large employer. So if you have those 50 full-time equivalents, you’re an a l applicable large employer, and your business is then required to offer health insurance to at least 95% of your full-time employees, that’s both affordable and provides minimum value. And so that’s just to clarify, because we’ve talked a lot about full-time and part-time, full-time equivalents, all of that is just for determining whether you are an a l applicable large employer. Assuming you’re an applicable large employer, you only need to offer health coverage to the full-time employees. You don’t need to, even though the part-time equivalents, the part-time, full-time equivalents get added into the calculation to determine a L e status, they don’t need to be offered the health insurance. So that’s number one big thing to remember. And
VANNOY:
Then what’s the calculation to determine whether they’re full-time then because different,
SHENKER:
So then a full-time employee is someone who’s going to be working over 30 hours per week. So those are the people that you’re offering health insurance or you’re required to under ACA or else you face penalties.
VANNOY:
So it’s the F T E calculation that determines whether you’re an applicable large employer in a l e. Once you’ve determined that you must comply with the Affordable Care Act, now you must offer it to all full-time employees, the full-time employees, anybody who works more than 30 hours per week, how is that calculated? Because the number of hours work per week could go up and down. There’s all kinds of variables there. What period of time is that calculated? Take us through all that.
SHENKER:
So that’s just generally going to be obviously right. You can’t look at the present month, but it’s going to be a look back to these employees and it’s looking right at that average of hours. So it’s similar to what we’re looking back in the first instance as to the number of hours and whether they’re a full-time employees. So that should generally be similar when you’re looking at who you’re going to actually need to offer the coverage to.
VANNOY:
Got it.
SHENKER:
And then, look, there are two main requirements. We can’t go into them so much today given the time, but coverage needs to be affordable. So there are several safe harbors for this in terms of how to offer affordable coverage. The real key is looking at the various safe harbors, the rate of pace, safe harbor, the federal poverty level, and W two wages. Those are the three ones. And so the idea is understanding which of those will be most beneficial to your business depending on different types of business. Some of those safe harbors can be better others, but once you use one, you’re stuck with it, I believe for at least a year. So it’s good to figure out how you’re going to make that coverage affordable.
VANNOY:
And you and I covered this in a separate show, I would encourage everybody, hop on the website, hop on the YouTube channel or wherever we podcast where you consume this show. If you want more details on the two tests for what coverage of value? I’m losing it again.
SHENKER:
Minimum value,
VANNOY:
Yeah. Yeah. So there’s an hour worth of content just on that. We probably won’t go deeper here. What other requirements, I know there’s a reporting requirement, so it’s the coverage itself and whom you must extend that coverage to in those two tests. But then there’s also the reporting. Can you take us through the reporting and whatever other requirements there are?
SHENKER:
Right, exactly. So just as with most things under the tax code, there are reporting methods or requirements to the I R S. So there are certain reports that each employer must provide, basically telling the I R s the information about coverage offered and who was covered, and those are yearly submissions by the employer. And in addition to failing to provide minimum essential coverage, there are penalties for failure to file those forms with the I R S as there typically would be for employers failing to file. And again, penalties here can, depending on what the violation is, they can be quite severe. So not an area where you want to take a shot and hope for the best. If you are an a L applicable large employer, then you want to make sure you have the understanding of how to comply with the requirements of aca.
VANNOY:
Yeah, and I’d say this isn’t one you want to mess with. So fortunately, it’s an annual filing, right? It’s not like a 9 41 where the employer must file on a quarterly basis. This is an annual filing. It is not just some report, it’s a tax return that the employer must submit at the A tax return, but it uses all these annual calculations and it spells all the instructions out for you with that tax form. Anything else that people need to understand, Brian? I think ACA is probably the number one. Our next one is going to be number two.
SHENKER:
Yeah, I think that covers what we can, I think for aca, and like you said, I’d recommend anyone take a look at our prior webinar addressing that because we were able to do a bit of a dive into those requirements.
VANNOY:
Last thing I’ll say on this one, I’ve literally talked to business owners. I had a conversation a week ago with a business owner that was like, you know what? They got about 40 employees going in 45, and they were very deliberate. I don’t want to get this thing over 50 employees because I don’t want to have to provide health insurance a perceived cost, a couple of questions in 80, maybe 90% of their workforce is part-time. Like do the calculation here. You got a lot of headroom before you’re going to have to comply with this. If I was, you focus on growing your business, you get to 50 FTEs in your business, you’re going to have more than enough money to be able to have the resources to comply with this thing. It’ll be well worth the trade off. So my personal encouragement would be, don’t be scared by this, be aware of it. Understand the calculation requirements of how you qualify, and you might have more headway than you think you do in the ability to grow your business. Thus creating the revenues that can pay for any incremental costs. You might incur anything you’d want to put a bow on that.
SHENKER:
Yeah, I think right, reaching that level, it’s a good problem to have provided that there are compliance issues that you need to tackle that you previously. Yeah,
VANNOY:
Right. Okay, next one, the Family Medical Leave act. So this is another one of those. There are, there’s different numbers, 50 employees, 20 employees. When must that comply? When I have to comply, take us through the employee count requirements for FMLA Family Medical Leave Act.
SHENKER:
Sure. So for employer coverage, the employer is bound by to FMLA if they employee more than 50 employees within 75 miles of the work site. And that would be during any 20 work weeks in the current or proceeding year. So let’s break that down real quick. So this doesn’t necessarily mean that any company with more than 50 employees is subject to FMLA, right? Those 50 employees need to be within 75 miles of a work site. So if you have 25 employees in California, another 20 in Denver, and then another 20 out here in New York, you have 60 employees, but none of those, you have no work site where there are 50 employees or more within a 75 mile radius. So it’s important to understand there’s a geographical PORs part of this test,
VANNOY:
And maybe to explain why that’s important, give a 32nd of what FMLA is and therefore how that ties back,
SHENKER:
Right? So FMLA in the early nineties, I want to say 1993, and it allows employees to take 12 weeks of unpaid, but job protected leave for their own medical reasons or to care for sick family members. And so that’s 12 weeks in each year or in a 12 month period. So again, when we talk about FMLA, it provides this big leave benefit. And so the idea is it’s designed for bigger employers who might reasonably be able to deal with those types of absences that the government isn’t necessarily mandating on smaller employers. And so again, just like aca, it’s looking back. So you can look at the number of employees per year in the prior year, but you also look in the current year. So if you hit 20 weeks of 50 employees or more within those 75 mile radius in the prior year, current year for 20 weeks, then you’re bound by the F fmla. And
VANNOY:
Just so everybody understands the why here, right? So think back early nineties, this was early Clinton administration, not that matters, but just that’s the timing. And the goal here was to just basically protect people’s jobs if they were sick or if they had to take care of an elderly parent or a sick child that their job would be protected. There was no expectation that they would get paid for that leave, but that you couldn’t lose your job. The carve out for the below 50 employees is because there, there’s an acknowledgement, Hey, if you’re a small business, if you’re a trucking firm and you’ve got an office manager who is also your dispatcher and you’ve got nine over the road truck drivers and your dispatcher office manager goes out, you can’t live 12 weeks without someone in that seat. So as a small business, you’re going to probably have to find someone to replace, and it doesn’t mean that you’re cruel hearted and don’t want to protect that person’s job.
Many business owners will find a way to do exactly that, but it was to acknowledging that smaller businesses, it would be too much of a hardship to guarantee that person’s job. If you are over 50 employees, whether you agree with it or not, the determination is that okay, you’re big enough, you have enough resources that you can keep this person’s job safe. Unless to your opening statement, Brian, those locations are far enough apart from each other that they truly act as standalone businesses. If you think about 1993, the work from home movement was not what it is today. In some businesses, if you work at a restaurant, there’s no such thing as work from home. You got to cook the food, you got to serve customers. But if you’re one location more than 50 employees, you have a bigger pool of talent to draw from to offset someone while they’re on leave. But if you have lots of employees at disparate locations, they can’t fill in for each other. So I just want people to understand the why behind that question.
SHENKER:
Yeah, absolutely. And you hit on one point when we were talking about employer coverage remote work. So how do you count remote workers? And I think that’s a great question that wasn’t necessarily considered in 93, but what the FMLA says is that you include remote employees for whatever office location that they report to or receive assignments from. So it’s important to make sure if you’re a company with a good number of remote workers, that they don’t get lost in your calculation of 50 employees for FMLA purposes, even though theyre not at a specific location, they’re going to be counted towards one of those and you could hit the 50.
VANNOY:
Yeah. So if you’re a white collar company, software development, accounting services, business services, whatever it is, maybe you’re at 45 employees that work in your, say Dallas office, but you’ve got 10 other employees that work around the country. If they receive their assignments for work from the Dallas headquarters office, then that puts you at 55 employees. You must comply. Am I thinking about that, right?
SHENKER:
Yeah, exactly. Exactly. And look, in talking about then moving towards compliance, I mean, look, before you get to compliance, there are a number of bases for FMLA leave, as we mentioned, it can be for the serious health condition of the actual employee, but it can be family members, it can be to care for a son or daughter or a newborn child. It can be to care for a spouse or a parent or that type of family member with a serious health condition. It can also come from a care for covered service member. So there are various ways that covered leave arises under the FMLA. And so
VANNOY:
Brian, maybe not listing all of them out, and maybe you can, but can you explain qualifying events? So you gave some of the underlying reasons, and I think truly these are qualifying events, but what I want people to understand that it is a qualifying event. It’s not, Hey, this person is a good friend. They were like an uncle to me when I was a kid, and so I need to be there for them now noble, but maybe not protected under the law. Can you speak to the best you can, the lines in the sand, so to speak, around qualifying events?
SHENKER:
Absolutely. So we’ll start first, the employee’s own serious health conditions. So again, we’re talking about the employee being unable to perform the functions of the job. This is not like an A type leave where they can only, there’s one essential function of the job. They can’t perform, but they can do it all. They can do everything with an accommodation. Now this is a situation where the person can perform the job and leave is necessary. So again, these are not your ordinary everyday conditions like a flu, a routine dental problem, an ear ache. Those are not what we’re talking about for FMLA, leave for the own person. And so then look to care for the employee’s, spouse, son, daughter or parent with a serious health condition. We’re talking about the same type of thing. And then look, as I mentioned before, you can take FMLA for the birth of a son or daughter and to care for a newborn, similarly for the placement of a son or daughter for adoption. So it definitely views adoption and birth the same way. And then again, I mentioned service members, right? So if there’s an exigency arising out of the employee’s spouse, son, daughter, immediate family member who is a military member and they’re on cover duty, that’s something where if my son needs to go for duty and I need a couple days off to get everything together, help them get settled and get set, that’s what the FMLA leave there is for. Maybe the last question.
VANNOY:
Go ahead. You were going to say
SHENKER:
No, no, go ahead.
VANNOY:
Yeah, so the thing about time we go get a bunch of ’em to get through in our hour here, maybe the last big question I have, so we know it requires a qualifying event. You kind of walk through the calculation of what 50 employees means on a per location basis. The law says that you need to guarantee this person’s quote unquote job that’s not, can you explain for folks, what does the law literally say? That was my words, that guarantees their job. That’s not what I’m sure it says in the statutes, but what does it literally say? And do you have to where I’m going with it? Do you have to truly retain that person’s exact job? Or is there an equivalency? Is it the duties they’re performing? Is it what you paid them, but you could stick ’em in a completely different role? I’m envisioning someone could go on leave. You have every intention of bringing that person back on. The person you replaced them with, they might be better. Are you obligated to then fire that person to bring the other person back? Help us understand that,
SHENKER:
Right? Yeah. So the FMLA is a bit different than the A D A, right? The A d A leave, bring them back. You want to bring them back to similar roles, similar wages, similar benefits. That’s under let’s say the A D A under the FMLA. It’s a bit more strict that they should be returned to the same position they were in, right? And so yeah, the excuse that, yeah, we brought in someone else who did the position that much better. That’s not going to necessarily fly as a reason that you cannot return the person to their original position. Now, there might be other reasons that someone can’t be returned to their same position. For instance, in the time period they’re out, there’s a reorganization that for instance, a department is eliminated or a position is eliminated or just some other type of restructuring in that case, right?
I mean, if it’s impossible to bring the employee back to their same position, then you are almost going about it the same way as we would under the A D A that you’re then going to bring them back to the most similar position you can without a dip in benefits, seniority pay, things like that. So yeah, you want to bring them back to the same position. That’s the idea. And look, part of it is at the outset of FMLA leave and employer can get a medical certification, and that would be something that the employee and their doctor fill out. And so at the outset of FMLA leave, the company should have a good idea of what is the return date of whether this is something where the employee expects to use all 12 weeks, or is it something that’s just going to last for one or two weeks, or is it intermittent leave, right? There’s intermittent,
VANNOY:
I was going to ask you about intermittent leave. So I generally always on this show try to give benefit of the doubt to the employer. I know how hard it is to understand all the laws and comply with all. And for sure there are some employers who might abuse this. I think we all have heard horror stories where some employees might abuse this intake leave when maybe it was inappropriate for them to take leave. I’ll leave it at that and puts the burden on the employer to still keep their job open for ’em. Does it have to be sequential? I think the answer is no here, but is it sequential it 12 within a calendar year, 12 within a enrolling 12 months? What about the employee who takes their 12 weeks, they work for a couple of weeks, and then lo and behold they need another FMLA leave. How does all that work with this sequential time off during what time period, et cetera?
SHENKER:
Yeah, great, great questions. And look, these are things that employers should know and need to know whether or not they think there’s potential abuse of FMLA leave. But so going back to step right there, 12 weeks, and there are various ways an employer can calculate that, right? You can use the calendar year, a fixed 12 month period, such as based on the anniversary date or a fiscal year, a rolling 12 month period looking backwards, a 12 month period going forward. And so again, the employer should, you need to decide which one of these 12 month periods you’re going to use. And while it might not sound it, it is very important which one you use because each method is more or less beneficial to the employer. So for instance, the 12 month period, the rolling 12 month period, typically most advantages employers, because it looks back, you look backward 12 months from the date the employee first takes, takes leave, right?
As opposed, let’s say you do the calendar year. Let’s say the employee takes 12 weeks from September to December. Now as of January one, they have another 12 months, not 12 months, 12 weeks available to them, and they could immediately take another 12 weeks. So then you have an employee that’s taken 24 straight weeks of FMLA. So yes, number one, yes, it really does matter what measureing period you do for the 12 months. And then yeah, getting back to the type of leave, whether it’s intermittent or it’s one or two days a week, it’s really dependent on what the doctor, and there’s a certification form that employer can use where they’ll get medical information about what is needed. And so look, it’s oftentimes less burdensome for an employer to deal with an employee who’s going to be out six weeks and they know they have someone to replace for six weeks, as opposed to someone who every Thursday they’re taking the day off because that’s the day they need to assist a family member or go to their own doctor’s appointments. And those are the ones where it’s intermittent leave. It’s going to become more difficult to actually hire someone to fill that role during those intermittent leaves. And oftentimes it’s not realistic too. So those are the things that companies need to understand what is available to employees so they can plan. Number one, both give the employee what they’re entitled to and then plan how you can operate your business while complying with the fmla.
VANNOY:
And this is just a perfect example where A, you need a handbook, you need a handbook, and B, don’t Google it because you might just read it and say, oh, for the year, well, what does the year mean? In a quarter law, you’re going to have to define what the year means. Is it rolling 12 months? Is it calendar year? Is it a fiscal year? I mean, you need to define these things. So we’d love to be the company that helps you build your handbook, whether it’s us, somebody else, you do it yourself. Know that it’s a lot more nuanced than you perhaps think, but you got to have a handbook that defines these things. Last thing, maybe we talk on FMLA. What are the consequences? What’s the price tag for fines? Does non-compliance when you’re caught, does it show up as a fine? Does it show up as a lawsuit? What does that look like?
SHENKER:
So yeah, it’s typically going to show up as a lawsuit similar to another type of discrimination lawsuit. And so it’s similar to those others, right? You have an employee who isn’t returned to work and they’re fired. So that employee could have a backpay or front pay claim, they’re going to get their attorney’s fees. The court can award liquidated damages which are equal to the wages that are owed to ’em. There’s potential personal liability for owners of companies here. And so where we often see the biggest problems with FMLA violations are sloppy administration. There’s a lot going on here. You have to monitor the 12 weeks. They’re entitled to each year based on whatever calendar, whichever 12 months you’re using. So the company should have a streamlined process for once a request is made and granted, the employer needs to make sure that the leave is carried out.
Time is properly tracked. If you don’t track the 12 weeks, you might end up giving them 13 or 14 weeks that the employee is not actually entitled to. And really one of the biggest ones is the initial issue of understanding whether the leave that the employee is requesting is covered or not. Because as with many leaves of absences, there’s no magic words. So the employee gives you a reason. If it sounds like it might be something that would be covered by F M L, then what you do, you give them a form, right? You give them the form to fill out and you consider then whether it actually is FMLA qualifying. But it’s important to consider that. And look, I think investigating those dubious absences that you mentioned, Mike earlier, that’s not necessarily a bad idea. Some employees will use these types of leaves to take every Monday off or every Friday off or the day before or after holiday weekend. So companies can look for patterns. I’ve had instances where private investigators were hired, but what I would caution too is that if you are an employer getting that far into looking into potential abuse, likely you should seek outside help ashore from ashore, from an HR professional, from an attorney to guide you the right way. If something’s that serious, you probably shouldn’t be going at it alone.
VANNOY:
And I just want to reiterate, you got to have an employee handbook that spells all this out. Part of the onboarding and perhaps a best practice would also be ongoing annual recertification, acknowledgement of receipt and understanding of all these things can go just a long way. I think a lot of times these things, you give benefit doubt to both the employer and the employee. It’s just a misunderstanding of what it even means, right? And each side feeling victimized by the other. When if you just would’ve sat down and explained the rules so both parties understood you wouldn’t have had an issue in the first place. And last point, what you said, I think is a hundred percent right, and this is where it could really bite employers. It’s not the happy employee who is highly productive and part of your culture and has a life event that you have this problem with. It’s the person who goes out on leave and says that they had a qualifying event. You didn’t have documentation. Maybe you didn’t even ask them if it was a qualifying event. You didn’t explain, no, this actually doesn’t qualify. You’re not eligible. They just go in. So the employer fires them. Maybe it’s week one, maybe it’s week 11 and a half, and what does that disgruntled employee do? They call an attorney. And lo and behold, you’re neck deep in a lawsuit. Okay?
FMLA ACA. Those are the two really, really big ones we appropriately spent most of our time on today. I’m going to really speed us through the next few topics here, but a lot of people don’t realize you cross 50 employees. There’s a new threshold for reporting with the equal employment opportunity, right? The e e O one report. Can you explain what that means?
SHENKER:
Yeah, absolutely. So just real quick, the EEO one report is a compliance survey that’s done by the E E O C that requires employers to provide certain employment data to the E E O C concerning race, ethnicity, gender, and job categories of their employees employer coverage on this. So private employers who are subject to Title seven must file this annually. If they have over a hundred employees or if they’re owned by a company affiliated with another one that has over a hundred employees. There’s also a requirement that brings us down to 50 employees, most federal contractors. So you have a contract with the government, you are going to be required to file an EEO one report if you have at least 50 employees. And so
VANNOY:
Is that for only 50 or greater if you do business with the government in former government,
SHENKER:
That’s just for the federal contractors. That’s
VANNOY:
Right. And so over 50 employees, and you’re all maybe business to consumer, business to business, no federal contracts, no subsidies of any kind from a government agency is part of your revenue stream. Are you required to comply with EEO one reporting?
SHENKER:
So no. If you’re under a hundred employees and you’re private, then no. If you’re over a hundred employees and private, then you’d likely be filing the EEO one report.
VANNOY:
Okay? So we’ll keep today’s topic on 15 and over. That assumes not 100 and over. Just know that if you do hit that threshold, God bless you, congratulations on building a successful business. But again, the bigger you grow, the more compliance requirements you’re going to face. And that’s not some optional survey that you get in the mail. There’s teeth for non-compliance with the EEO one if you’re required to provide it,
SHENKER:
Right? Yeah, exactly.
VANNOY:
Knowing for private, it’s greater than a hundred employees. It’s only 50 plus when it’s government contracts, I suspect people doing business in that world understand a whole other realm of compliance requirements that comes with doing business with the government anyway.
SHENKER:
They should. They should.
VANNOY:
Alright, so next one I want to talk is state laws. And we could talk forever on this one on ACA FMLA and to some extent even, oh, I got one other one before I go to the state laws form 5,500. A lot of people I think don’t even know what form 5,500 is. Can you explain that?
SHENKER:
Yeah. And real quick, right? So form 5,500, that is under erisa, and that is a form that I’m not going to give a whole ERISA primer here, but right, that’s a form that is required to be filled out by companies that have ERISA plans. That could be a retirement plan like a 4 0 1 K or a health insurance plan. Those are all governed by erisa. And so if your company has at least a hundred employees, and you’re going to need to fill out this full form, and it provides information, not necessarily on the employees, but on the plan. So about the financials in various coverage and expenses and operations. And it’s actually a form that the D O L then puts up online and it’s available publicly. So if you’ve ever Googled Form 5,500, you can find it for covered companies and it’s just information about their plan, right? It’s not information about specific employee information.
VANNOY:
And so over a hundred employees, you must fill out the 5,500 under. There’s the simple form who must complete? Is it all employers who provide a qualifying benefit? Have
SHENKER:
You used Yes. Yeah, I believe that all plans that at least all companies that have a plan under ERISA are at least required to fill out the short form version of a 5,500.
VANNOY:
Okay? And so the reason we bring this up today, so the topic of today is laws. You got to comply with over 50 employees. This one, technically, Brian, correct me if I’m wrong, this one technically is not a 50 plus employee requirement, but because it’s governed by erisa, which is the Employee Retirement Income Security Act, has to do with benefit plans 4 0 1 k, other retirement vehicles, health insurance, dental, et cetera. Because ACA does have that 50 employee requirement. That’s also commonly the line in the sand where employers start to offer benefits. Pretty common under 50 employees, you got an entrepreneur, they’re scraping by and they’re grinding, trying to grow their business, and they don’t have the margin to pay for benefits. And so now all of a sudden, now they’re legally required to, okay, now I’m in the benefits game. And so if you are providing those qualifying benefits, maybe at 20 employees, maybe 10 employees, maybe five employees, right? God bless, that’s awesome. You must comply and do at least the short form, 50 to 500 to make sure that your plans are complying with the law. The reason we stuck it into this show is because it’s usually around that 50 employee mark that employees start to offer benefits. Am I stating that correctly?
SHENKER:
Yeah, you’re spot on. So if you’re at 50 full-time equivalents, then you’re offering health coverage under aca, which comes under erisa. So depending on number of employees, you’re either filing the regular form or the short form. And and as companies get bigger, you might be offering a 4 0 1 K, you might be offering a 4 0 1 K even before you hit 50 employees. So again, that’s something that can bring you under the ERISA regulations.
VANNOY:
Okay, so we talked Affordable Care Act, FMLA, EEO one reporting in the form 5,500. Let’s spend a couple minutes talking about state laws. And this is what I’ve referred to before as the Cambrian explosion of HR laws. If you remember your middle school earth science, this is when the fossil record went from a small number of life forms to just exploded from just shelled creatures in the sea to mammals and plants and birds and all kinds of stuff. So there’s this giant explosion of life forms. I feel like we’re in this Cambrian explosion period right now for HR laws where it’s not just the big federal laws. We talked about a couple of ’em, FMLA, early nineties, affordable Care Act, 2010, big federal laws coming along once a decade or so. Now all these things kind of have a life of their own at the state level. And increasingly, counties, cities, local municipalities. How would you guide employers? There’s no way we can list ’em all. How would you guide employers to be thinking about compliance when you hit this 50 employee threshold, so to speak, in regards to state laws?
SHENKER:
Yeah, so I mean, I just think it’s so important to understand that the federal law is not where all your company’s obligations and requirements are going to come from. And that oftentimes companies will look to someone that might know nationally what’s the federal law say, and it’s very important to know that, but you need to make sure that right, the locality right, the city, the state, and they all might have laws right governing the same discrimination or sex harassment. It all might be on the same topic, but number one, there are going to be differences in terms of coverage. So whereas the FMLA might not apply to employers with less than 50 employees in a 75 mile radius, there could be a state leave law that provides similar type of leave with companies with very few employees. So it’s really important to understand that because number one, there could be just completely different laws at your state level, but it can also be very similar laws that just kick in when you’re a smaller business than what the federal levels might be.
So real, real important to know those. And again, I think Mike, the only way that companies can really understand everything that they have to comply with is by looking elsewhere. It’s really come to a point, as you said, where the web that’s tangled web of laws we have for employers to comply with. It’s very difficult, especially because as we’ve seen in the last few years, the laws change at the state and city level much quicker than at the federal level. And so we are always talking about handbooks, and just because your handbook was compliant last year, I mean in a state like New York, it’s not going to be compliant in the following year because these local laws, things just move quicker at the state and local levels than they do at the federal level. So you really have to understand, see what the changes are. And look, one great way of doing so is reading the news, understanding what’s coming down before it actually does, so you have time to prepare and make changes that might benefit your business.
VANNOY:
I mean, just an example, 7 25 has been the minimum wage federally forever, right? There are 155 unique minimum wage jurisdictions. 33 states make up 155 unique jurisdictions. So of the 33 states, 25, maybe it’s 26, have updated their minimum wage this year already. And the rest, some of ’em actually have employee size requirements. So minimum wage, if is X up to 20 employees, it’s y greater than 50 employees. And so I’m seeing this trend, and I don’t think there’s tons of ’em, but there is a trend where whether you do or don’t provide benefits, whether you are over or under this employee threshold, literally changes your minimum wage. So lots and lots of laws that are local more than we could ever probably try to capture in this show. I think the message is you’ve got to have a mechanism to understand those local laws.
Certainly this is what we do for a living. This is how we help small employers get their head around this, create that handbook to help keep them compliant. But again, whether you’re using us or somebody else, I wouldn’t rely solely on Google. I mean, Google’s great for perhaps components thereof, but you have to have an authoritative source that understands the law, that then puts that in the handbook that you communicate regularly with your employees. Brian, we’ve only got a couple minutes here. Is there anything you’d want to say in closing for just general guidance for small business owners and small businesses to stay compliant with all these changes, especially in the context of, okay, we got a good business going, we’re growing, we’re tipping over that 50 employee mark, that probably means we’re a $5 million growing business. We’ve just crossed a threshold that we should be celebrating. This is a good thing. What is your closing advice for employers who crossed this threshold?
SHENKER:
Yeah, well, I think two of the big points we were just discussing, right? Looking at the law and regularly looking at it, so when there are changes in it, and then establishing policies, having your own handbook, that’s so key. I think those two are enormously important. It all starts with those written policies. And again, some employers might look at compliance as a one size fit all type thing, but it really is not. And that is why I know Mike, when Asure helps the company with a handbook, I know that it’s tailoring it to the company’s business that, look, for instance, the Fair Labor Standards Act, the federal law, you can have employees clock out for their lunch breaks, or you can have an auto deduct where the time is automatically deducted. Both can be lawful under the law, but which one is the company going to go with?
So there are a lot of choices that companies have, and I think it’s that recognition that without looking into it, without coming up with your policies and practices, that you can’t take the law and make it your own, so to speak. Right? You can’t do that unless you understand what the law is, how it’s being updated. You put it in writing, and then you examine, is this how we want the culture of our workplace to go? Or do we want to have a different policy? And then determining whether those are compliant. That’s really what it’s all about.
VANNOY:
Yeah. Brian, important topics to everyone who’s approaching or has crossed that 50 employee threshold, congratulations and to everybody else, we’re rooting for you in anything we can do to help you get there. By all means, let us know, Brian, thanks again and everyone else. Until next week, thanks